KESAR TERMINALS AND INFRASTRUCTURE LTD., vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 1(2)(1), MUMBAI AND 3 ORS.

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WP/3248/2022HC Bombay27 January 2025Bench: HON'BLE SHRI JUSTICE M.S. SONAKHON'BLE SHRI JUSTICE JITENDRA SHANTILAL JAIN7 pages
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What did the High Court hold?

The High Court held that the Assessing Officer committed a procedural illegality and breached the principles of natural justice by issuing a combined order disposing of the assessee's objections to the reopening of assessment and simultaneously passing the reassessment order. The Court found that this procedure was not approved in decided cases and violated principles of natural justice and fair play. Citing *Fomento Resorts & Hotels Ltd* and other precedents, the Court noted that such consolidated orders were quashed for want of compliance with jurisdictional parameters. The Court rejected the revenue's contention that the Petitioner should be relegated to the alternate remedy of appeal, stating that when an order is wholly without jurisdiction, the rule of exhaustion of alternate remedy can be bypassed. Consequently, the Petition was allowed, and the impugned notice and order were quashed and set aside. The Petitioner undertook to withdraw the appeal filed subsequently. No issue was expressly left undecided.

What were the facts?

The assessee, Kesar Terminals & Infrastructure Ltd, challenged a notice dated March 30, 2021, and an order dated March 31, 2022, issued by the Deputy Commissioner of Income Tax. The notice sought to reopen the assessment for assessment year 2016-17, and the subsequent order disposed of the assessee's objections to the reopening and passed the reassessment order. The assessee argued that the assessing officer erred by issuing a combined order for both disposing of objections and passing the reassessment, breaching procedural mandates and principles of natural justice. The revenue contended that the assessee had already filed an appeal against the impugned order, and therefore, the writ petition should not be entertained. The High Court heard both parties and considered the procedural history, including the issuance of the notice under Section 148, the filing of objections, and the subsequent notice under Section 142(1) without disposing of the objections.

What were the issues?

1. Whether the Assessing Officer committed a procedural illegality and breached the principles of natural justice by issuing a combined order disposing of the assessee's objections to the reopening of assessment and simultaneously passing the reassessment order, contrary to the mandatory procedure prescribed under the Income Tax Act? (Question of law and mixed fact and law, relating to Section 148 and principles of natural justice). Assessee's contentions: - The Assessing Officer breached the mandatory procedure by issuing a combined order, violating principles of natural justice and fair play. - Relied on *Fomento Resorts & Hotels Ltd Vs The Assistant Commissioner of Income Tax, Central Circle, Panjim* and other cited decisions. - Argued that the rule of exhaustion of alternate remedy can be bypassed when an order is wholly without jurisdiction. Revenue's contentions: - The Petitioner has already instituted an Appeal against the impugned order, and thus the present Petition should not be entertained. - Submitted that the impugned order disposed of assessment proceedings and objections in adherence to statutory timelines. - Claimed there was no infirmity in the procedure adopted and the Petitioner should be relegated to the remedy of Appeal.

Which sections of the Income-tax Act were involved?

Section 148,Section 142(1),Section 143(3),Section 80-IA

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Kesar Terminals & Infrastructure Ltd v The Deputy Commissioner of Income Tax & Ors 5-osial-11887-2023 in oswp-3248-2022-J1(F).docx Amol IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 3248 OF 2022 1. Kesar Terminals & Infrastructure Ltd, Oriental House, 7, Jamshedji Tata Road, Churchgate, Mumbai – 400 020 …Petitioner VERSUS

1.

The Deputy Commissioner of Income Tax Circle -1(2)(1), Mumbai, Room No. 535, 5th Floor, Aayakar Bhavan M.K. Road, Mumbai – 400 020 2. Additional/Joint/Deputy/Assistant Commissioner of Income-tax/ Income Tax Officer, National Faceless Assessment Centre, Delhi. 3. The Principal Commissioner of Income-tax, Mumbai – 1 Mumbai Room No. 330, 3rd Floor, Aayakar Bhavan, M.K. Road, Mumbai - 400020 4. Union of India, Through the Joint Secretary & Legal Adviser, Branch Secretariat, Department of Legal Affairs Ministry of Law and Justice, 2nd Floor, Aayakar Bhavan, M.K. Marg, New Marine Lines, Mumbai - 400020 …Respondents WITH INTERIM APPLICATION (L) NO. 11887 OF 2023 Page 1 of 7 AMOL PREMNATH JADHAV Digitally signed by AMOL PREMNATH JADHAV Date: 2025.01.30 14:08:55 +0530

Kesar Terminals & Infrastructure Ltd v The Deputy Commissioner of Income Tax & Ors 5-osial-11887-2023 in oswp-3248-2022-J1(F).docx Kesar Terminals & Infrastructure Ltd …Applicant In the matter between Kesar Terminals & Infrastructure Ltd …Petitioner VERSUS

Deputy Commissioner of Income-tax Circle-1(2)(1), Mumbai & Ors …Respondents __________________________________________________________ APPEARANCES- Mr P J Pardiwalla, Senior Advocate, with Mr Fenil Bhatt, i/b, Mr Atul K Jasani, for the Petitioner. Mr Suresh Kumar, for the Respondents. __________________________________________________________ CORAM : M.S.Sonak & Jitendra Jain, JJ. DATED : 27 January 2025 ORAL JUDGMENT (

Per MS Sonak J)

:- 1. Heard learned Counsel for the parties. 2. Rule. The Rule is made returnable immediately at the request of and with the consent of the learned Counsel for the parties. 3. This petition challenges the impugned notice dated 30 March 2021 and the impugned order dated 31 March 2022, by which the Petitioner’s objections to reopening the assessment were disposed of and the assessment order made. 4. Mr Pardiwalla, the learned Senior Advocate for the Petitioner, submitted that the assessing officer could not have made such a combined order disposing of the Petitioner’s objections to reopening the assessment and assessing the Page 2 of 7

Kesar Terminals & Infrastructure Ltd v The Deputy Commissioner of Income Tax & Ors 5-osial-11887-2023 in oswp-3248-2022-J1(F).docx Petitioner's income. He submitted that by making such a combined order, the assessing officer had breached the mandatorily prescribed procedure, and adopting such a procedure also violates the principles of natural justice and fair play. He relies on Fomento Resorts & Hotels Ltd Vs The Assistant Commissioner of Income Tax, Central Circle, Panjim1 and the three decisions referred to in this decision. 5. Mr Suresh Kumar, learned Counsel for the Respondents, submits that the Petitioner has already instituted an Appeal against the impugned order and, therefore, we should not entertain the present Petition. He submitted that the impugned order disposed of the assessment proceedings and the objections lodged by the Petitioner to adhere to the statutorily prescribed timelines. He submitted that there was no infirmity in the procedure adopted, and therefore, this Petition may be dismissed, or in any event, the Petitioner may be relegated to the remedy of Appeal, which the Petitioner has already invoked. 6. The rival contentions now fall for our determination. 7. In this matter, vide assessment order dated 25 March 2016 made under Section 143(3) of the Income Tax Act, the returns filed by the Petitioner were assessed and accepted, and the claim under Section 80-IA was revised. 8. The petitioner was issued the impugned notice under Section 148 of the Income Tax Act on 30 March 2021, seeking to reopen the assessment. In compliance with the notice, the petitioner filed a return on 7 April 2021. On 12 May 2021, the 1 MANU/MH/2513/2019 Page 3 of 7

Kesar Terminals & Infrastructure Ltd v The Deputy Commissioner of Income Tax & Ors 5-osial-11887-2023 in oswp-3248-2022-J1(F).docx Petitioner requested the reasons for reopening, which were furnished to the Petitioner on 6 July 2021. 9. On 4 August 2021, the Petitioner filed objections to the reopening of the assessment by raising several contentions. Without disposing of such objections, on 22 November 2021, the Petitioner was issued a notice under Section 142(1) directing it to justify its claim under Section 80-IA with supporting documents. 10. On 26 November 2021, the Petitioner requested the Respondents to dispose of the objections filed by the Petitioner before proceeding any further. The Petitioner made a specific reference to the Hon’ble Supreme Court’s decision in the case of GKN Driveshaft (India) Limited Vs ITO2. The Petitioner also referred to this Court’s decision in the case of Asian Paints Ltd. vs Deputy Commissioner Of Income-Tax And Ors3, which had provided that an assessee must be given a reasonable period of about four weeks to take any remedial course of action should the assessee’s objections to the reopening be rejected by the revenue. 11. The Petitioner’s objections were never disposed of, but the impugned consolidated reassessment order dated 31 March 2022 was made, in which the Petitioner’s objections were also purported to be disposed of. 12. Apart from the fact that the making of such consolidated or combined orders was not approved in some decided cases, which we propose to refer to, we think that such a procedure 2 259 ITR 19 3 296 ITR 90 Page 4 of 7

Kesar Terminals & Infrastructure Ltd v The Deputy Commissioner of Income Tax & Ors 5-osial-11887-2023 in oswp-3248-2022-J1(F).docx also involves breaching the principles of natural justice and fair play. 13. The assessing officer in Fomento Resorts & Hotels Ltd (supra) made a similar combined order. Neither were the assessee’s objections disposed of by a separate order, nor was the assessee granted any reasonable opportunity of questioning the order disposing of the objections. In such circumstances, the Court, after analysing the decision of the Hon’ble Supreme Court in GKN Driveshaft (supra) and following its earlier precedents in KSS Petron Private Ltd Vs The Assistant Commissioner of Income Tax Circle 10 (2)4 and M/s Bayer Material Science (P.) Ltd Vs Deputy Commissioner of Income-tax-10(3)5 quashed the combined order on the ground of want of compliance with jurisdictional parameters. 14. Accordingly, we cannot accept Mr Suresh Kumar’s contention about there being no infirmity in the impugned consolidated order dated 31 March 2022, given the above decisions referred to by us rendered in substantially similar facts. 15. The Petitioner has, no doubt, instituted an Appeal after the filling of this Petition. However, Mr Pardiwalla clarified that this was only to protect from the bar of limitation. He further pointed out that the factum of the institution of this Petition and the reason for the institution of the Appeal were clarified in the appeal memo. Further, this factum of the institution of the Appeal after the institution of this Petition was brought on record through an affidavit in a rejoinder in 4 Income Tax Appeal No 224 of 2014 decided on 3/10/2016. 5 (2016) 66 taxmann.com 335 (Bombay) Page 5 of 7

Kesar Terminals & Infrastructure Ltd v The Deputy Commissioner of Income Tax & Ors 5-osial-11887-2023 in oswp-3248-2022-J1(F).docx these proceedings. He submitted that since the impugned order is vitiated due to noncompliance with jurisdictional parameters, there is no point in relegating the Petitioner to the alternate remedy of Appeal. He submits that where an order is wholly without jurisdiction, the rule of exhaustion of alternate remedy can always be bypassed. 16. Since the impugned consolidated order warrants interference due to noncompliance with jurisdictional parameters, relegating the Petitioner to the alternate remedy would not be appropriate. As noted earlier, this Court has interfered with consolidated orders in almost identical circumstances, making assessments and disposing of objections. Therefore, Mr Suresh Kumar’s objection based on exhaustion of alternate remedy cannot be sustained in the facts of the present case. 17. For all the above reasons, we allow this Petition and make the Rule absolute in terms of prayer clause (a), which reads as follows:- “(a.) that this Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ order or direction under Article 226 of the Constitution of India calling for the records of the case leading to the issue of the impugned notice and passing of the impugned order and after going through the same and examining the question of legality thereof quash, cancel and set aside the impugned notice (Exhibit O) dated March 30, 2021 and impugned order (Exhibit W) dated March 31, 2022;” 18. Mr Pardiwalla states that the Petitioner will withdraw the Appeal within 15 days. This statement is accepted. 19. The pending Interim Application does not survive the disposal of the Petition. Accordingly, it is also disposed of. Page 6 of 7

Kesar Terminals & Infrastructure Ltd v The Deputy Commissioner of Income Tax & Ors 5-osial-11887-2023 in oswp-3248-2022-J1(F).docx 20. All concerned to act on an authenticated copy of this order. (Jitendra Jain, J) (M. S. Sonak, J) Page 7 of 7

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