Vidhyadhar Shetty - Ay 2018-19 vs Income Tax Officer Ward 28(1)(1) Mumbai
2024 Latest Caselaw 22758 Bom

Bombay High Court

Vidhyadhar Shetty - Ay 2018-19 vs Income Tax Officer Ward 28(1)(1) Mumbai on 6 August, 2024

Author: G.S. Kulkarni

Bench: G. S. Kulkarni

2024:BHC-AS:31664-DB
                                                                           916.WP10851_2024.DOC


     Vidya Amin
                         IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                 CIVIL APPELLATE JURISDICTION

                                      WRIT PETITION NO. 10851 OF 2024

                  Vidhyadhar Shetty                                     ... Petitioner

                                   Versus
                  Income Tax Officer, Ward 28(1)(1), Mumbai &           ... Respondents
                  Ors.

                  Mr. Sham Walve a/w. Mr. Sameer G. Dalal for the petitioner.
                  Mr. Arjun Gupta for the respondents.
                                       _______________________
                              CORAM:              G. S. KULKARNI &
                                                  SOMASEKHAR SUNDARESAN, JJ.

                               DATE                 6 August, 2024

                                       _______________________

                  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

challenging notice dated 29 July, 2022 issued by respondent no.1 to the

Petitioner under Section 148 of the Income Tax Act, 1961 ("the Act"), and also

a prior notice issued under Section 148A(b) and an order dated 29 July, 2022

passed under Section 148(A)(d) of the Act. The Assessment Year in question

is AY 2019-19.

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3. It is apparent that the impugned notice dated 29 July, 2022 issued under

Section 148 of the Act and the order of the same date under Section 148A(d)

of the Act are issued by the Jurisdictional Assessing Officer ("JAO") and not

under the mandatory faceless mechanism as per the provisions of Section 151A

of the Act. For a notice to be validly issued under Section 148 of the Act, the

Respondent No.2 would be required to comply with the provisions of Section

151A of the Act, so as to adhere to the faceless mechanism, as notified by the

Central Government by notification dated 29 March 2022. A Division Bench

of this Court in the case of Hexaware Technologies Limited Vs. Assistant

Commissioner of Income Tax & 4 Ors. 1 had considered the effect and

interpretation of the said provision. The relevant extract of the said decision

reads thus:-

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 29 th 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

1 (2024) 464 ITR 430

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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 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

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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 no question of petitioner having to prove further prejudice before arguing the invalidity of the notice.

[Emphasis Supplied]

4. It is hence apparent that in the present case, the impugned order and the

notices issued by respondent no.1 are not in compliance with the Scheme

notified by the Central Government implementing the provisions of Section

151A of the Act. The Scheme, as tabled before the Parliament as per the

requirements of the said provision, is in the nature of a subordinate legislation,

which governs the conduct of proceedings under Section 148A as well as

Section 148 of the Act. Thus, in view of the explicit declaration of the law in

Hexaware Technologies Limited (supra), the grievance of the petitioner-

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assessee insofar as it relates to an invalid issuance of the impugned order and

the notice is required to be accepted.

5. Learned Counsel for the parties agree that in this view of the matter, the

proceedings initiated under Section 148 of the Act would not be sustainable

and are rendered invalid in view of the judgment rendered in Hexaware

Technologies Limited (supra).

6. Apart from the petitioner's contention that the proceedings would stand

covered by the decision of this Court in Hexaware Technologies Limited

(supra), another contention as raised by the petitioner is in regard to the

impugned notice also being contrary to the decision of this Court in Siemens

Financial Services Pvt. Ltd. vs. Deputy Commissioner of Income Tax, Circle

8(2)(1), Mumbai & Ors.2. for the reason that the proceedings were initiated

well after the expiry of three years from the end of the relevant assessment year.

If this be so, the contention as urged on behalf of the petitioner is that the

sanction for initiating the reassessment ought to have been granted by the

authorities of the rank 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. It is

submitted that the issue in this regard is no more res integra in view of the

pronouncement of this Court in Siemens Financial Services Pvt. Ltd. (supra)

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as relied on behalf of the petitioner.

7. In Siemens Financial Services Pvt. Ltd., this Court held that the sanction

as granted by the authority would be rendered invalid in the case it is not

issued by the authorities specified in Clause (ii) in the event reassessment

proceedings were initiated well after the expiry of three years from the end of

the relevant assessment year. The following observations as made in Siemens

Financial Services Pvt. Ltd. are required to be noted, which reads thus:

"24. As per section 151 of the Act, the 'specified authority' who has to grant his sanction for the purposes of section 148 and section 148A is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. The present petition relates to the AY 2016-17, and as the impugned order and impugned notice are issued beyond the period of three years which elapsed on 31 st March, 2020 the approval as contemplated in section 151(ii) of the Act would have to be obtained which has not been done by the Assessing Officer. The impugned notice mentions that the prior approval has been taken of the 'Principal Commissioner of Income-tax - 8' ('PCIT-8') which is bad in law as the approval should have been obtained in terms of section 151(ii) and not section 151(i) of the Act and the PCIT-8 cannot be the specified authority as per section 151 of the Act. Further, even in the affidavit-in-reply, the department has accepted that the approval obtained is of the 'Principal Commissioner of Income- tax - 8' and, hence, such an approval would be bad in law.

25. TOLA, enacted on 29th September 2020 and came into force on 31st March 2020. It inter alia, provided for a relaxation of certain provisions of the Income-tax Act, 1961. Where any time limit for completion or compliance of an action such as completion of any proceedings or passing of any order or issuance of any notice fell between the period 20th March 2020 to 31st December 2020, the time limit for completion of such action stood extended to 31st March 2021. Thus, TOLA only seeks to extend the period of limitation and does not affect the scope of section 151.

26. The Assessing Officer cannot rely on the provisions of TOLA and

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the notifications issued thereunder as section 151 has been amended by Finance Act, 2021 and the provisions of the amended section would have to be complied with by the Assessing Officer, w.e.f., 1st April 2021. Hence, the Assessing Officer cannot seek to take the shelter of TOLA as a subordinate legislation cannot override any statute enacted by the Parliament. Further, the notification extending the dates from 31 st March 2021 till 30th June 2021 cannot apply once the Finance Act, 2021 is in existence. The sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151(ii) of the Act and since the sanction has been obtained in terms of section 151(i) of the Act, the impugned order and impugned notice are bad in law and should be quashed and set aside."

8. The decision in Siemens Financial Services Pvt. Ltd. (supra) was

subsequently followed in Vodafone Idea Ltd. vs. Deputy Commissioner of

Income Tax, Circle-5(2)(1), Mumbai & Ors. 3 where the Court made the

following observations:

"3. The impugned order and the impugned notice both dated 7 th April, 2022 state that the Authority has accorded the sanction is the PCIT, Mumbai-5, The matter pertains to Assessment Year (AY) 2018-19 and since the impugned order as well as the notice are issued on 7 th April, 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCIT as provided under Section 151(ii) of the Act. The proviso to Section 151 has been inserted only with effect from 1st April, 2023 and therefore, shall not be applicable to the matter at hand.

4. In this circumstances, as held by this Court in Siemens Financial Services Private Ltd. vs. Deputy Commissioner of Income Tax & Ors., the sanctino is invalid and consequently, the impugned order and impugned notice both dated 7th April, 2022 under section 148A(d) and 148 of the Act are hereby quashed and set aside."

9. In the light of the above discussion, and when there is no dispute that

the Jurisdictional Assessing Officer (JAO) had no jurisdiction to issue the

3 Writ Petition No. 2768 of 2022 dated 6 February, 2024

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impugned order and the impugned notices, the writ petition is required to be

allowed. It is accordingly allowed in terms of prayer clause (a), which reads

thus:-

"(a) That this Hon'ble Court may be pleased to issue a Writ of Certiorari or 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 27 May, 2022 issued under section 148A(b) of the Act (Ex. D); (ii) Order dated 29 July, 2022 passed under section 148A(d) of the Act (Ex. E); (iii) Notice dated 29th July, 2022 issued u/s. 148 of the Act (Ex. F), (iv) Assessment Order dated 24th May, 2023 passed u/s. 147 r.w.s.

144B (Ex. H) and all consequential Notices/Orders."

10. 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 as raised in the Writ Petition, which are expressly

kept open.

11. Rule is made absolute in the aforesaid terms. No costs.

(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)

Signed by: Vidya S. Amin

Designation: PS To Honourable Judge 6 August, 2024 Date: 08/08/2024 18:02:02