Bombay High Court
Ganesh Nivrutti Jagtap-2020-21 vs Assistant Commissioner Of Income Tax ... on 2 September, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:13541-DB
Digitally
signed by
PRAJAKTA
PRAJAKTA SAGAR
926-WPL 18265-24.DOC
SAGAR VARTAK
VARTAK Date:
2024.09.04
10:28:59
+0530
Prajakta Vartak
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L.) NO. 18265 OF 2024
Ganesh Nivrutti Jagtap ...Petitioner
Vs.
Assistant Commissioner of Income Tax
Central Circle 5(3), Mumbai & Ors. ...Respondents
__________
Mr. Devendra Jain i/b. Ms. Radha Halbe for Petitioner.
Ms. Swapna Gokhale 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 18 March, 2024 ("impugned notice")
issued to the petitioner under Section 148 of the Income Tax Act, 1966
("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 2020-21.
3. On perusal of the record, it is apparent that the impugned notice
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dated 07 March, 2024 issued under Section 148A(b), the order passed
thereon under Section 148A(d) dated 18 March, 2024 and the consequent
notice dated 18 March, 2024 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
to either the JAO or the FAO in the Scheme dated 29th March,
1 (2024) 464 ITR 430
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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
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,
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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
issuance of a notice is sustainable and consequently, the very manner in
which the proceedings have been initiated, vitiates the proceedings.
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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 ("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
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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required to be allowed.
8. In a decision rendered by us in the case of Abhin Anilkumar Shah
Vs. Income Tax Officer, International Tax, Ward Circle 4(2)(1) & Ors. 4
("Abhin Anilkumar Shah") in the context of the objections as raised on
behalf of the revenue that the petitioner's case pertains to the central
charges and hence impugned notice issued under Section 148 of the Act
would stand excluded from the applicability of the provisions of Section
144B read with Section 151A of the Act and the Scheme as notified by the
Central Government under the notification dated 29 March, 2022, we
have considered the issue of applicability of the said provisions in respect
of these exceptions sought to be urged by the revenue, namely, central
charges and international tax charges. The Court in the said case made the
following observations:-
"12. Having heard the learned counsel for the petitioner and
Mr. Mistry, the learned amicus, it is clear to us that although the
objection of Ms. Goel at the first blush appeared to be attractive,
when we first heard the matter on earlier occasion, however on a
deeper scrutiny, such objection needs to fail. Ms Goel's contention
that the category of cases as notified under order(s) dated 31
March, 2021 and 6 September, 2021 issued under section 119 of
the Act providing for exclusion of cases assigned to the central and
international charges from the applicability of Section 144B of the
Act is concerned, certainly cannot be accepted to be the correct
position in law.
13. Such contention of Ms Goel needs to fail for more than one
reason. Firstly, the order dated 31 March, 2021 issued under sub-
section (2) of Section 144B of I.T. Act and order dated 6
September, 2021 issued under section 119 of the Act apply only in
4 Writ Petition (L.) No. 16750 of 2024 dated 26-08-2024
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respect of "assessment orders to be passed, as clearly seen from the
content of both such orders, which we have extracted hereinabove;
Secondly, the scheme notified under section 151A under
notification dated 29 March, 2022 applying the procedure of
faceless mechanism to the proceedings under Section 148A and
Section 148 is neither subject to the applicability of the prior order
dated 31 March, 2021 read with 6 September, 2021 nor is it
explicit so as to include the applicability of the said orders to the
scheme as notified under section 151A; Thirdly, it would be doing
violence to the language of the notification/scheme dated 29
March, 2022 to read into such notification what has not been
expressly provided for and/or something which is kept outside the
purview of the said notification, namely, the orders dated 31
March, 2021 and 6 September, 2021. It would be uncalled for as
also not appropriate for the Court to read into the scheme dated
29 March, 2022, something which is not included. It cannot be
said that the Central Government was not aware as to what was
provided for in the orders dated 31 March, 2021 and 6 September,
2021 so as to not include the same under the scheme dated 29
March, 2022. It would thus be not correct, that the Court
nonetheless reads into the scheme dated 29 March, 2022 the
applicability of orders dated 31 March, 2021 and 6 September,
2021. In fact such approach would also be contrary to the mandate
of Section 151A and to the scheme framed thereunder.
14. Thus, accepting Ms Goel's contention to read into the
scheme as contained in the notification dated 29 March 2022, the
applicability of the order dated 31 March, 2021 and 6 September,
2021 would in fact amount to not only rewriting such scheme
issued by the Central Government but reading something into the
provisions of section 151A which the legislature itself has not
provided for. Section 151A and the Scheme notified below it stand
independent under the notification dated 31 March 2022. Further,
as rightly pointed out by Mr. Mistry, Section 151A is not subject to
the other provisions of the Act when it empowers that the Central
Government to make a scheme in the context of section 147 or for
issuance of notice under section 148A and for conducting a prior
enquiry by issuance of a show-cause notice or passing order under
section 148A of the Act. The provisions is intended with an object
of achieving efficiency, transparency and accountability inter alia
by eliminating the interface between the income tax authority,
optimizing utilization of the resources through economies of scale
and functional specialization, and by introducing a team based
assessment, reassessment, recomputation or issuance or sanction of
notice with dynamic jurisdiction, as set out in clauses (a), (b) and
(c) of sub-section 151A of the Act.
15. Thus, on a bare reading of section 151A as it stands, read
with the scheme notified thereunder, we are of the clear opinion
that the observations as contained in Paragraphs 10 and 11 of our
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decision in CapitalG LP do not require any reconsideration.
16. In the above context, Mr. Mistry has also drawn our
attention to the decision of the Division Bench of the High Court
of Telangana in Sri Venkataramana Reddy Patloola Vs. Deputy
Commissioner of Income Tax, Circle 1(1), Hyderabad & Ors .
(2024 SCC OnLine TS 1792) to contend that such decision
fortifies the view taken by us in CapitalG LP (supra) to submit that
such decision takes a similar view, when an identical issue had
fallen for consideration of the Division Bench of the High Court
of Telangana, namely, whether the show-cause notice issued under
section 148 of the Act in matters relating to international taxation
charges are exempted to follow the procedure of faceless
proceedings. In an elaborate judgment, their Lordships
considering the provisions of section 151A as also the Notification
dated 6 September, 2021 and the scheme notified by the Central
Government under Notification dated 29 March, 2022 have held
that only the actual assessment or reassessment would be laid in a
face to face mode while the selection of cases and issue of notices
could be in the faceless mode.
18. The result of the above discussion is to the effect that this
Court not only in Hexaware and thereafter in CapitalG LP but also
the Division Bench of the High Court of Telangana in Sri
Venkataramana Reddy Patloola (supra), to have consistently held
that in respect of central charges and international taxation
charges, the proceedings under Section 148A read with Section
148 of the Act would be required to be held in a faceless manner,
applying the provisions of section 144B and as effected under the
provisions of section 151A read with scheme notified by the
Central Government vide a Notification dated 29 March, 2022.
We accordingly reject the contentions as urged by the revenue that
the present case would fall outside the applicability of the said
provisions and the scheme."
9. In this view of the matter, Ms. Gokhale, learned counsel has urged
on behalf of the revenue that as the present case pertains to the central
charges, it would be required to be excluded, cannot be accepted and it
would be required to be rejected. The writ petition 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
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Certiorari or a Writ in the nature of Certiorari or any other appropriate
Writ, Order or direction, calling for the records of the Petitioner's case
and after going into the legality and propriety thereof, to quash and set
aside notice dated 07.03.2024 u/s 148A (b) (Exhibit B1), order dated
18.03.2024 passed under section 148A(d) (Exhibit E) and the notice dated
18.03.2024 issued under section 148 of the Act (Exhibit G)."
10. It is clarified 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.)
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