TPL HGIEPL JOINT VENTURE vs. UNION OF INDIA

WPL-15292-2024.DOCX lgc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO. 15292 OF 2024 TPL – HGIEPL Joint Venture, ] Unincorporated joint venture between ] HG Infra Engineering Pvt Ltd. and Tata ] Projects Limited ] Having its address at: ] C/O Tata Projects Limited, One Boulevard, ] Lake Boulevard Road, Hiranandani Business, ] Park, Powai, Mumbai, Maharashtra – 400 076. ] …Petitioner Versus 1. Union of India ] (through the Secretary) ] Government of India, ] Ministry of Finance, ] Department of Revenue, North Block, ] New Delhi. ] 2. Deputy Director of Income Tax, ] CPC, Bengaluru ] Centralized Processing Centre, ] Prestige Alpha, Post Bag No. 3, ] Electronic City Post, Hosur Road, ] Bangalore – 560 100 ] 3. Assistant Commissioner of Income Tax ] Circle 15(3)(1) Mumbai, Room No. 653, ] 6th Floor, Aayakar Bhawan, Maharishi ] Karve Road, Mumbai – 400 020 ]..Respondents

______________________________________________________ Mr Dhinal Shah (Through V.C.) with Mr Mihir Beradia, i/b, V. M. Legal, for Petitioner. Mr Akhileshwar Sharma, for Respondents. ______________________________________________________ Page 1 of 13 LAXMIKANT GOPAL CHANDAN Digitally signed by LAXMIKANT GOPAL CHANDAN Date: 2025.03.27 15:15:33 +0530 CNR No : HCBM020152982024 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

2025:BHC-OS:4949-DB

WPL-15292-2024.DOCX CORAM: M.S. Sonak & Jitendra Jain, JJ. Revered on 25 MARCH 2025 Pronounced on 27 MARCH 2025 JUDGMENT:- (Per M. S. Sonak, J) 1. Heard learned counsel for the parties. 2. Rule. The rule is returnable immediately at the request and with the consent of the learned counsel for the parties. 3. The Petitioner challenges the order dated 13 December 2023 (Exhibit-C) passed under Section 139(9) of the Income Tax Act, 1961 (“IT Act”), declaring the Petitioner’s return as invalid. Though the impugned order contains no reasons, the Respondent’s reply states that the Petitioner’s return was declared invalid for non-filing a compulsory audit report under Section 44AB of the IT Act. 4. The brief facts in which this challenge arises need to be mentioned. This petition concerns Assessment Year 2022-23, for which the Petitioner filed its income tax return on the department’s portal on 27 July 2022. On 14 December 2022, the Petitioner received a notice, possibly generated by the CPC/Portal, raising defects in the return. This notice stated that the taxpayer, i.e. the Petitioner, had claimed gross receipt or income under the head “Profits and Gains of Business or Profession” of more than Rs.10 Crore, exceeding the threshold limit under Section 44AB of the IT Act. However, no tax audit report was filed as required under Section 44AB of the IT Act. Page 2 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX 5. The Petitioner responded to the defects notice by pointing out that it had claimed gross receipts or income under the head of “Profits and Gains of Business or Profession” amounting to Rs.6.15 crores only, which was much less than the threshold limit of Rs.10 crores. Hence, the Petitioner submitted that there was no requirement to obtain and e-file a tax audit report. 6. The Petitioner heard nothing further in the matter for quite some time. Therefore, by communications dated 14 August 2023 and 22 August 2023, the Petitioner raised its grievances through the department’s online grievance portal, requesting that its return be processed and refund, as permissible under the law, be granted. 7. The Petitioner’s case is that the Respondents, by completely ignoring the Petitioner’s plea and reasoning vide the impugned order dated 13 December 2023, declared the Petitioner’s return invalid. There was no compliance with the principles of natural justice, and the impugned order was entirely non-speaking. Hence, this Petition. 8. Mr. Shah, the learned counsel for the Petitioner, submitted that the impugned order is computer generated or made by the CPC without any application of mind or considering the cause shown by the Petitioner. He submitted that the impugned order contains no reasons whatsoever. He submitted that all this vitiates the impugned order for violating the principles of natural justice and fair play. 9. Mr. Shah submitted that the gross turnover or receipts under the head “Profits and Gains of Business or Profession” Page 3 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX were only Rs.6.15 crores, which was less than the threshold limit of Rs10 Crores prescribed under Section 44AB. Therefore, there was no requirement for any tax audit, and this crucial aspect was not even considered before making the impugned order. 10. Mr. Shah submitted that the tax returns and the documents accompanying the tax returns declare income of Rs.16.82 crores, which arises from liabilities no longer required to be written back at Note 19 of such statements. He submitted that these receipts do not amount to Total Sales, Turnover or Gross Receipts of the Business. He relied on Guidance Note on Tax Audit under Section 44AB (Revised 2023) issued by ICAI. He submitted that the accounts were prepared in terms of these Guidance Notes and should have been accepted by the Respondents. 11. Mr. Shah submitted that the ICAI Guidance Note could be relied upon, and adjustments for discounts, write-backs, or other non-operational receipts should not be considered in the turnover for audit requirements. He relied on M/s. Rohtak Panipat Tollway Private Limited vs. Dputy Director of Income Tax, CPC and Anr.1 in support of his arguments. 12. Mr. Shah submitted that the Guidance Notes issued by the ICAI certainly have persuasive value in understanding accounting terminology like gross receipts, turnover, etc. He relied on Commissioner of Income Tax VII, New Delhi Vs. Punjab Stainless Steel Industries2 to submit that the guidelines 1 SCA/5727/2024 2 ([2014] 46 taxmann.com 68 (SC) Page 4 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX issued by the ICAI can be relied upon while computing and filing returns. 13. For all the above reasons, Mr. Shah submitted that the impugned order declaring the Petitioner’s return as invalid warrants interference and may be set aside. 14. Mr. Sharma, learned counsel for the Respondents- Revenue, submitted that the Petitioner has an alternate remedy under Section 264 of the IT Act to impugn the order dated 13 December 2023 made under Section 139(9) of the IT Act. He submitted that there was no good reason why the Petitioner has not availed of such an alternate and efficacious remedy. He submitted that this Court must not entertain this Petition because the Petitioner has an alternate and efficacious remedy under Section 264 of the IT Act. 15. Without prejudice, Mr. Sharma submitted that the Petitioner was admittedly engaged in carrying on business. The write back would constitute sales, turnover or gross receipt as per Section 44AB of the Act. Accordingly, the tax audit report was essential, and in its absence, the income tax return did not fulfil the vital conditions in Section 44AB of the IT Act. Accordingly, Mr. Sharma submitted that there was no infirmity in the impugned order. 16. Mr Sharma submitted that the impugned order was generated by the portal (AI/CPC). Since the Petitioner was engaged in business and further since declared income exceeded Rs.10 crores, the return was declared invalid under Section 139(9) because it was not accompanied by any tax audit report as required under Section 44AB of the IT Act. He Page 5 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX submitted that the defects notice was issued to the Petitioner, and full opportunity was given to rectify such defects. Accordingly, he submitted that there was no breach of the principles of natural justice and fair play. 17. The rival contentions now fall for our determination. 18. As noted earlier, this petition challenges the impugned AI-generated order dated 13 December 2023 by the CPC or the computer portal. The same is at Exhibit C (pages 41-42 of the paper book). 19. The relevant extract from the AI-generated impugned order reads as follows:- “The return of income filed by you for assessment year 2022-23 was found to contain the following defect(s) ________________________________________________ Sr.No. Defect(s) ________________________________________________ Notice u/s 139(9) of the Income Tax Act, 1961 was issued on 14-Dec-2022 vide email to n rectify the defect(s) “The response filed by you has been considered and same is not acceptable” Therefore, as per the provisions of section 139(9) of the Income Tax Act, 1961, the return of income for A.Y. 2022-23 filed on 27-Jul-2022 vide Acknowledgement Number 155142050270722 is declared as INVALID. N SAYIRAJ, I.R.S Deputy Director of Income Tax, CPC, Bengaluru” 20. From the above, it is apparent that the impugned order contains no reasons. Though it states that the response filed by the Petitioner was considered and found to be unacceptable, no reasons why the response was not found to Page 6 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX be acceptable are reflected in the impugned order. In short, the impugned order contains only the conclusions, not the reasons supporting the conclusions. 21. By now, it is well settled that the duty to give reasons in support of adverse orders is a facet of the principles of natural justice and fair play. In several cases, the necessity of providing reasons by a body or authority to support its decision was considered before the Hon’ble Supreme Court. Initially, the Court recognised a sort of demarcation between administrative orders and quasi-judicial orders. Still, with the passage of time, the distinction between the two got blurred and thinned out, reaching virtually a vanishing point. The Hon’ble Supreme Court held that the face of an order passed by a quasi-judicial authority or even an administrative authority affecting the parties' rights must speak. It must not be like the “inscrutable face of a sphinx.” (see Kranit Associates Private Limited and another Vs. Masood Ahmed Khan and others3). 22. In Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota Vs. Shukla and Brothers4 the Hon’ble Supreme Court has held that a litigant has a legitimate expectation of knowing reasons to reject his claim/prayer. Only then would a party be able to challenge the order on appropriate grounds. Recording of reasons would also benefit the appellate court. As arguments bring things hidden and obscure to the light of reasons, reasoned judgment, where the law and factual matrix of the case are discussed, provides lucidity and foundation for conclusions or 3 (2010) 9 SCC 496 4 (2010) 4 SCC 785 Page 7 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX exercise of judicial discretion by the courts. The reason is the very life of the law. When the reason for a law once ceases, the law itself generally ceases. Such is the significance of reasoning in any rule of law. Giving reasons furthers the cause of justice and avoids uncertainty. 23. The Court held that the absence of reasons essentially introduces an element of uncertainty and dissatisfaction and gives entirely different dimensions to the questions raised before the higher/appellate courts. The principle is that when reasons are announced and can be weighed, the public can be assured that the correction process is in place and working. Reasons for an order would ensure and enhance public confidence and would provide due satisfaction to the consumer of justice under our justice dispensation system. Procedural law and established practice impose an unqualified obligation upon the Courts to record reasons. The Court noted that there was hardly any statutory provision under the Income Tax Act or the Constitution itself requiring the recording of reasons in the judgments. Still, it was no more res integra and stands unequivocally settled by different decisions of the Court, holding that the courts and tribunals are required to pass reasoned judgments/orders. 24. In Union of India Vs Mohan Lal Capoor5, the Hon’ble Supreme Court explained that reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They should reveal a rational nexus between the facts considered and the conclusions reached. 5 (1973) 2 SCC 836 Page 8 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX 25. The AI-generated impugned order contains no reasons in this case. The argument that the software is not programmed to record elaborate reasoning or that the previous system was too cumbersome may not be the answer. The new system certainly offers numerous advantages and is efficient. However, it must evolve to include what was essential in the earlier system. For example, while no detailed judgment is expected when declaring a return invalid, the order must provide minimal reasoning so that the affected party can take corrective action or effectively challenge the reasoning. Such minimum compliance with the principle of natural justice cannot be dispensed with on the grounds of expediency or due to the machine's limitations. Nothing in the impugned order explains why the cause presented by the Petitioner was deemed unacceptable. There is no indication that the cause shown by the Petitioner was given due consideration despite the order’s format stating that a response was considered. The impugned order indeed resembles the “inscrutable face of a sphinx.” 26. Therefore, based upon the violation of principles of natural justice or because the impugned order is a non- speaking order, we could have set aside the order and remanded the matter for fresh consideration. However, our apprehension is that the CPC or the portal, which is programmed in a particular manner, may be able to do no better, even upon remand. Therefore, a remand may not solve the problem. 27. Mr Shah submitted that we should follow the decision of the Gujarat High Court in M/s. Rohtak Panipat Tolway Private Limited (supra) and hold that the accounts or the returns in Page 9 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX the present case were consistent with the guidance note issued by ICAI. Therefore, there was no requirement for a tax audit. This exercise would involve scrutinizing the accounts and interpreting the guidance note. If each time, the return of an assessee is declared invalid by the CPC based upon the programming of the portal through its AI-generated responses, this Court is required to exercise its extraordinary jurisdiction for scrutinising the returns, profit and loss accounts and computation of income, then that would impose an extraordinary strain on the working of the Court. If no alternate remedy were available to an assessee, then this Court would undoubtedly step in and discharge its Constitutional duty, undaunted by the volumes of similar Petitions and contentions. 28. However, where the Petitioner has an alternate and effective remedy in the form of a revision under Section 264 of the IT Act, we see no reason to entertain this Petition or investigate issues of compliance with the requirements of Section 44AB in the specific facts of each case. Such investigation would, as noted earlier, involve scrutiny of the returns, interpretation of the documents accompanying the returns, and not merely interpreting the provisions of Section 44AB. There would also be the question of interpreting the guidance note and other matters. In the present case, we are concerned with the alleged non-compliance with the requirements of Section 44AB. However, returns can be declared invalid under Section 139(9) of the IT Act for various reasons. 29. In each such case, it would not be possible to exercise extraordinary jurisdiction and undertake such an elaborate Page 10 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX exercise bypassing the alternate and statutory remedy under Section 264 of the IT Act. If such a remedy is resorted to, an official of the Commissioner of Income Tax rank would examine whether declaring the return as invalid was legal and proper. The factual matters which invariably arise could also be effectively investigated by the Commissioner exercising revisional jurisdiction in the first instance. 30. In B. Muralidhar Vs. Deputy Commissioner of Income- tax Corporate Circle-16 the Madras High Court, has held that a rule of exhaustion of alternate remedy, though a rule of discretion and not a rule of compulsion, must be applied with utmost rigour when it comes to fiscal law statutes. This rule may be deviated only when it falls within the exceptions set out in the long line of authorities, i.e. complete lack of jurisdiction to pass the order, violation of principles of natural justice where vires of the statute is challenged or where the alternative remedy is ineffectual or not efficacious. Upon considering the judgments of the Hon’ble Supreme Court, the Court has held that where the Petitioner could file a statutory revision under Section 264 of the Income Tax Act against the impugned order, the Writ Petition should not be entertained. Accordingly, the Petition was disposed of, relegating the Petitioner to avail of the remedy of statutory revision under Section 264 of the Income Tax Act. 31. Mr. Sharma submitted that a revision under Section 264 of the IT Act lies against “any order” other than an order to which Section 263 applies. He submitted that the impugned order under Section 139(9) of the IT Act was certainly revisable. Even Mr. Shah did not dispute that the impugned 6 [2019] 110 taxmann.com 54 (Madras) Page 11 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX order under Section 139(9) was revisable. However, he submitted that since the issue was covered by the decision of the Gujarat High Court, the Petitioner should not be relegated to the alternate remedy, and this Court should exercise its extraordinary jurisdiction and declare that the return was valid. 32. Though the Hon’ble Gujrat High Court's decision prima facie supports the Petitioner’s contention, we still think that this matter would require deeper scrutiny of returns, profit and loss accounts, and other documents accompanying the income tax returns. The Commissioner exercising revisional jurisdiction under Section 264 of the IT Act can more conveniently undertake such an exercise. Even the guidance note of the ICAI would require interpretation in the context of the provisions of Section 44AB of the IT Act. 33. Recently, in the case of Oberoi Constructions Ltd Vs. The Union of India and others7, we considered several precedents on the exhaustion of alternate remedies. By following the reasoning in the said decision, we do not think that this is a matter which falls within the exceptions or that this is an exceptional case where the rule of exhaustion of alternate remedies must be bypassed. 34. For the reasons indicated above, the Petitioner is best placed to avail of the alternate remedy under Section 264 of the IT Act. At the same time, we believe that the Respondents must create a system in which their CPC or portal demonstrates thoughtful consideration, and the essence of the orders is not like the “inscrutable face of a sphinx. " Resorting 7 Writ Petition (L) No.33260 of 2023 & connected matters decided on 11-11-2024 Page 12 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32

WPL-15292-2024.DOCX to Artificial Intelligence (AI) is certainly welcome. However, when the application of thoughtful consideration through actual intelligence is required, it cannot be cast aside simply because AI and automation represent the expedient future. The principles of natural justice and fairness are too valuable to be sacrificed at the altar of AI and automation expediency. 35. Accordingly, we decline to entertain this Petition but relegate the Petitioner to avail of the alternate remedy under Section 264 of the IT Act. Suppose such a revision is instituted within four weeks from today. In that case, we direct the Revisional Authority to dispose of the revision petition as expeditiously as possible and, in any event, within three months of its institution. Needless to add, the Revisional Authority must give the Petitioner an opportunity of hearing and pass a reasoned order on merits and not remand the matter to CPC. 36. All contentions of all parties are left open for the decision of the Revisional Authority in the first instance. 37. The rule is disposed of in the above terms without any cost orders. 38. All concerned to act upon an authenticated copy of this order. (Jitendra Jain, J) (M.S. Sonak, J) Page 13 of 13 Uploaded on - 27/03/2025 Downloaded on - 27/10/2026 21:52:32 Powered by TCPDF (www.tcpdf.org)