Bombay High Court
Shailesh Motilal Shah vs Income Tax Officer Ward-41(3)(4) on 2 September, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:13545-DB
Digitally
signed by
906-WP 3670-24.DOC
PRAJAKTA
PRAJAKTA SAGAR
SAGAR VARTAK
VARTAK Date:
2024.09.04
10:29:00
+0530
Prajakta Vartak
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3670 OF 2024
Shailesh Motilal Shah ...Petitioner
Vs
Income Tax Officer Ward-41(3)(4) & Ors. ...Respondents
__________
Mr. Nishit Gandhi for Petitioner.
Mr. Ravi Rattesar for Respondents.
__________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
DATED: 02 September 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
has been filed to challenge a notice dated 26 April, 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 Act, respectively. The
reassessment under Section 148 of the Act has been 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
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dated 30 March, 2023 issued under Section 148A(b), the order passed
thereon under Section 148A(d) dated 26 April 2023 and the consequent
notice dated 26 April 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 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
1 (2024) 464 ITR 430
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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 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
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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]
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
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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 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 ambit of Section 151A of the Act.
2 Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024
3 Writ Petition (L) No. 22686 of 2024 dated 05.08.2024
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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.
8. The Learned counsel for the petitioner has also contended that the
notice under Section 148 as impugned which is also required to be held to
be illegal inasmuch as it does not satisfy the requirement of a three months
notice as incorporated in Section 148 vide Finance Act, 2023 w.e.f. 1 April
2023. His contention is that the order under Section 148A(d) of the Act
was passed on 26 April 2023 which is on a day after the amendments to
Section 148 as effected by Finance Act, 2023 were brought into effect that
is from 1 April 2023. He submits that once the provision itself ordains that
a notice of period of three months from the end of the month in which
such notice was issued in that case, the impugned notice under Section 148
cannot provide for a period of merely 30 days as set out in paragraph two
of the impugned notice under Section 148 which reads thus:
"2. I, therefore, propose to assess or reassess such income or
recompute the loss or the depreciation allowance or any other
allowance or deduction for the Assessment Year 2019-20 and I,
hereby, require you to furnish, within 30 days from the service of
this notice, a return in the prescribed form for the Assessment Year
2019-20."
9. We find substance in the contention as urged on behalf of the
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petitioner. Certainly, by the Finance Act, 2023 Section 148 has stood
amended whereby a period of three months from the end of the month in
which such notice under the provision is issued or such further period as
may be allowed by the Assessing Officer on the basis of an application
made in that regard by assessee, was inserted. It would be appropriate to
extract the relevant part of Section 148 to note the effect of the
amendment as brought about by Finance Act, 2023 which reads thus:
"[Issue of notice where income has escaped assessment.
148. Before making the assessment, reassessment or
recomputation under section 147, and subject to the provisions of
section 148A, the Assessing Officer shall serve on the assessee a
notice, along with a copy of the order passed, if required, under
clause (d) of section 148A, requiring him to furnish within [a
period of three months from the end of the month in which such
notice is issued, or such further period as may be allowed by the
Assessing Officer on the basis of an application made in this regard
by the assessee], a return of his income or the income of any other
person in respect of which he is assessable under this Act during
the previous year corresponding to the relevant assessment year, in
the prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed; and the
provisions of this Act shall, so far as may be, apply accordingly as if
such return were a return required to be furnished under section
139;
[Provided also that any return of income, required to be furnished
by an assessee under this section and furnished beyond the period
allowed shall not be deemed to be a return under section 139.]"
10. 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) which reads
thus :
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"(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 Order u/s
148A(d) dated 26.04.2023, Ex. "E" herein and the Notice u/s 148
dated 26.04.2023, Ex. "F" herein and the Notice /
communication dated 26.06.2024, Ex. "H" herein issued /
passed by the First and the Second Respondents and all
consequential proceedings thereto."
11. 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.
12. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
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