Court quashes notice under Income Tax Act, emphasizes need for proper approval processes

The Court ruled in favor of the petitioner, quashing the notice issued under section 148 of the Income Tax Act for the assessment year 2015-16. The Court held that the approval obtained from the Additional Commissioner of Income Tax was incorrect as it should have been obtained from the authority specified under section 151(ii) of the Act. The petition was allowed without costs, emphasizing the necessity of proper approval processes for such notices.

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Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 for the assessment year 2015-16 based on approval requirement from the Principal Chief Commissioner of Income-tax in terms of section 151(ii) of the Act.

Analysis:
The petitioner challenged the notice dated 31st March 2021 under section 148 of the Income Tax Act, 1961 for the assessment year 2015-16, arguing that approval from the Principal Chief Commissioner of Income-tax was necessary since it was issued beyond four years. The notice was issued after obtaining satisfaction from Range 3(2), Mumbai, and approval was granted by the Additional Commissioner of Income Tax, Range (3)(2), Mumbai, citing the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. This Act extended the limitation period under sections 151(i) and 151(ii) of the Act to 31st March 2020. However, a previous judgment by the Court held that the Relaxation Act applied only to cases where the limitation expired on 31st March 2020, and for the assessment year 2015-16, the limitation period was six years, expiring on 31st March 2022. Therefore, the Relaxation Act provisions were deemed inapplicable as they did not amend section 151 of the Act.

Before the amendment of section 149 of the Act, the time limit for issuing a notice under section 148 varied based on the elapsed years from the end of the relevant assessment year. The petitioner contended that their case fell under section 149(b), which allowed a six-year limitation for issuing a notice under section 148 for the assessment year 2015-16, expiring on 31st March 2022. The Court held that the petitioner's case aligned with the previous judgment, emphasizing that the approval for the notice under section 148 should have been obtained from the authority specified under section 151(ii) of the Act, not the Additional Commissioner of Income Tax.

Despite other grounds raised to challenge the notice, the Court focused on the issue of sanction and ruled in favor of the petitioner, quashing the notice dated 31st March 2021. The petition was allowed without costs, based on the incorrect approval process for the notice under section 148 of the Act.

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