Rakesh Ramdas Kanani (Huf) vs Income Tax Officer-23(3)(6)
2024 Latest Caselaw 24713 Bom

Bombay High Court

Rakesh Ramdas Kanani (Huf) vs Income Tax Officer-23(3)(6) on 26 August, 2024

Author: G. S. Kulkarni

Bench: G. S. Kulkarni

 2024:BHC-OS:13072-DB

                                                                                                      917-WPL-26944-2023.DOCX




                                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                     ORDINARY ORIGINAL CIVIL JURISDICTION
                                      WRIT PETITION (LODG.) NO. 26944 OF 2023

                       Rakesh Ramdas Kanani (HUF)                                             ... Petitioner
         Digitally
         signed by
         SHRADDHA
SHRADDHA KAMLESH                              Versus
KAMLESH TALEKAR
TALEKAR  Date:
         2024.08.27
         19:45:59
         +0530
                       1. Income Tax Officer-23(3)(6)
                       & 2 Ors.                                                               ...Respondents


                       Mr. Nishit Gandhi a/w. Ms. Aadnya Bhandari, for Petitioner.
                       Mr. Siddharth Chandrashekar, for Respondents.
                                          _______________________

                                               CORAM:                G. S. KULKARNI &
                                                                     SOMASEKHAR SUNDARESAN, JJ.

                                               Date       :           August 26, 2023
                                                    _______________________
                       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 24 April, 2023 (" impugned notice")

issued to the petitioner under Section 148 of the Act, and also the underlying

prior notice and order under Section 148A(b) and Section 148A(d) of the

Act, respectively. The reassessment under Section 148 of the Act has been

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initiated in respect of returns filed by the petitioner-Assessee for the

Assessment Year 2019-20.

3. On perusal of the record, it is apparent that the impugned notice

dated 30 March, 2023 issued under Section 148A(b), the order passed

thereon under Section 148A(d) dated 24 April, 2023 and the consequent

notice dated 24 April, 2023 issued under Section 148 of the Act are 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

August 26, 2024

Shraddha Talekar, PS

917-WPL-26944-2023.DOCX

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 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:-

(2024) 464 ITR 430

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Shraddha Talekar, PS

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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 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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Shraddha Talekar, PS

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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 the recent decisions of this Court in Nainraj

Enterprises Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax, Circle-

4(3)(1), Mumbai & Ors.2 and in Niranjana D. Madhavani Vs. Income Tax,

Circle 023(2)(6) & Anr. 3, whereby in similar circumstances, this Court has

allowed the petition considering the provisions of Section 151A of the Act.

Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024

Writ Petition (L.) No. 18281 of 2023 dt. 12-08-2024.

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7. Learned counsel for the revenue fairly agrees that this 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.4 ("Kairos Properties").

8. Learned counsel for the petitioner has also drawn our attention to the

decision of this Court in Kairos Properties, 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 as also

considering the observations of this Court in Kairos Properties , 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 petition is

Writ Petition (L) No. 22686 of 2024 dated 05.08.2024

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Shraddha Talekar, PS

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accordingly allowed in terms of prayer clause (a) which reads thus :

"(a) That this Hon'ble Court may be pleased to issue under Article 226 of the Constitution of India an appropriate direction, order or a writ, including a writ in the nature of 'Certiorari', calling for the records of the case and, after satisfying itself as to the legality thereof, quash and set aside the Notice(s) u/s 148A(b) dated 30.03.2023, Ex. "B" herein, the Order u/s 148A(d) dated 24.04.2023, Ex."D" herein and the Notice u/s 148 dated 24.04.2023 Ex. "F"

herein and all consequential proceedings thereto."

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

Shraddha Talekar, PS