Bombay High Court
Deepbharti Welfare Society - Ay 2016-17 vs Income Tax Exemption Ward Thane on 26 August, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-AS:34407-DB
935-ASWP-11419-2024.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 11419 OF 2024
Deepbharti Welfare Society AY 2016-17
... Petitioner
Versus
Income Tax Exemption Ward Thane & Ors ...Respondents
Mr. Pradeep S. Jetly, Senior Advocate, a/w Sham V. Walve &
Sameer G. Dalal, Advocates for Petitioner.
Mr. A.K. Saxena, Advocate for Respondents.
_______________________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
Date : AUGUST 26, 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 21 March, 2023
("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
Digitally
signed by
ASHWINI
ASHWINI JANARDAN
JANARDAN VALLAKATI
VALLAKATI Date:
Act, respectively. The reassessment under Section 148 of the Act has
2024.08.28
13:15:28
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935-ASWP-11419-2024.DOC
been initiated in respect of returns filed by the Petitioner-Assessee
for the Assessment Year 2016-17.
3. On perusal of the record, it is apparent that the impugned
notice dated 20 January, 2023 and 9 February, 2023 issued under
Section 148A(b), the order passed thereon under Section 148A(d)
dated 21 March, 2023 and the consequent notice dated 21 March,
2023 issued under Section 148 of the Act are all 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.
4. To give effect to the provisions of Section 151A, the Central
Government has issued a Notification dated 29 March 2022 whereby
a faceless mechanism has been introduced. Thus, necessarily in
resorting to a procedure under Section 148A and the consequent
notice to be issued under Section 148 of the Act, the Assessing Officer
is required to adhere to the provisions of Section 151A read with the
Notification. Thus, 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
August 26, 2024
935-ASWP-11419-2024.DOC
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
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
(2024) 464 ITR 430
August 26, 2024
935-ASWP-11419-2024.DOC
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
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]
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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 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.
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 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. Learned Counsel for the Revenue fairly agreed that this
Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024
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proceeding would stand covered by the decisions of the Division
Bench of this Court in the cases of Hexaware and Kairos Properties
Pvt. Ltd. vs. Assistant Commissioner of Income-tax and Ors .3
("Kairos Properties").
8. 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.4 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
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.
9. 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
Writ Petition (L) No. 22686 of 2024 dated 05.08.2024
Writ Petition (L) No. 22686 of 2024 dated 05.08.2024
August 26, 2024
935-ASWP-11419-2024.DOC
Petition is accordingly allowed in terms of prayer clause (a) which
reads thus :
"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 (i) Show Cause Notices dated 20.01.2023 & 09.02.2023 issued u/s
148A(b) of the Act (Ex. A and Ex. B), (ii) Order dated 21.03.2023 passed u/s
148A(d) of the Act (Ex. D), (iii) Notice dated 21.03.2023 issued u/s 148 of the
Act (Ex. E), and (iv) Assessment Order dated 05.03.2024 u/s 147 r.w.s. 144 &
144B of the Act (Ex. G) and (v) 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 raised in the Writ Petition.
The other questions raised in this petition are not being answered
since it is not necessary to do so.
11. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
August 26, 2024
