Bombay High Court
Everest Kanto Cylinder Limited vs Deputy-Assistant Commissioner Of ... on 4 July, 2024
Author: G.S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:9963-DB
910.WPL18458_2024.DOC
Vidya Amin
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 18458 OF 2024
Everest Kanto Cylinder Ltd. ... Petitioner
vs.
Deputy/Assistant Commissioner of Income-tax, ...Respondents
Circle-3(4), Mumbai & Ors.
Ms. Aarti Sathe a/w. Ms. Aasavari Kadam for the petitioner.
Mr. Ravi Rattesar i/b. Mr. Arjun Gupta for the respondents.
_______________________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
DATED: 4 July, 2024
_______________________
ORAL JUDGMENT (Per G.S. Kulkarni, J.)
1. Rule, made returnable forthwith. Respondents waives service. By consent of the parties, heard finally.
2. This petition under Article 226 of the Constitution of India challenges a notice dated 28 March, 2024 issued by the Jurisdictional Assessing Officer (JAO) under section 148A(b) of Income-tax Act (for short "the Act") as also an order dated 24 April, 2024 passed on such notice under section 148A(d) and as a consequence thereof, a notice issued to the petitioner under section 148 of the even date. The substantive prayers as made in the petition can be noted, which reads thus:
"(a) this Hon'ble Court may be pleased to issue a writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 of the Page 1 of 7 4 July, 2024
910.WPL18458_2024.DOC Constitution of India calling for the records of the petitioner's case and after examining the legality and validity thereof quash and set aside the impugned initial notice dated 28 th March, 2024 (Exhibit- "HH" hereto) issued under section 148A(b) of the Act, the impugned order dated24th April, 2024 ("Exhibit-JJ" hereto) passed under section 148A(d) and the impugned notice dated 24 th April, 2024 issued under section 148 of the Act ("Exhibit- KK"
hereto) by respondent no. 1 seeking to reopen the assessment for the AY 2017-18;
(b) this Hon'ble Court may be pleased to issue a Writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and directing the respondents to forthwith withdrawn and cancel the impugned initial notice dated 28th March, 2024 (Exhibit- "HH" hereto), the impugned order dated 28th April, 2024 passed under section 148A(d)("Exhibit-JJ"
hereto) and the impugned notice dated 24 th April, 2024 issued under section 148 of the Act ("Exhibit-KK" hereto) by respondent no. 1 seeking to reopen the assessment for the AY 2017-18;
(c) this Hon'ble Court may be pleased to issue a Writ of Prohibition or a writ in the nature of Prohibition or any other appropriate writ, order or direction under Article 226 of the Constitution of India ordering and directing the respondents to permanently refrain from giving effect to and/or proceeding further by way of reassessment or otherwise in any manner in respect of the impugned notice dated 24 th April, 2024 issued under section 148 of the Act ("Exhibit'KK" hereto) seeking to reopen the assessment for the AY 2017-18".
3. Although there are several grounds raised in the Writ Petition, however, it is pointed out at the bar that the challenge as raised by the petitioner would stand covered by the decision of a co-ordinate Bench of this Court in Hexaware Technologies Ltd. vs. Assistant Commissioner of Income-tax 1.
4. We have heard Ms. Sathe, learned counsel for the petitioner and Mr. Rattesar, learned counsel for the respondents. The assessment year in question is 2017-18.
1 [2024] 162 taxmann.com 225 (Bombay) Page 2 of 7 4 July, 2024
910.WPL18458_2024.DOC
5. Ms. Sathe, at the outset, would submit that in Hexaware Technologies Ltd. (supra) one of the issue which fell for consideration of this Court in the context of challenge to a notice issued under section 148 of the Act, was as to whether such notice, as assailed in such proceedings, would be rendered invalid and bad in law, being issued by the Jurisdictional Assessing Officer (JAO), for the reason that the same would fall foul of Section 151A of the Act.
It is submitted that this Court considering the implications Section 151A would bring about and in pursuance thereof the scheme framed by Central Board of Direct Taxes (CBDT) vide notification dated 29 March, 2022, the Division Bench held that in view of the substantive scheme being notified to implement Section 151A, the jurisdiction of the JAO to issue notice under Section 148A(b) was divested and replaced by the Faceless Assessment. It is hence submitted that any notice issued by the JAO was rendered illegal and invalid. In this context, our attention is drawn to the following observations of the Court :
"32. As regards issue no.4, Section 151A reads as under :
Faceless assessment of income escaping assessment.
151A. (1) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of assessment, reassessment or recomputation under section 147 or issuance of notice under section 148 [or conducting of enquiries or issuance of show- cause notice or passing of order under section 148A] or sanction for issue of such notice under section 151, so as to impart greater efficiency, transparency and accountability by--Page 3 of 7
4 July, 2024
910.WPL18458_2024.DOC
(a) eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based assessment, reassessment, recomputation or issuance or sanction of notice with dynamic jurisdiction.
(2) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (1), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 2022.
(3) Every notification issued under sub-section (1) and subsection (2) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.
Section 151A of the Act gives the power to the Central Board of Direct Taxes ("CBDT") to notify the Scheme for :
(i) the purpose of assessment, reassessment or recomputation under Section 147;
(ii) issuance of notice under Section 148; or
(iii) conducting of inquiry or issuance of show cause notice or passing of order under Section 148A; or
(iv) sanction for issuance of notice under Section 151;
so as to impart greater efficiency, transparency and accountability by inter alia eliminating the interface between the Income Tax Authorities and assessee. Sub-section 3 of Section 151A of the Act also provides that every notification issued under sub-section (1) and (2) of Section 151A of the Act shall be laid before each House of Parliament.
In exercise of the powers conferred by sub-sections (1) and (2) of Section 151A of the Act, CBDT issued a notification dated 29 th March, 2022 [Notification No.18/2022/F. No.370142/16/2022-TPL and formulated a Scheme. The Scheme provides that -
(a) the assessment, reassessment or recomputation under Section 147 of the Act, Page 4 of 7 4 July, 2024
910.WPL18458_2024.DOC
(b) and the issuance of notice under Section 148 of the Act, shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act for issuance of notice and in a faceless manner, to the extent provided in Section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee. The impugned notice dated 27th August, 2022 has been issued by respondent no.1 (JAO) and not by the NFAC, which is not in accordance with the aforesaid Scheme.
35. Further, in our view, there is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148 of the Act. The Scheme dated 29th March 2022 in paragraph 3 clearly provides that the issuance of notice "shall be through automated allocation" which means that the same is mandatory and is required to be followed by the Department and does not give any discretion to the Department to choose whether to follow it or not. That automated allocation is defined in paragraph 2(b) of the Scheme to mean an algorithm for randomised allocation of cases by using suitable technological tools including artificial intelligence and machine learning with a view to optimise the use of resources. Therefore, it means that the case can be allocated randomly to any officer who would then have jurisdiction to issue the notice under Section 148 of the Act. It is not the case of respondent no.1 that respondent no.1 was the random officer who had been allocated jurisdiction.
36. With respect to the arguments of the Revenue, i.e., the notification dated 29th March 2022 provides that the Scheme so framed is applicable only 'to the extent' provided in Section 144B of the Act and Section 144B of the Act does not refer to issuance of notice under Section 148 of the Act and hence, the notice cannot be issued by the FAO as per the said Scheme, we express our view as follows:-
Section 151A of the Act itself contemplates formulation of Scheme for both assessment, reassessment or recomputation under Section 147 as well as for issuance of notice under Section 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A Page 5 of 7 4 July, 2024
910.WPL18458_2024.DOC of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under Section 148 of the Act being assessment, reassessment or recomputation under Section 147 of the Act and inapplicable to the issuance of notice under Section 148 of the Act. The Scheme is clearly applicable for issuance of notice under Section 148 of the Act and accordingly, it is only the FAO which can issue the notice under Section 148 of the Act and not the JAO. The argument advanced by respondent would render clause 3(b) of the Scheme otiose and to be ignored or contravened, as according to respondent, even though the Scheme specifically provides for issuance of notice under Section 148 of the Act in a faceless manner, no notice is required to be issued under Section 148 of the Act in a faceless manner. In such a situation, not only clause 3(b) but also the first two lines below clause 3(b) would be otiose, as it deals with the aspect of issuance of notice under Section 148 of the Act. Respondents, being an authority subordinate to the CBDT, cannot argue that the Scheme framed by the CBDT, and which has been laid before both House of Parliament is partly otiose and inapplicable. The argument advanced by respondent expressly makes clause 3(b) otiose and impliedly makes the whole Scheme otiose. If clause 3(b) of the Scheme is not applicable, then only clause 3(a) of the Scheme remains. What is covered in clause 3(a) of the Scheme is already provided in Section 144B(1) of the Act, which Section provides for faceless assessment, and covers assessment, reassessment or recomputation under Section 147 of the Act. Therefore, if Revenue's arguments are to be accepted, there is no purpose of framing a Scheme only for clause 3(a) which is in any event already covered under faceless assessment regime in Section 144B of the Act. The argument of respondent, therefore, renders the whole Scheme redundant. An argument which renders the whole Scheme otiose cannot be accepted as correct interpretation of the Scheme. The phrase "to the extent provided in Section 144B of the Act" in the Scheme is with reference to only making assessment or reassessment or total income or loss of assessee.
Therefore, for the purposes of making assessment or reassessment, the provisions of Section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term "to the extent provided in Section 144B of the Act" is not relevant. The Scheme provides that the notice under Section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, "to the extent provided in Section 144B of the Act" does not go with issuance of notice and is applicable only with reference to assessment or reassessment. The phrase "to the extent provided in Section 144B of the Act" would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Page 6 of 7 4 July, 2024
910.WPL18458_2024.DOC Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub-section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme."
6. Learned counsel for the revenue would also not dispute that in the present case the impugned notices dated 28 March, 2024 and 24 April, 2024 were issued by JAO. Thus, considering the clear position in law as discussed hereinabove, the JAO would not have jurisdiction to issue the impugned notices more particularly in view of the clear provisions of Section 151A read with notification dated 29 March, 2022 issued by the Central Government.
7. As fairly conceded on behalf of the revenue, the challenge in the proceedings would stand covered by the decision of this Court in Hexaware Technologies Ltd. (supra). The impugned notices would be required to be held to be illegal and invalid. We, accordingly, allow this petition in terms of prayer clause (a).
8. We clarify except for what has been urged and examined by us , we have not delved on the petitioner's case on other issues of challenge. All contentions of the parties on such issues are expressly kept open.
9. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
Page 7 of 7
Signed by: Vidya S. Amin 4 July, 2024
Designation: PS To Honourable Judge
Date: 09/07/2024 15:35:25