INTERNATIONAL AIRPORT HOTELS AND RESORTS PRIVATE LIMITED vs. ASSISTANT CONUNISSIONER OF INCOME-TAX CIRCLE-14(1)(1)-MUMBAI

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WP/3938/2024HC Bombay02 July 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 Bombay High Court held that the notice dated April 13, 2023, issued under Section 148 of the Income Tax Act, 1961, and the underlying order dated April 13, 2023, under Section 148A(d) of the Act, were invalid. The Court found that the Revenue had not complied with the Scheme notified by the Central Government pursuant to Section 151A(2) of the Act. Following the explicit findings in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income-tax, the Court reiterated that Section 151A contemplates a Scheme for both assessment/reassessment and the issuance of notice under Section 148, and this Scheme mandates that notice under Section 148 must be issued by a Faceless Assessing Officer (FAO) through automated allocation, to the exclusion of the Jurisdictional Assessing Officer (JAO). The Court reasoned that any other view would lead to chaos and render faceless proceedings redundant. The Court found that the Revenue's argument that the Scheme was not applicable to the issuance of notice under Section 148 was unsustainable and would render parts of the Scheme otiose. Consequently, the Court quashed and set aside the impugned notices and order. 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, International Airport Hotels and Resorts Private Limited, filed a writ petition challenging a notice dated April 13, 2023, issued under Section 148 of the Income Tax Act, 1961, along with the underlying prior notice and order under Sections 148A(b) and 148A(d) of the Act. These reassessment proceedings were initiated for Assessment Year 2019-20. The core of the challenge was that the notice and the order under Section 148A(d) were issued by the Jurisdictional Assessing Officer (JAO) and not by a Faceless Assessing Officer (FAO), which is mandated by Section 151A of the Act. The Revenue was represented by the Assistant Commissioner of Income-tax, Circle 14(1)(1), Mumbai, and other authorities.

What were the issues?

1. Whether the notice dated April 13, 2023, issued under Section 148 of the Income Tax Act, 1961, and the underlying order dated April 13, 2023, under Section 148A(d) of the Act, are valid when issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO), in light of Section 151A of the Act and the relevant Scheme? Assessee's Contention: The Petitioner argued that the notice and order were invalid because they were issued by the JAO, contrary to the mandatory requirement under Section 151A of the Act that such proceedings, including the issuance of notice under Section 148, must be conducted in a faceless manner by a Faceless Assessing Officer (FAO) as per the Scheme notified by the Central Government. They relied on the judgment in Hexaware Technologies Limited Vs. Assistant Commissioner of Income-tax. Revenue's Contention: The Revenue contended that the Scheme framed under Section 151A was applicable only to the extent provided in Section 144B, and since Section 144B did not refer to the issuance of notice under Section 148, the notice could not be issued by the FAO as per the Scheme. They argued for a possibility of concurrent jurisdiction.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A,Section 151A,Section 144B,Section 147

AI-generated summary — verify with the full judgment below

939-WPL-19497-2024-2-7-2024.DOC IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (LODG.) NO. 19497 OF 2024 International Airport Hotels and Resorts Private Limited, CSIA Terminal 1, Level 01, CSMIA, Sahargaon B.O. Mumbai, Andheri East, Mumbai 400 099. … Petitioner Versus

1.

Assistant Commissioner of Income-tax, Circle 14(1)(1), Mumbai

2.

National Faceless Assessment Centre, Income Tax Department, Ministry of Fiance, Government of India

3.

Principal Commissioner of Income Tax, Mumbai- 6

4.

Union of India through the Secretary, Department of Finance, Ministry of Finance, New Delhi – 110 001. …Respondents **** Mr. Jeet Gandhi a/w. Mr. Sameer Dalal, Advocates for Petitioner. Ms. Akhileshwar Sharma, Advocate for Respondents. _______________________ CORAM: G. S. KULKARNI & SOMASEKHAR SUNDARESAN, JJ. Date : 2 July, 2024 _______________________ Oral Judgement (Per, Somasekhar Sundaresan J):

1.

Rule, made returnable forthwith. Learned Counsel for the 2 July, 2024 SHRADDHA KAMLESH TALEKAR SHRADDHA KAMLESH TALEKAR Date: 2024.07.10 15:15:42 +0530 CNR No : HCBM020195032024 Uploaded on - 10/07/2024 Downloaded on - 31/10/2026 00:33:24

2024:BHC-OS:10087-DB

939-WPL-19497-2024-2-7-2024.DOC Respondents waives service. By consent of the parties, heard finally.

2.

This writ petition has been filed to challenge a notice dated 13 April, 2023 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 148(A)(d) of the Act, respectively. The reassessment under Section 148 has been initiated in respect of returns filed for the Assessment Year 2019-20. 3. From a plain reading of the record, it is apparent that the notice dated 13 April, 2023 issued under Section 148 of the Act and indeed the underlying order of the same date under Section 148A(d) of the Act are 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.

It is now well settled that for a notice to be validly issued for reassessment under Section 148, the 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 : 1 (2024) 464 ITR 430 2 July, 2024 Downloaded on - 31/10/2026 00:33:24

939-WPL-19497-2024-2-7-2024.DOC 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 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 2 July, 2024 Downloaded on - 31/10/2026 00:33:24

939-WPL-19497-2024-2-7-2024.DOC 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 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] 2 July, 2024 Downloaded on - 31/10/2026 00:33:24

939-WPL-19497-2024-2-7-2024.DOC

5.

Therefore, it is apparent that the Revenue is not in compliance with the Scheme notified by the Central Government pursuant to Section 151A(2). The Scheme is also required to be 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 findings returned in Hexaware, the grievance of the Petitioner insofar as it relates to an invalid issuance of a notice is unsustainable 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. Consequently, the petition deserves to be allowed, which we do in terms of prayer clause (a), which reads as follows : 19(a) that this Hon’ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari, or any other appropriate Writ, order or direction under Article 226 of the Constitution of India, calling for the records of the Petitioner’s case and after examining the legality and validity thereof, quash, cancel and set aside the impugned show cause notice dated March 14, 2023, the impugned order dated April 13, 2023, the impugned notice dated April 13, 2023 issued by Respondent No. 1 and the second show cause notice dated April 24, 2024 issued by Respondent No.2. 7. 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 2 July, 2024 Downloaded on - 31/10/2026 00:33:24

939-WPL-19497-2024-2-7-2024.DOC 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.

8.

Rule is made absolute in the aforesaid terms and the writ petition is hereby disposed of. No costs. (SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.) 2 July, 2024 Downloaded on - 31/10/2026 00:33:24 Powered by TCPDF (www.tcpdf.org)

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