Bombay High Court
Navita S. Hetampuria vs Income Tax Officer Ward - 33(1)(1) on 31 July, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:11408-DB
925-OSWPL-16181-2024.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 16181 OF 2024
1. Navita S. Hetampuria
Having PAN AATPH9116R
B-3/1802, Whispering Palms CHS Ltd.
Akruli Road, Kandivali (E), Mumbai- 400 101 ...Petitioner
Versus
1. Income Tax Officer Ward-33(1)(1)
Having officer t Kautilya Bhavn,
C41 to C43, G Block, Bandra Kurla Complex
Mumbai, Maharashtra- 400 020
2. The Assessing Authority
Natinal Faceless Assessment Centre
North Block, Delhi, Through its office at Aaykar
Bhavan, New Marine Lines, Churchgate,
Mumabi-400 020
3. Principal Commissioner Income Tax-17
Having office at 241, Kautilya Bhavan,
C41 to C43, G Block, Bandra Kurla Complex
Mumbai, Maharashtra- 400 020
4. Income Tax Officer Ward-33(1)(1)
Having office at Kautilya Bhavan,
C41 to C43, G Block, Bandra Kurla Complex
Mumbai, Maharashtra- 400 020
5. The Union of India
Through the Secretary, Ministry of Finance,
Government of India, North Block,
New Delhi 110001 ...Respondents
Mr. Nishit Gandhi, Advocate for the Petitioner.
Mr. Ravi Rattesar, Advocate for Respondents.
Digitally
signed by
ASHWINI
ASHWINI JANARDAN
JANARDAN VALLAKATI
VALLAKATI Date:
2024.08.01
14:14:27
+0530
Page 1 of 8
July 31, 2024
Ashwini Vallakati
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925-OSWPL-16181-2024.doc
CORAM : G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
DATE : JULY 31, 2024 PC :
1. Rule. Rule made returnable forthwith. Learned Counsel for the Respondents waives service. By consent of the parties, heard finally.
2. This Writ Petition under Article 226 of the Constitution of India has been filed to challenge a notice dated 18 th April, 2022 issued to the Petitioner for reassessment in Assessment Year 2018-19, under Section 148 of the Income Tax Act, 1961 ("the Act"), and also the underlying prior notice and order under Section 148A(b) and Section 148A(d) of the Act, respectively. The reassessment has also been completed and communicated by order dated 14th March, 2024 which is also impugned.
3. From a plain reading of the record, it is apparent that the notice dated 18th April, 2022 issued under Section 148 of the Act, and indeed the underlying order of the same date under Section 148A(d) of the Act are issued by the Jurisdictional Assessing Officer ("JAO") and not by a Faceless Assessing Officer ("FAO"), as is required by the provisions of Section 151A of the Act. The Petitioner has also challenged the reassessment proceedings on the ground of non-compliance by the Page 2 of 8 July 31, 2024 Ashwini Vallakati ::: Uploaded on - 01/08/2024 ::: Downloaded on - 01/08/2024 16:20:11 ::: 925-OSWPL-16181-2024.doc Revenue with Section 151 of the Act inasmuch as the sanction accorded for the reassessment has not been given by the authority specified in Section 151(ii). The sanction has been given by the Principal Commissioner of Income-tax, an authority under Section 151(i) of the Act, although the reassessment was initiated three years after the end of the relevant assessment year. Consequently, the Petitioner submits that the entire reassessment proceedings deserve to be interfered with as being per se illegal.
4. It is now well settled that for a notice to be validly issued for reassessment under Section 148 of the Act, the Respondent-Revenue would need to be compliant with Section 151A, which has been interpreted and analysed in detail by a Division Bench of this Court in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax & 4 Ors. 1 ("Hexaware"). The Division Bench has clearly declared the law as follows :
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 1 (2024) 464 ITR 430 Page 3 of 8 July 31, 2024 Ashwini Vallakati ::: Uploaded on - 01/08/2024 ::: Downloaded on - 01/08/2024 16:20:11 ::: 925-OSWPL-16181-2024.doc 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 Page 4 of 8 July 31, 2024 Ashwini Vallakati ::: Uploaded on - 01/08/2024 ::: Downloaded on - 01/08/2024 16:20:11 ::: 925-OSWPL-16181-2024.doc the provisions of Section 151A 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. ........"
37 When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is Page 5 of 8 July 31, 2024 Ashwini Vallakati ::: Uploaded on - 01/08/2024 ::: Downloaded on - 01/08/2024 16:20:11 ::: 925-OSWPL-16181-2024.doc no question of petitioner having to prove further prejudice before arguing the invalidity of the notice.
[Emphasis Supplied]
5. Therefore, it is apparent that the Respondent-Revenue is not in compliance with the Scheme notified by the Central Government pursuant to Section 151A(2) of the Act. The Scheme has also been tabled in Parliament and is in the character of subordinate legislation, which governs the conduct of proceedings under Section 148A as well as Section 148 of the Act. In view of the explicit declaration of the law in Hexaware, the grievance of the Petitioner-Assessee insofar as it relates to an invalid issuance of a notice is sustainable and consequently, the very manner in which the proceedings have been initiated, vitiates the proceedings.
6. Learned Counsel for both the parties agree that the proceedings initiated under Section 148 of the Act would not be sustainable in view of the judgment rendered in Hexaware. Learned Counsel for the Respondents-Revenue has also drawn our attention to a recent decision of this Court in Nainraj Enterprises Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax, Circle-4(3)(1), Mumbai & Ors. 2, whereby in similar circumstances, this Court has allowed the petition considering 2 Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024 Page 6 of 8 July 31, 2024 Ashwini Vallakati ::: Uploaded on - 01/08/2024 ::: Downloaded on - 01/08/2024 16:20:11 ::: 925-OSWPL-16181-2024.doc the provisions of Section 151A of the Act.
7. Learned Counsel for the parties are also of the unanimous view that evidently the proceedings were initiated well after the expiry of three years from the end of the relevant assessment year. Consequently, the sanction for initiating the reassessment ought to have been granted by the authorities of the ranks referred to in Section 151(ii) of the Act, and not by the authorities of the relatively lower rank under Section 151(i) of the Act. Towards this end, it is clear that the decision of a Division Bench of this Court in the case of Vodafone Idea Limited vs. Deputy Commissioner of Income Tax, Circle-5(2)(1), Mumbai & Ors. (Writ Petition No.2768 of 2022), which, in turn, relied on the decision in Siemens Financial Services Pvt. Ltd. Vs. Deputy Commissioner of Income Tax, Circle 8 (2)(1), Mumbai & Ors. (Writ Petition No.4888 of 2022), would squarely apply to the facts of the case.
8. In the light of the above discussion, as there is no dispute that the JAO had no jurisdiction to issue the impugned notice, and for the reason that the sanction for reassessment was not sanctioned by a legally authorised officer, the Writ Petition is accordingly allowed.
9. In this view of the matter, we quash the reassessment Page 7 of 8 July 31, 2024 Ashwini Vallakati ::: Uploaded on - 01/08/2024 ::: Downloaded on - 01/08/2024 16:20:11 ::: 925-OSWPL-16181-2024.doc proceedings in their entirety on the aforesaid two grounds namely, non- compliance with Section 151 as well as Section 151A of the Act. Consequently, the Petition is allowed in terms of prayer clause (a) which is reproduced below:-
(a) That this Hon'ble Court may be pleased to issue under Article 226 of the Constitution of India an appropriate direction, order or a writ, including a writ in the nature of 'Certiorari', calling for the records of the case and, after satisfying itself as to the legality thereof, quash and set aside the Order u/s 148A(d) dated 18.04.2022, Ex. "C" herein, the Notice u/s 148 dated 18.04.2022, Ex. "D", the assessment order u/s 144B r.w.s. 147 of the Act and the Notice of Demand u/s 156 of the Act both dated 14.03.2024, Exs. "K" & "L"
herein respectively issued / passed by the Respondents and all consequential proceedings thereto including the notices seeking levy of penalty, Ex. "M" herein;
10. We make it clear that having disposed of this petition on the ground of non-compliance with Section 151 and Section 151A of the Act, we have not expressed any opinion on the other issues raised in the Writ Petition, since it is not necessary to do so.
11. Rule is made absolute in the aforesaid terms and the Writ Petition is hereby disposed of. No costs.
[ SOMASEKHAR SUNDARESAN, J.] [ G. S. KULKARNI, J.] Page 8 of 8 July 31, 2024 Ashwini Vallakati ::: Uploaded on - 01/08/2024 ::: Downloaded on - 01/08/2024 16:20:11 :::