Bombay High Court
Samp Furniture Pvt Ltd vs Income Tax Officer Ward-3(3)-Thane on 5 August, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:12647-DB
O-901-OSWP-3290-2024.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3290 OF 2024
Samp Furniture Pvt. Ltd. ...Petitioner
Versus
Income Tax Officer, Ward 3(3)-Thane & Ors ...Respondents
Mr. Devendra Jain, Advocate for the Petitioner.
Mr. Akhileshwar Sharma, Advocate for Respondents.
CORAM : G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
DATE : AUGUST 05, 2024
PC :
1. This is a classic case of an absolute abuse of the powers vested
in the public officer namely, the Jurisdictional Assessing Officer (for short
"JAO"), Income Tax Officer, Ward 3(3)-Thane. We begin this order
PRASHANT
VILAS
RANE
saying so, as we find that the JAO has either acted with total non-
application of mind or otherwise, initiating proceedings against the
Petitioner under Section 148A of the Income-tax Act, 1961 (for short "the
Act") as also in issuing the notice under Section 148. In our opinion, the
irresponsible and/or not an honest conduct (we do not know) of the JAO
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is further compounded from the reading of the reply affidavit filed to this
Petition in which, not a slightest attempt is made, to point out as to why
the JAO did not take into consideration the Assessment Order dated 20
December, 2019 passed under Section 143(3) of the Act. This for the
reason that the assessment order considers the very transaction which is
the subject matter of the notice issued to the Petitioner under Section
148A(b), i.e., an amount of Rs.4 Crores deposited by the Petitioner in his
bank account No.005013600000217 on 10 November, 2016, after
demonetization. Significantly the Petitioner has annexed to the Petition,
assessment order dated 20 December, 2019, wherein in paragraph 16, the
Assessing Officer had taken into consideration such deposit and added the
said amount to the Petitioner's income. Further the Petitioner being
aggrieved by such order had approached the Commissioner of Income Tax
Appeal (for short "CIT(A)") who passed an order dated 26 February, 2024
deleting such addition. All such material along with the documents was
always available on the record of the department and the concerned
Assessing Officer. The order of the CIT(A) has also been annexed to the
petition.
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2. The Petitioner's contention is that despite the order in appeal
passed by the CIT(A), for the reason only known to the JAO, the
Petitioner is issued the impugned notice under Section 148 of the Act, on
the very same ground as set out in the annexure to the notice under
Section 148A(b) dated 8 February, 2024.
3. Although at the time the notice under Section 148A(b) was
issued (i.e., on 8 February, 2024), the order by the CIT(A) was yet to be
passed (as passed on 26 February, 2024), however, by the time the order
under Section 148A(d) was passed on 8 March, 2024, the JAO was fully
aware of the outcome in the Appeal. The order passed under Section
148A(d) is conspicuously silent about such adjudication on the very facts,
on which reassessment is being contemplated. The JAO himself was a
party to the Appeal, hence he was aware about the order dated 26
February, 2024 passed by the CIT(A). Even the writ petition has annexed
the order passed by the CIT(A) and yet, the reply affidavit simply does not
comment/deal with the same.
4. Things do not stop at this. Despite all such materials being
available with the department, a mechanical sanction has been granted
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under Section 151(ii) of the Act by the Chief Commissioner of Income-
tax, which is also without application of mind. It is on such backdrop,
contrary to the provisions of Section 151A namely, outside the faceless
mechanism as applicable under the notification dated 29 March, 2022
issued by the Central Government, the impugned notice under Section
148 of the Act was issued to the Petitioner.
5. On the above backdrop, the Petitioner is before the Court
challenging the notice under Section 148A(b) and the order passed
thereon under Section 148A(d), as also, the notice under Section 148.
6. The primary grievance of the Petitioner to such actions
initiated by concerned officers against the petitioner, is that the impugned
proceedings are initiated with gross non-application of mind and/or much
more than mechanically, as the entire basis of such notices is the amount
which was subject matter of consideration of the Assessing Officer in the
assessment order which has ultimately resulted in its deletion. So also, the
impugned notice under Section 148 dated 8 March, 2024 is issued
contrary to the provisions of Section 151A, it is hence, submitted that the
impugned actions/notices would be required to be held illegal, including
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on the basis of the principles as laid down by Division Bench of this Court
in Hexaware Technologies Limited Vs. Assistant Commissioner of Income
Tax & 4 Ors. 1. Also the sanction as accorded under Section 151 is
without application of mind and/or mechanical.
7. A reply affidavit is filed to this Petition of Mr. Naresh Kumar,
the JAO which has shocked our conscience. What surprises us is the
approach of the JAO, when at the first instance he refuses to acknowledge
the Petitioner's case in regard to the amount of Rs.4 Crores already being
considered on its merits in the assessment orders, wherein the JAO had
added such amounts to the Petitioner's income. The assessment order is
dated 20 December, 2019 in which the Assessing Officer in regard to the
said amount has made the following observations:-
16. In view of above facts, the cash deposit amount of
Rs.4,00,00,000/- during FY 2016-17 in this is liable to be assessed as
income u/s 69A r.w.s 115BBE of the I.T. Act for the reasons
mentioned above. Accordingly, an amount of Rs.4,00,00,000/- is
hereby added to the total income of the assessee u/s 69A r.w.s.
115BBE of the Income-tax Act for the year under consideration.
Further, addition in this case has been made u/s 69A of the Act,
therefore, penalty proceedings u/s 271AAC of the Act is initiated
separately for the year under consideration.
(2024) 464 ITR 430
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17. After verification of the detailed discussion as above, the
income of the assessee is assessed as under:
Returned income Rs. 20,09,955/-
Add: As per para 14 Rs. 4,00,00,000/-
Total Income Rs. 4,20,09,965/-
Assessed Income Rs. 4,20,09,970/-
8. At the second instance, the deponent of the reply affidavit has
not accorded any sanctity to the order dated 26 February, 2024 passed by
the CIT(A) in appellate proceedings under Section 250 of the Act,
wherein on this very issue, such addition as made by the Assessing Officer
had stood deleted. We do not find that there was any acceptable / cogent
reason or any justification whatsoever, for the Assessing Officer not to
consider, discard and overlook the legal effect of such orders passed by the
appellate authority. Such significant material which had a direct bearing on
any notice to be issued under Section 148A(b) and an order to be passed
thereon, and in issuance of further notice under Section 148, in our
opinion is certainly quite gross, amounting to a dereliction of duty,
discarding from the path of law.
9. It also cannot be accepted that the JAO was totally alien to the
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proceedings leading to the assessment order dated 20 December, 2019
and the subsequent appellate proceeding before the CIT(A) culminating
into the order dated 26 February, 2024. In such context a perusal of the
reply affidavit in fact indicates that quite astonishingly the Assessing
Officer has thought it proper not to deal with such vital facts, which were
paramount in initiating any reassessment proceedings, on the very same
issue, which had attained finality. The JAO in fact proceeded to resort to a
Section 148 action, as if there is no assessment order dated 20 December,
2019 and the appellate order passed by CIT(A). This is clear from the
reasons the JAO has set out in paragraph 7, 8 and 9 of the reply affidavit.
Such statements and/or justifications to initiate action under Section
148A(b) and (d), as rightly pointed out on behalf of the Petitioner, shows
something more than a gross non-application of mind.
10. Further, what has disturbed us more, is that when a reply
affidavit is filed, it needs to deal with the Petitioner's case in the writ
petition, in which the Petitioner has unfailingly annexed the assessment
order as also the orders passed by the CIT(A) which are on the amounts
subject matter of the impugned notices. This position would be clear even
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to a layman, that there were prior proceedings qua the very same amounts
being added to the Petitioner's income, and the subsequent deletion of
these amounts by the appellate authority. In the reply affidavit, there is not
a whisper of acknowledgment to these facts, much less any statement in
denial, on case made out by the Petitioner so as to point out to the Court
as to how these orders would not be relevant in the context of the notice
issued when the amount of Rs.4 Crores being the deposited in the very
same account, was subject matter of consideration and assessment in
passing the assessment order as noted by us hereinabove. All this indicates
that the deponent has not only shown total discourtesy but also was callous
much less not truthful in his approach, to file such affidavit before the
Court. Being the JAO, the deponent was certainly required to discharge
his duties in accordance with law, when he is supposed to wield such
enormous powers, conferred on him in law. Such power is coupled with an
onerous public duty and responsibility to act in accordance with law. It is
least expected that the JAO would act mechanically and for any extraneous
reason initiates proceedings against the assessee.
11. This apart we also find that quite absurd and unwarranted
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statements are made by the JAO in paragraph 12 of the reply affidavit,
when he says that the department does not agree with the judgment of this
Court in Hexaware Technologies Limited (Supra). It may be that the
Revenue has not "accepted" the judgment but it would not mean that till
the same is set aside in a manner known to law, the same has lost its
binding force as the deponent intends to say in paragraph 12, so as to
proceed as if there is no such desicision of this Court, and much less a
binding decision. It is noteworthy that this very approach of treating
judgments being "not acceptable" is in the teeth of the law as laid down by
the Supreme Court deprecating such conduct of the authorities. In Union
Of India And Others vs. Kamlakshi Finance Corporation Ltd 2 the
Supreme Court in identical circumstances held as under:-
6. Sri Reddy is perhaps right in saying that the officers were not
actuated by any mala fides in passing the impugned orders. They
perhaps genuinely felt that the claim of the assessee was not tenable and
that, if it was accepted, the Revenue would suffer. But what Sri Reddy
overlooks is that we are not concerned here with the correctness or
otherwise of their conclusion or of any factual malafides but with the
fact that the officers, in reaching in their conclusion,by-passed two
appellate orders in regard to the same issue which were placed before
them,one of the Collector (Appeals) and the other of the Tribunal . The
High Court has, in our view, rightly criticised this conduct of the
Assistant Collectors and the harassment to the assessee caused by the
failure of these officers to give effect to the orders of authorities higher
to them in the appellate hierarchy. It cannot be too vehemently
1992 (1) SCC SUPP 443
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emphasised that it is of utmost importance that, in disposing of the
quasi-judicial issues before them, revenue officers are bound by the
decisions of the appellate authorities; The order of the Appellate
Collector is binding on the Assistant Collectors working within his
jurisdiction and the order of the Tribunal is binding upon the Assistant
Collectors and the Appellate Collectors who function under the
jurisdiction of the Tribunal. The principles of judicial discipline require
that the orders of the higher appellate authorities should be followed
unreservedly by the subordinate authorities. The mere fact that the
order of the appellate authority is not "acceptable" to the department -
in itself an objectionable phrase - and is the subject matter of an appeal
can furnish no ground for not following it unless its operation has been
suspended by a competent court. If this healthy rule is not followed, the
result will only be undue harassment to assessees and chaos in
administration of tax laws.
*****
12. We have dealt with this aspect at some length, because it has been
suggested by the learned Additional Solicitor General that the
observations made by the High Court, have been harsh on the officers.
It is clear that the observations of the High Court, seemingly vehement,
and apparently unpalatable to the Revenue, are only intended to curb a
tendency in revenue matters which, if allowed to become widespread,
could result in considerable harassment to the assesses-public without
any benefit to the Revenue . We would like to say that the department
should take these observations in the proper spirit. The observations of
the High Court should be kept in mind in future and the utmost regard
should be paid by the adjudicating authorities and the appellate
authorities to the requirements of judicial discipline and the need for
giving effect to the orders of the higher appellate authorities which are
binding on them.
[Emphasis Supplied]
13. While the aforesaid judgment was passed by the Supreme
Court way back in 1991, the declaration of the law as laid down in such
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decisions appears to not have been absorbed and overlooked.
14. In the above circumstances, we must observe that although we
have a pronouncement of a co-ordinate Bench of this Court on the
provisions of law, in Hexaware Technologies Limited (Supra) , an affidavit
cannot be filed before this Court, to challenge such pronouncement. We
are unaware as to how and in what manner the JAO/ the Respondents are
advised to file such affidavits. Clearly on affidavit a position being taken
that the judgment on a point of law declared by this Court, is not
acceptable, is wholly irresponsible. The concerned officers who are
supposed to know the Income Tax Act and the law, that the decisions of
the jurisdictional High Court would bind them, cannot have an approach
of such open disregard to the orders passed by this Court. It is also not the
case that before they file any affidavit in the Court they are not legally
advised, as to what ought to be an appropriate and proper content of an
affidavit, as the law would require the department to file. Also the officer/
deponent needs to know the purpose for which a reply affidavit is
necessary in a legal proceeding. A reply affidavit certainly cannot be a
mechanical exercise and an empty formality and / or for that matter for
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any statistical purpose. The present case reflects a very poor state of affairs
on the part of the JAOs which is also not being corrected by the higher
officials namely, the Commissioner and Chief Commissioner of Income-
tax. In the present case even the Chief Commissioner of Income Tax has
acted with total non-application of mind. As seen from paragraph 13 of
the affidavit, what has been mechanically done is, by some method of
online as well as offline, an approval has been accorded by the Chief
Commissioner of Income Tax on 7 March, 2024, the same being made
available on the order sheet for issuance of the impugned notice. There is
no explanation whatsoever as to why such materials which were on the
record of the department were not considered and dealt in according such
approval. It thus appears that the Chief Commissioner of Income Tax has
also acted without application of mind, this has clearly caused prejudice
and harassment to the Petitioner. Nowhere the provisions of the Act
would justify such action permitting the Chief Commissioner to exercise
powers under Section 151 in such manner. In fact in exercising authority
in such manner, the whole purpose of a sanction under Section 151 stands
defeated, which would be actions against the object and spirit of the
provisions of law resulting in civil consequences. It appears that in the
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present proceedings the Chief Commissioner has also acted, with quite a
haste. For all these reasons, we are more than sure that this is a fit case,
where not only the reliefs as prayed by the Petitioner are required to be
granted, but also the brazen untenable stand of the Respondents on what
has been observed hereinabove needs to be deprecated. The JAO has
refused to acknowledge the orders passed by the CIT(A) involving the
very amounts in regard to which the reply affidavit is blissfully silent. This
is in fact travesty of law and nullifying the binding effect of the orders
passed by the appellate authority.
15. In the above circumstances, we would be failing in our duty if
we do not reprimand such conduct of the JAO in discarding materials
which, in fact, prohibited him from issuing the impugned notice as also
the Chief Commissioner when he accorded a mechanical sanction. Apart
from this, except for the brazen stand taken by the JAO that the decision
of this Court in Hexaware Technologies Limited (Supra) is not accepted
by the department, so as to justify the impugned notices, there is no
acceptable justification as to why the proceedings qua the impugned notice
under Section 148 would not stand covered by the decision in Hexaware
Technologies Limited (Supra).
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16. We accordingly allow this Petition in terms of prayer clause (a).
17. Considering our observations as made above, we direct the JAO
as also the Chief Commissioner to deposit personal cost of Rs.25,000/-
each, to be deposited with the "National Association for the Blind", having
its office at 11/12 Khan Abdul Gaffar Khan Road, Opp. Bandra Worli Sea
Link, Mumbai, India (nabindia.org.in) within two weeks from the day a
copy of this order is available.
18. Disposed of in the aforesaid terms.
[ SOMASEKHAR SUNDARESAN, J.] [G. S. KULKARNI, J.]
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