Bombay High Court
Kairos Properties Private Limited vs Assistant Commissioner Of Income-Tax ... on 5 August, 2024
Author: G.S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:11962-DB
907-WPL-22686-2024-7-8-2024.DOCX
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (LODG.) NO. 22686 OF 2024
Kairos Properties Private Limited, ... Petitioner
A-401 and 402, Delphi Orchard Avenue.
Hiranandani Gardens, Powai,
Mumbai - 400076
PAN: AAGCK5022K
Versus
1. Assistant Commissioner of Income-tax,
Circle-15(1)(2), Mumbai
Room No.483A, 4th Floor,
Aaykar Bhavan, Maharisi Karve Road,
Mumbai - 400 020
2. Chief Commissioner of Income-tax,
Mumbai-3, Mumbai,
Room No. 351, 3rd Floor,
Aaykar Bhavan, Maharishi Karve Road,
Mumbai - 400 020.
3. Union of India,
Through Joint Secretary & Legal Adviser,
Branch Secretariat,
Department of Legal Affairs,
Ministry of law and Justice,
2nd Floor, Aaykar Bhavan,
M. K. Road, New Marine Lines, ...Respondents
Mumbai - 400 020.
Mr. Madhur Agrawal i/b Mr. Atul K. Jasani, Advocate for Petitioner.
Mr. Akhileshwar Sharma, Advocate for Respondents.
_______________________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
Date : August 05, 2024
_______________________
August 05, 2024
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Oral Judgment (Per, G.S. Kulkarni, J.)
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 is filed
to challenge a notice dated 25 April, 2024 (" impugned notice") issued to the
Petitioner 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 notice under Section 148 of the Act has been issued to
the Petitioner in respect of returns filed by the Petitioner-Assessee for the
Assessment Year 2017-18.
3. On perusal of the record, it is apparent that the impugned notice dated 30
March, 2024 issued under Section 148A(b) and the order passed thereon under
Section 148A(d) dated 25 April, 2024 and the consequent notice dated 25 April,
2024 issued under Section 148 of the Act are issued by the Jurisdictional Assessing
Officer ("JAO") and not by a Faceless Assessing Officer ("FAO"), as required by
the provisions of Section 151A of the Act.
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4. To give effect to the provisions of Section 151A, the Central Government
has issued a Notification dated 29 March 2022 whereby faceless mechanism has
been introduced. Thus, necessarily by resorting to a procedure under Section 148A
the consequent notice is required to be issued under Section 148 of the Act, the
Assessing Officer needs to adhere to the provisions of Section 151 read with the
said notification. Thus, for a notice under Section 148 of the Act to be validly
issued, the Respondent-Revenue is required to comply with the provisions of
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 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
(2024) 464 ITR 430
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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 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
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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 no question
of petitioner having to prove further prejudice before arguing the
invalidity of the notice.
[Emphasis Supplied]
5. In the present case, it is apparent that the Respondent-Revenue has not
complied with the Scheme notified by the Central Government pursuant to Section
151A(2) of the Act. The Scheme has also been tabled before the 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.
6. Learned Counsel for the parties agree that the proceedings initiated under
the impugned notice issued to the Petitioner under Section 148 of the Act, would not
be sustainable in view of the judgment rendered in Hexaware. Learned Counsel for
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the Petitioner-Assessee 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. This apart it is submitted by Mr. Mohanty, Learned Counsel for the
Revenue that while the notice issued under Section 148 may be quashed and set
aside, considering the law declared by this Court in Hexaware (supra), however, the
order passed under Section 148A(d) and the notice issued by the JAO under Section
148A(b) cannot be set aside, since the requirement to issue notice in the faceless
mode, is a requirement attached only to Section 148 and not to Section 148A.
8. On a perusal of the notification and the relevant provisions of the Act,
namely Section 148A Clauses (b) and (d), it cannot be held that the proceedings
under these provisions would fall outside the scope of the Scheme, namely the "E-
Assessment of Income Escaping Assessment Scheme, 2022" ("Scheme"), as defined
in paragraph 3, as notified by the Central Government under notification dated 29
March, 2022 issued by the Ministry of Finance (Department of Revenue (Central
Board of Direct Taxes) ("notification"), it would be difficult to accept a proposition
that only the notice under Section 148 of the Act, in such circumstances, would be
Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024
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required to be quashed and set aside, and not the notice issued by the JAO under
Section 148A(b) and the order passed under Section 148A(d), as a consequence of
which the JAO has issued a notice under Section 148. The reasons for which are
discussed hereunder.
9. The Scheme under such notification has been issued to give effect to the
provisions of Section 151A of the Act, as the notification explicitly provides that it
has been issued under the powers conferred by sub-sections (1) and (2) of Section
151A of the Act by the Central Government. Paragraph 3 defining the scope of the
Scheme reads thus :
3. Scope of the Scheme - For the purpose of this
Scheme,--
(a) assessment, reassessment or recomputation under
Section 147 of the Act,
(b) issuance of notice under section 148 of the Act,
shall be through automated allocation, in accordance with risk
management strategy formulated by the Board be 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 or total income or
loss of the assessee.
10. On a plain reading of paragraph 3, it is clear to us that the provision of
Section 148A would also fall within the ambit/scope of the Scheme. All aspects
pertaining to 'assessment', 're-assessment' or 're-computation' under Section 147 of
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the Act and issuance of notice under Section 148 of the Act, are to be undertaken
through automated allocation, in accordance with risk management strategy
formulated by the Board, as provided for in Section 148 of the Act for issuance of
notice, and in a faceless manner, to the extent provided under Section 144B of the
Act, in making assessment or reassessment of total income or loss of assessee.
11. Having noted the scope of the Scheme under the aforesaid notification,
the basic provision under which such notification is issued, namely Section 151A
would also be required to be noted, which reads thus :
[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 re-computation 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] 3 or
sanction for issue of such notice under section 151, so as to impart
greater efficiency, transparency and accountability by--
(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,
re-computation 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
Inserted by the Finance Act, 2021, w.e.f. 1-4-2021.
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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 sub-section (2)
shall, as soon as may be after the notification is issued, be laid before
each House of Parliament.]
12. On a plain reading of sub-section (1) of Section 151A, it is seen that it
clearly provides that the Central Government may make a scheme by notification in
the Official Gazette for the purposes of assessment, reassessment or re-computation
under section 147 or issuance of notice under section 148 or conducting of enquiries
etc., or sanction for issue of such notice under section 151, so as to impart greater
efficiency, transparency and accountability which could be in terms of clauses (a), (b)
and (c) of sub-section (1) of Section 151A, namely, eliminating the interface between
the income-tax authority and the assessee or any other person, to the extent
technologically feasible; optimising utilisation of resources through economies of
scale and functional specialisation; and introducing a team-based assessment,
reassessment, re-computation or issuance or sanction of notice with dynamic
jurisdiction. Sub-section (2) makes it explicit that for the purpose of giving effect to
the Scheme made under sub-section (1), by notification in the Official Gazette, the
Central Government can also 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 and further under sub-section (3), every notification
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issued under sub-section (1) and sub-section (2) shall be laid before each House of
Parliament.
13. It is thus clear from the implications as brought about by the provisions of
Section 151A that the notification dated 29 th March, 2022 is issued in terms of what
has been provided under Section 151A. It has been issued after the amendments
were incorporated in sub-section (1) by Finance Act, 2021 with effect from 1 April,
2022. It would be thus difficult to accept a proposition when in paragraph 3(a) of
the Scheme defining the scope of the Scheme when the words "assessment",
"reassessment" or "re-computation" under Section 147 of the Act are explicitly
provided, and further when clause (b) inparagraph 3 of the Scheme provides for
issuance of notice under Section 148 of the Act, it would not take within its ambit
the provisions of Section 148A which are the initial steps, which in a given case are
required to be taken in issuance of notice under Section 148 of the Act. Section
148A provides for "Conducting inquiry, providing opportunity before issue of notice
under section 148". Thus, this provision postulates a procedure inextricably linked
to Section 148 which would apply to all cases of reassessment with a proviso
stipulating exceptions to the rule. In other words, Section 148A in its object, intent
and purpose is inextricably connected with the assessment, re-assessment or re-
computation, for which a notice under Section 148 may be issued. Any other view
would mean that the requirement to adopt the faceless procedure under the Scheme
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is a mere ministerial requirement for issuance of the notice. Such a reading would
not be in conformity with the objectives spelt out in clauses (a), (b) and (c) of Section
151A(1).
14. Thus, to accept a contention that merely because the notification does not
explicitly refer to the provisions of Section 148A, the scope of the Scheme as defined
in paragraph 3 would exclude the applicability of Section 148A, would lead to an
absolute absurdity, and more particularly, considering the express provisions of sub-
section (1) of Section 151A. Also it is not possible to accept reading of the provisions
of Section 144B de-hors Section 151A(1). Sub-section (2) of Section 151A is
specifically incorporated to empower the Central Government to exclude the
applicability of any of the provisions of the Act and/or to make such provisions
applicable with exceptions, modifications and adaptations. Nothing of this nature is
found in the notification to infer any exclusion of Section 148A, and when it clearly
concerns the entire assessment, reassessment or re-computation under Section 147
and issuance of notice in that regard under Section 148 of the Act.
15. Thus, the Central Government has not applied the provisions of sub-
section (2) of Section 151A to specifically exclude the application of Section 148A
from the scope of the Scheme in paragraph 3 of the notification dated 29 th March,
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2022, it would hence be not be possible to accept the Revenue's contention that the
provision of Section 148A stands excluded from the applicability of the faceless
mechanism.
16. For the aforesaid reasons, we would not accept Mr. Mohanty's submission
that the scope of the Scheme would exclude the applicability of Section 148A and if
steps are taken by the JAO under Section 148A culminating into issuance of a notice
under Section 148 of the Act, the entire exercise being undertaken outside the
faceless mechanism would be required to be quashed and set aside. There cannot be
any other reading of these provisions along with the notification.
17. In the light of the above discussion, and as there is no dispute that the JAO
had no jurisdiction to issue the impugned notice, the Writ Petition is accordingly
allowed in terms of prayer clause (a) which reads thus :
(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari or any
other writ order or direction under Article 226 of the Constitution of India
calling for the records of the case leading to the issue of the impugned initial
notice (Exhibit L) dated 30th March 2024, passing of the impugned order
(Exhibit P) dated 25th April 2024 and the issue of the impugned notice
(Exhibit Q) dated 25th April 2024 and after going through the same and
examining the question of legality thereof quash, cancel and set aside the
impugned initial notice (Exhibit L) dated 30th March 2024, the impugned
order (Exhibit P) dated 25th April 2024 and the impugned notice (Exhibit Q)
dated 25th April 2024;
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18. We make it clear that having disposed of this petition on the ground of
non-compliance with Section 151A of the Act, we have not expressed any opinion on
the other issues raised in the Writ Petition. The other questions raised in this petition
are not being answered since it is not necessary to do so.
19. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
August 05, 2024
Shraddha Talekar PS
Signed by: Shraddha K. Talekar
Designation: PS To Honourable Judge
Date: 08/08/2024 21:29:34
