Bombay High Court

Pratik Prakash Sutrave Ay 2017-18 vs Income Tax Officer 20(1)(1) Mumbai on 1 August, 2024

Author: G. S. Kulkarni

Bench: G. S. Kulkarni

 2024:BHC-OS:11746-DB


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                                    IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                             ORDINARY ORIGINAL CIVIL JURISDICTION
         Digitally
         signed by
         SHRADDHA                              WRIT PETITION (L) NO. 19917 OF 2024
SHRADDHA KAMLESH
KAMLESH  TALEKAR
TALEKAR  Date:
         2024.08.05
         20:02:20
                           Pratik Prakash Sutrave                                             ...Petitioner
         +0530



                                 Versus
                           1. Income Tax Officer Ward-20(1)(1)                                ...Respondents
                              Mumbai & Ors.



                           Mr. Sham Walve a/w. Mr. Sameer Dalal, Advocate for Petitioner.

                           Ms. Mamta Omle, Advocate for Respondents.

                                             CORAM       : G. S. KULKARNI &
                                                             SOMASEKHAR SUNDARESAN, JJ.

                                             Date        : August 01, 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 28 July, 2022 issued to the Petitioner for

reassessment in Assessment Year 2017-18, 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 10

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May, 2023 which is also impugned.

3. On perusal of the record, it is apparent that the notice dated 28 July,

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 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

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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 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.,

1 (2024) 464 ITR 430

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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 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

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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 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.

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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 Respondent-

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 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. 3, would squarely apply to the facts of the

case.

2 Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024 3 (2023) 247 ITR 647

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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 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 be pleased to issue an appropriate Writ, order or direction under Article 226 of the Constitution of India calling for all papers and records of the Petitioner's case leading to initiation of reassessment proceedings by Respondents and after going through the same and examining the validity, legality and propriety thereof quash, cancel and set aside the, (i) Show Cause Notice dated 25 th May 2022 issued u/s 148A(b) of the Act (Ex. D), (ii) Order dated 22 nd July 2022 passed u/s 148A(d) of the Act (Ex. E), (iii) Notice dated 22nd July 2022 issued u/s 148 of the Act (Ex. F), (iv) Assessment Order dated 10th May 2023 passed u/s 147 r.w.s 144B (Ex. HJ, and all consequential Notices/Orders.

10. At this stage, Mr. Walve, Learned Counsel for the Petitioner, on

instructions, makes a statement that he withdraw the Appeal in view of the order

passed by this Court setting aside the impugned notice under Section 148 of the

Act. Statement is accepted.

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11. 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.

12. Rule is made absolute in the aforesaid terms and the Writ Petition is

hereby disposed of. No costs.