RADHA KISHAN LALCHAND vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE AND ANR

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WP/8584/2024HC BombayHCBM01023091202412 August 2024Author: HON'BLE SHRI JUSTICE G. S. KULKARNI,HON'BLE SHRI JUSTICE SOMASEKHAR SUNDARESAN6 pages
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What did the High Court hold?

The High Court held that the notice dated March 20, 2024, issued under Section 148 of the Income Tax Act, 1961, and the order passed under Section 148A(d) dated March 20, 2024, were invalid. The Court found that the Respondent-Revenue had not complied with the Scheme notified by the Central Government pursuant to Section 151A(2) of the Act. The Court relied on the explicit declaration of law in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax & 4 Ors., which clearly stated that for a notice to be validly issued for reassessment under Section 148, the Revenue must be compliant with Section 151A. The Division Bench in Hexaware had held that the JAO and FAO have exclusive jurisdictions and that the Scheme mandates automated allocation of cases, meaning only the randomly allocated officer (FAO) has jurisdiction to issue the notice. The Court further noted that an act done by an authority contrary to the provisions of the statute is invalid and causes prejudice to the assessee. Therefore, the grievance of the Petitioner-Assessee regarding the invalid issuance of the notice was sustainable, and the proceedings initiated were vitiated. The Writ Petition was allowed, quashing the impugned order under Section 148A(d) and the impugned notice under Section 148. The Court explicitly stated that it had not expressed any opinion on other issues raised in the Writ Petition, as it was not necessary to do so.

What were the facts?

The Petitioner, Radha Kishan Lalchand, filed a Writ Petition challenging a notice dated March 20, 2024, issued under Section 148 of the Income Tax Act, 1961. This notice was preceded by a notice under Section 148A(b) and an order under Section 148A(d). The reassessment proceedings were initiated for Assessment Year 2017-18. The Petitioner contended that the notices and order were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO), as mandated by Section 151A of the Act and the relevant notification introducing a faceless mechanism. The Revenue was represented by Mr. Akhileshwar Sharma.

What were the issues?

1. Whether the notice dated March 20, 2024, issued under Section 148 of the Income Tax Act, 1961, and the underlying order under Section 148A(d) are invalid due to being issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO), contrary to Section 151A of the Act and the relevant notification. (Question of law) Assessee's Contentions: - The Petitioner argued that the issuance of the notice under Section 148 and the order under Section 148A(d) by the JAO, rather than a FAO, violates Section 151A of the Act and the faceless scheme notified by the Central Government. - Reliance was placed on the decision in Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax & 4 Ors. for the proposition that the JAO has no concurrent jurisdiction with the FAO in issuing such notices and that the Scheme mandates automated allocation. - The Petitioner also referred to a recent decision in Nainraj Enterprises Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax, Circle-4(3)(1), Mumbai & Ors., which allowed a similar petition on the grounds of non-compliance with Section 151A. Revenue's Contentions: - The judgment records that learned counsel for the respondents (Revenue) agreed that the proceedings would not be sustainable in view of the judgment in Hexaware. No other specific arguments for the Revenue were recorded.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 151A,Section 147

AI-generated summary — verify with the full judgment below

914-WP-8584-2024.DOC IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 8584 OF 2024

Radha Kishan Lalchand ...Petitioner

Versus Assistant Commissioner of Income Tax, Circle - & Anr. …Respondents ---- Mr. Tanmay Phadke, for Petitioner. Mr. Akhileshwar Sharma, for Respondents. _______________________ CORAM: G. S. KULKARNI & SOMASEKHAR SUNDARESAN, JJ. DATE 12 AUGUST 2024 _______________________ P.C.

1.

Rule. Rule made returnable forthwith. Learned Counsel for the Respondents waives service. By consent of the parties, heard finally.

2.

Reply affidavit is taken on record.

3.

This Writ Petition under Article 226 of the Constitution of India has been filed to challenge a notice dated 20 March, 2024 (“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 914-WP-8584-2024.DOC Section 148 of the Act has been initiated in respect of returns filed by the Petitioner-Assessee for the Assessment Year 2017-18. 4. On perusal of the record, it is apparent that the impugned notice dated 8 February, 2024 issued under Section 148A(b), the order passed thereon under Section 148A(d) dated 20 March, 2024 and the consequent notice dated 20 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.

5.

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 151 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 Income Tax & 4 Ors. 1 (“Hexaware”). The Division Bench has clearly (2024) 464 ITR 430 914-WP-8584-2024.DOC 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 29

th 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 914-WP-8584-2024.DOC 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, 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 914-WP-8584-2024.DOC 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]

6.

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 before the 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.

7.

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 914-WP-8584-2024.DOC 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.

8.

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 (b) which reads thus : “(b) Issue a writ of Certiorari or a writ in the nature of certiorari or any other writ, order or direction, quashing Impugned Order under section 148A(d) of the Act dated 20 March 2024 (Exhibit L)

and the Impugned Notice under section 148 of the Act dated 20 March 2024 (Exhibit L).”

9.

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.

10.

Rule is made absolute in the aforesaid terms. No costs. (SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.) 2 Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024

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