Reassessment notice under Section 148 quashed for improper sanction under Section 151(ii) after three years

The Bombay HC quashed a reassessment notice issued under Section 148 for AY 2016-17 dated 30 July 2022. The court held that since the notice was issued after three years from the end of the assessment year, sanction under Section 151(ii) was required from Principal Chief Commissioner/Principal Director General or Chief Commissioner/Director General. However, sanction was obtained only from Principal Commissioner as per Section 151(i), which applies to cases within three years. The court ruled that proper sanction under the applicable provision was not obtained, rendering the notice bad in law. The respondent's reliance on TOLA notification was rejected as subordinate legislation cannot override parliamentary statute.

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Issues:
Challenge to notice issued under Section 148 of the Income Tax Act - Breach of provisions of Section 151 - Requirement of sanction by specified authority - Applicability of Section 151(i) and Section 151(ii) - Compliance with prior approval of specified authority - Legal validity of impugned notice and order.

Analysis:

1. The petition challenged a notice issued under Section 148 of the Income Tax Act, alleging a breach of Section 151 regarding the requirement of sanction by the specified authority. The petitioner sought to quash the notice issued in 2022 for the assessment year 2016-17, citing non-compliance with the provisions of Section 151.

2. The petitioner argued that the notice was illegal as it lacked the necessary sanction from the specified authority as per Section 151 of the Act. The petitioner contended that the sanction by the Principal Commissioner, instead of the required authority under Section 151(ii), rendered the notice invalid, as more than three years had elapsed from the relevant assessment year.

3. The Court examined the provisions of Section 148A and Section 151 of the Act, emphasizing the requirement of prior approval of the specified authority before issuing a notice under Section 148. The Court noted that the amended provisions of the Act applied to the case, making compliance with Section 151 imperative.

4. Referring to the decision in Siemens Financial Services Pvt. Ltd., the Court reiterated that the sanction must align with the amended Section 151(ii) of the Act. Since the sanction in this case did not meet the requirements of Section 151(ii), the impugned notice and order were deemed unlawful and were set aside.

5. The Court rejected the argument based on a notification under the Taxation and Other Laws Act, emphasizing that subordinate legislation cannot override statutory provisions enacted by Parliament. The Court concluded that the absence of sanction from the specified authority under Section 151(ii) invalidated the notice and order, leading to the success of the petition on that ground.

6. Consequently, the Court allowed the petition, quashing the notice and order issued under Section 148 of the Act. The decision was made based on the non-compliance with the provisions of Section 151, specifically the requirement of sanction by the appropriate authority as per the amended Act.

7. The Court's ruling was limited to the specific issue of non-compliance with Section 151, and other grounds were not considered in this judgment. The petition was disposed of with no costs awarded, emphasizing the importance of adhering to procedural requirements under the Income Tax Act.

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