Bombay High Court
Reliance Industries Ltd vs Deputy Commissioner Of Income-Tax, ... on 9 August, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:12761-DB
903-WPL-17817-2024.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (LODG.) NO. 17817 OF 2023
Reliance Industries Ltd. ... Petitioner
Digitally
signed by
SHRADDHA
SHRADDHA KAMLESH
KAMLESH TALEKAR
TALEKAR
Versus
Date:
2024.08.21
18:59:33
+0530 1) Deputy Commissioner of Income-tax,
Circle 3(4), Mumbai.
2) Principal Chief Commissioner of Income-tax,
Mumbai-400020.
3) Union of India,
Through the Secretary,
Department of Finance, Ministry of Finance,
New Delhi-110001. ...Respondents
****
Mr. J.D. Mistri, Senior Advocate a/w. Mr. Madhur Agarwal, Mr. Ashwin Dave,
Mr. Ketan Dave, Mr. Amit Mathur and Mr. P.C. Tripathi i/b A.S. Dayal and
Associates, for Petitioner.
Mr. Arjun Gupta, for Respondents-Revenue.
_______________________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
Date : August 09, 2024
_______________________
P. C. :
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
by the Petitioner praying for the following substantive reliefs :
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(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 notices (Exhibit E) dated 21st March 2023 and (Exhibit
J) dated 31st March 2023, passing of the impugned order (Exhibit L)
dated 1st May 2023 and the issue of the impugned notice (Exhibit M)
dated 1st May 2023 and after going through the same and examining the
question of legality thereof quash, cancel and set aside the impugned
initial notices (Exhibit E) dated 21st March 2023 and (Exhibit J) dated
31st March 2023, the impugned order (Exhibit L) dated 1 st May 2023 and
the impugned notice (Exhibit M) dated 1st May 2023;
(b) that this Hon'ble Court may be pleased to issue a Writ of
Mandamus or a Writ in the nature of Mandamus, or any other
appropriate Writ, Order or Direction under Article 226 of the
Constitution of India, ordering and directing the Respondents to
withdraw the impugned initial notices (Exhibit E) dated 21 st March 2023
and (Exhibit J) dated 31st March 2023, the impugned order (Exhibit L)
dated 1st May 2023 and the impugned notice (Exhibit M) dated 1 st May
2023;
(c) that this Hon'ble Court be pleased to issue a Writ of Prohibition or
any other writ order or direction under Article 226 of the Constitution of
India ordering and directing the Respondent No.2 not to take any action
in furtherance to the impugned initial notices (Exhibit E) dated 21 st
March 2023 and (Exhibit J) dated 31st March 2023, the impugned order
(Exhibit L) dated 1st May 2023 and the impugned notice (Exhibit M)
dated 1st May 2023;
(d) that pending the hearing and final disposal of this petition the
Respondents, their successors in office, subordinates, servants and
agents be restrained by an order and injunction of this Hon'ble Court
from taking any further steps pursuant to the passing of the impugned
order (Exhibit L) dated 1st May 2023 and the issue of the impugned
notice (Exhibit M) dated 1st May 2023."
3. The notice under Section 148 of the Income Tax Act, 1961 (" the Act")
dated 1 May, 2023 ("impugned notice") has been issued to the Petitioner in respect
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of returns filed by the Petitioner-Assessee for the Assessment Year 2016-17.
4. The primary contention as urged by Mr. Mistri, Learned Senior Counsel
on behalf of the Petitioner is that the impugned notice as also the prior procedure
followed for issuing notice dated 31 March, 2023 under Section 148A(b) and an
order dated 1 May, 2023 under Section 148A(d) are undertaken in breach of the
provisions of Section 151A read with the provisions of Section 144B of the Act
mainly that it is outside the faceless mechanism. It is on such ground, it is
contended that the reliefs as prayed by the Petitioner are required to be granted.
5. Briefly, the facts in the case may be summarized as follows :-
A) Following Assessment Year 2016-17, the Petitioner originally filed
return of income on 25 November, 2016 which was revised and re-filed on
27 March, 2017 and 30 March, 2018.
B) The case was taken up for scrutiny assessment under Section 143(2)
after which an assessment order came to be passed on 25 March, 2019.
C) On 27 March, 2021, a notice under Section 148 seeking to reassess
the return for Assessment Year 2016-17 came to be issued. On 27 March,
2022, a re-assessment order was passed.
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D) On 21 March, 2023, another notice under Section 148A(a) came to
be issued for reassessment of income for the very same assessment year,
which is not impugned in this petition. The ground for the second re-
assessment is that the Petitioner extracted excess gas from its wells which led
to extraction of gas outside the territorial boundaries allocated to the
Petitioner.
E) On 27 March, 2023, the Petitioner filed its objections which were
further supplemented on 31 March, 2023, coupled with a request for copy
of the prior approval of the specified authority.
F) On 31 March, 2023, a notice under Section 148A(b) came to be
issued to which the Petitioner filed objections dated 24 April, 2023.
Essentially, the Petitioner's contention was that even assuming there had
been excess extraction of gas, the same would be metered and there is no
scope for income escaping assessment.
G) On 1 May, 2023, the order under Section 148A(d) approving re-
assessment coupled with the impugned notice under Section 148 came to
be issued.
6. Mr. Gupta, Learned Counsel for the Revenue fairly submits that the notice
issued under Section 148A(b), the order passed thereon under Section 148A(d)
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and the consequent impugned notice 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.
7. 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 151A 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
(2024) 464 ITR 430
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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 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
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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 no question of petitioner
having to prove further prejudice before arguing the invalidity of the
notice.
[Emphasis Supplied]
8. 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 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
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consequently, the very manner in which the proceedings have been initiated,
vitiates the proceedings.
9. 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 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.
10. Learned Counsel for the Petitioner has also drawn our attention to
the decision of this Court in Kairos Properties Pvt. Ltd. vs. Assistant
Commissioner of Income-tax and Ors.3, where the Court considered the effect
of scheme as notified by the Central Government under the notification dated
29 March, 2022. The Court, considering the relevant provisions, has held that
this scheme as notified in paragraph 3 of the notification would take within its
ambit steps taken by the Revenue in issuing notice under section 148A(b) as
also an order passed under Section 148A(d), so as to be included within the
Writ Petition (L.) No. 16918 of 2024 dated 02-07-2024.
Writ Petition (L.) No. 22686 of 2024 dated 05-08-2024.
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ambit of Section 151A of the Act. In this view of the matter, on both
applicability of the law as laid down by this Court in Hexaware (supra) as also
considering the observations of this Court in Kairos Properties Pvt. Ltd.
(supra), the petition would be required to be allowed.
11. 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).
12. 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.
13. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
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