Leelavathi Arava vs. Income Tax Officer,
What did the High Court hold?
The High Court allowed the writ petition, quashing the notices issued under Sections 148A and 148 of the Income Tax Act, 1961, and all consequential orders. The Court reiterated its earlier decision in Kankala Ravindra Reddy vs. Income-Tax Officer, holding that proceedings initiated under Section 148A and Section 148 of the Act ought to have been issued and proceeded in a faceless manner as per the amendments brought by the Finance Act, 2021. The Court noted that numerous High Courts have taken a consistent stand that the action of the Income Tax Department in not adhering to faceless proceedings is violative of the Finance Act, 2020, and 2021. While acknowledging that the Revenue had filed Special Leave Petitions (SLPs) before the Supreme Court challenging the High Court's decision, the Court observed that no interim order had been granted. Therefore, to avoid further litigation and burden on the High Court's pendency, the Court disposed of the writ petition in terms of its earlier judgment, subject to the outcome of the pending SLPs. The Court clarified that either party could seek revival of the writ petition based on the Supreme Court's decision. The ratio decidendi is that proceedings initiated under Section 148A and 148 of the Income Tax Act, 1961, after the amendments by the Finance Act, 2021, must be conducted in a faceless manner, and failure to do so renders such proceedings illegal and liable to be quashed.
What were the facts?
The petitioner, Leelavathi Arava, challenged an order dated 29/03/2023 under Section 148A(d) and a notice dated 31/03/2023 under Section 148 of the Income Tax Act, 1961, for Assessment Year 2016-17. The petitioner also challenged the consequent assessment order dated 26/03/2024 and proceedings, including penalty proceedings, and notices dated 23/12/2024 for attachment of bank accounts. The primary ground for challenge was that the notices and proceedings were not issued in a faceless manner, contrary to the amendments brought by the Finance Act, 2021, which mandated faceless assessment proceedings. The petitioner relied on a previous judgment of the same High Court in Kankala Ravindra Reddy vs. Income-Tax Officer, which had allowed similar writ petitions on the same grounds.
What were the issues?
1. Whether the notices issued under Section 148A and Section 148 of the Income Tax Act, 1961, and the subsequent initiation of proceedings under Section 148, are illegal and bad in law for not being issued in a faceless manner, in violation of the Finance Act, 2021, and Notification No. 1/2022 dated 29.03.2022, thereby violating Section 151A of the Act? (Question of law) Assessee's contentions: The petitioner argued that the impugned notices and proceedings were issued by the jurisdictional Assessing Officer and not in a faceless manner, which is mandatory as per the Finance Act, 2021. This violates Section 151A of the Act and Notification No. 1/2022. The petitioner relied on the High Court's own judgment in Kankala Ravindra Reddy vs. Income-Tax Officer (2023) 156 taxmann.com 179 (Telangana) and various other High Court judgments, including Hexaware Technologies Ltd. vs. Assistant Commissioner of Income Tax (Bombay), Ram Narayan Sah vs. Union of India (Gauhati), Jatinder Singh Bangu vs. Union of India (Punjab & Haryana), and others, which have consistently held such proceedings to be bad in law. Revenue's contentions: The Revenue acknowledged that the issue is pending before the Supreme Court in SLP No. 3574 of 2024, arising from the High Court's decision in Kankala Ravindra Reddy. However, they conceded that no interim order has been granted by the Supreme Court. The Revenue did not present any arguments against the petitioner's primary contention regarding the lack of faceless assessment.
Which sections of the Income-tax Act were involved?
Section 148A,Section 148,Section 147,Section 151A,Section 144,Section 144B,Section 226
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
The Court made the following: ORDER
TIIE HONOURABLE SRI JUSTICE P.SAM KOSIIY AND TIIE HONOURABLE SRI JUSTICE NARSINGRAO NANDIKONDA W.P.No.5109 0F 2025 ORDER, (per Hon'bte Sri Justice P-Sam Koshy) Heard Mr. Polkampally Pavan Kumar Rao, leamed counsel for the petitioner and Ms. J. Sunitha, learned Junior Standing Counsel for the Income Tax Department for respondent Nos'l and 2. Perused the record.
This is a writ petition where the proceedings are either challenged to the notices which were issued under Section 148A and 148 of the Income Tax Act, 1961 (ior short 'the Act') or the assessment orders those have been passed under Section 147 of the Act which have been assailed'
This writ petition is being taken up today only on one of the grounds, that the notices issued under Section 148,{ of the Act and the subsequent initiation of proceedings under Section 148 of the Act by the jurisdictional Assessing Officer' whereas in terms of the amendment that was brought to the Income Tax Act by way ofFinanceAct,2O2lw.e.f',01'04'2021onwards'proceedings ]
2 'l(2023) 156 taxmann.com l7g (Telangana)l I i
J
Down the line, we find that the same issue has also been decided against the Revenue by various High Courts i'e'' OF INCOME TAX & OTHERS2, Gauhati High Court in the case of RAM NARAYAN SAH vs' UNION OF INDIA3' Punjab and case of GOVIND SINGH vs' INCOME TAX OFFICEI{' Gujarat High Court in the case of MANSUKHBHAI 2 t20241464 ITR 430 (Bom) ' iAnzil 1 56 taxmann'com 478 ( Gauhati)l ^iizozqj 165 taxmann'com 115 (Punjab & Haryana)l 'lzoz+1167 taxmann.com 41 I (Telangana)l "izozl) I 66 taxmann.com 679 (Bombay)l 'i;;t;;; ioi iu*ro*.'om I l3 (Himachal Pradesh)l OFFICER & ANOTHER and batch of writ petitionsro which stood decided on 19.03.2024. Similar views have also been taken by the Division Bench of Calcutta High Court in the case of GIRDHAR GOPAL DALMIA vs. UNION OF INDIA & ORS (M.A.T 1690 of 2023), decided on25.09.2024. 6. Even though the same issue having been decided by a large number of High Courts, we are still confronted with large filing of iCentical matters on daily basis ranging between 5 to l0 writ petitions. That upon the instructions being sought ffom the Department, they have been taking a solitary ground that the decision of the Bombay High Court in the case of Hexaware Technologies Ltd., (2 supra) as also the one which has been decided by this Court in the case of Kanakala Ravindra Reddy '2024 SCC Online Guj 4012 '2025 SCC Online Jhar 287 I o 72023 : RI-JD : 498 4-DBl
5 (1 supra) has been subj ected to challenge in a Special lrave Petition i.e., SLP No'3574 of 2024 before the Hon'ble Supreme Court and the Hon'bte Supreme Court is seized of the matter' In addition, there are about 1200 SLPs also filed arising out ofthe same issue being decided by various High Courts'
To a query being put to the learned counsel for the Revenue' they have categorically accepted the fact that there is no interim order granted by the Hon'ble Supreme Court in any of these matters pending before it' Meanwhile' fresh writ petitions of identical nature are being piled up before this Bench on daily basis and the pendency is getting increased on matter which otherwise has atready been dealt and decided by this very High Court itself'
On the one hand, even though the order of this Court that was passed as early as on 14'09'2023 and more 16 months have lapsed, till date, we do not find any remedial steps having been taken by the Income Tax Department to take appropriate steps to either hold back issuance ofnotice under Section 148A and under Section 148 of the Act by the jurisdictional Assessing Officer' rather the authorities concemed in the teeth of series of decisions a 6 by all the major High Courls in India are continuously still initiating proceedings under Section l4gA of the Act and also initiating proceedings under Section l4g of the Act in contravention to the amendments brought into the Income Tax Act pursuant to the Finance Act,2020as also the Finance Act202l.
Upon a query being put as to why can,t this writ petition be disposed of in the teeth of the decision rendered by this Court in the case of Kanakala Ravindra Reddy (I supra), learned Standing Counsel for the Income Tax Department contends that those would unnecessarily burden the Income Tax Department where they would be required to file equal nurnber of slps before the Hon'ble Supreme Court and it would be further burdening the exchequer of the Union of India. It was also the contention of the leamed Standing Counsel that no prejudice would be caused to the interest of the petitioners in case ifthis writ petition is kept pending till the finalization of the SLps pending before rhe Hon,ble Supreme Court and the fact that the petitioner is already enjoying the benefit of interim protection. Nonetheless, on the earlier query of this Court as to why the Income Tax Department have not come out with a mechanism to issue appropriate instructions or to take 1 I
7 appropriate steps in ensuring that proceedings under Section 148A of the Act as also the assessment orders under Section 148 of the Act are kept in a hold in the light ofthe decisions dedcided by the various High Courts, it was submitted by the learned Standing Counsel that the said steps can only be taken at the level of CBDT as any such steps would have to be taken Pan India and cannot be limited to any of these jurisdictional High Courts' l0.Asaresultofwhich,whatwearefacingissteepincreaseof litigation day in and day out even though various orders have been passed by this High Court allowing writ petitions on the very same issue. The Income Tax authorities concemed are still even now in 2025 also initiating proceedings in contravention to the provisions of Section 151,{ of the Act and as a result by now' more than 600 to 700 petitions have been already got piled up before this High Court on an issue which otherwise stands squarely covered by the judgment of this Court in the case of Kanakala Ravindra Reddy (1 supra). What is also surprising is the fact that though while allowing the writ petitions in the case of Kanakala Ravindta Reddy (l supra), the Division Bench while reserving the right of the Revenue, has also protected the interest of the petitioners ( .1 1 I i I I i,
I 8 insofar as the riberty which was granted to the Revenue for initiating fresh proceedings strictry in accordance with the amended provisions of the Act, as amended by the Financ e Act, 2020 and. the Finance Act,202r. The petitioner assessee would be entitled to challenge or raise the other legal objections if the Revenue initiates fresh proceedings. The Department has made no endeavour in availing the said liberty that was reseryed for the Revenue. on the contrary, they have been still sticking on to the stand, which this High Court as well as many other High Courts already held to be bad. I 1. It appears that because of the aforcsaid liberty that this High court had granted permitting the Revenue for initiating fresh proceedings as a one_time measure in a faceless manner, the Income Tax Department wants to take advantage of the same by protracting these proceedings which would enable them to meet the limitation that would otherwise come in the way. Likewise, if the writ petition is kept pending for a considerable long period of time and finally at a later stage if the Hon,ble Supreme Court confirms the decision taken by this High Court as also by the other High Courts .in which the SLps are still pending, the Income Tax \
9 Department would get the advantage of the liberty that is otherwise protected in favour of the Revenue for initiation of fresh proceedings from the disposal ofthese matters at a much later stage which would be advantageous and beneficial to the Revenue and would be equally disadvantageous and detrimental so far as interest of the assesses are concemed' As a consequence' the Income Tax Department gets an extended period of time for initiation of fresh proceedings.
The alarming trend of docket explosion in this Court' despite the clear precedent setin Kanakala Ravindra Reddy (l supra)' is a matter of grave concem' The Income Thx Department's persistent initiation of fresh proceedings, disregarding the established judicial pronouncements, has led to an unprecedented surge in litigation with over 600-700 petitions piling up on the same issue' This deliberate approach not only undermines the principle ofjudicial precedent but also strains the judicial resources unnecessarily' The Department's strategy of awaiting the Supreme Court's decision on pending SLPs while continuing to initiate fresh proceedings appears to be a calculated move to buy time and circumvent limitation periods, rather than adhering to the established legal
I 10 position. Such conduct raises serious questions about the administrative efficiency and the respect for judicial pronouncements, particularly when this Court has already provided a balanced approach by preserving both the Revenue,s rights and assesses tnterests.
Another aspect which needs to be considered is that in fact it should have been realized by the Income Tax Department itself and should have found out via media in ensuring that proceedings under Sections 148-^4 and 14g should not have been issued in a faceless manner, at least till the Hon,ble Supreme Court decide the twelve hundred (1200) odd SLps whichit is already seized ofor, at least the Income Tax Department should have fbund out some remedial steps to ensure that wherever the authorities intend to initiate proceedings under Sections l4g-A and 14g, other than in a faceless manner, the proceedings should have been deferred without precipitating the matter further intimating the assessee that they shall initiate appropriate proceedings only after the SLp,s are decided by the Hon,ble Supreme Court on the very same issue. This again, the Income Tax Department, has not been able to give a convincing reply, except for the fact that such a decision if at all e
1\ has to be taken, has to be taken for the whole of India' and which otherwise has to be by way of a policy decision and that too at the level of Central Board of Direct Taxes' Though the leamed Standing Counsel for the Income Tax Department contended that the Delhi High Court dismissed a writ petition of similar nature' on theonehandwhentheHighCourtisstrugglingtoreduceits pendency, such notices which are under challenge in this writ petition are forcing the assessee to knock the doors of this High Court resulting in filing of hundreds of new writ petitions which in the long run not only affects the disposal of the writ petitions but also consumes substantial time of the Bench in hearing these matters again and again on daily basis' Admittedly' in spite of the matterbeforetheHon,blesupremeCourthavingbeentakenon many occasions' the Hon'ble Supreme Court which is seized of the matter has been reluctant in granting any interim protection to the Income Tax Department' Yet, the authorities concerned at the State level are not ready to accept the verdict passed by a majority of High Courts of different States on the same issue; and to make things further worse, the Income Tax Department is showing audacity by issuing notices continuously under Sections 148-A and / ,'1 High Court of Bombay held at paragraph No.25 as under, viz., :
"25. "accepted" the judgment of the High court wourd not mean that tirl ',', l?!321 .t.t3 *mann.com 42 2 ( B om bay) l '' [978] I t3 ITR 5891Bombay) ','. 720241 I 65 taxmann. com 5 g I /3 00 T axman 4 52(Bombay) 'o lq9z1taxmann.com 16/55 ELT 433 (SC) \
,13 '
Sri Reddy is perhaps right in' qaying that the officers were passing the not actuated bY any mala impugned orders. TheY fides in perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted' the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with otherwise of their conclusion the correctness or or of anY factual malafides but with the fact that the officers' in reaching in their conclusion, by-passed hvo appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view' rightly criticized this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy lt cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasijudicial issues before them, revenue officers are bound by the decisions of the appellate authorities' The order of the Appellte Collector is binding on the Assistant Collectors working within his .lurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the iurisdiction of the Tribunal The principles of iudicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court lf this hellthy I
I 14 rule is nol followed, the result will only be undue harassment to assesses and chaos in administration of tax laws.
We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been harsh on the officers. lt is clear that the observations of the High Court, seemingly vehement, and apparenfly unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to lhe assesses-public without any benefit to the Revenue. We woulC like to say that the department should lake these observations in the proper spirit. The observations of the High Court should be kept in mind in future anl the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them." 15' what is worrying this Bench more is the fact that an endeavour is being made whole heartedly to ensure rot to generate further litigation on issues which have been laid to rest by a large number. of High Courts all of whom have taken a consistent stand that the action of the Income Tax Department being violative of the 15 Finance Act,2020 and Finance Act,2021. Now, in order to protect the interest of the Revenue as also that of the assessee, it would be trite at this juncture, if we dispose of the writ petition with an observatior/direcrion that the disposal of the instant writ petition in terms of the judgment rendered by this High Court in the case of Kankanala Ravindra Reddy (l supra) shall however be subject to the outcome of the SLPs which were filed by the Income Tax Department and which is pending consideration before the Hon'ble Supreme Court.
In the given facts and circumstances, this Rench is of the considered opinion that unless and until'we do not timely dispose ofmatterswhicharesquarelycoveredbythedecisionofthisCoutt and which stands fortifred by the decisions of the various other High Courts on the very same issue, the pendency of this High Courtwouldfurtherbeburdenedwhichotherwisecanbedecided and disposed of as a covered matter' 17 . So far as the interest of the Revenue is concemed, we are of the considered opinion that the interest of the Revenue has already been considered and protected, as has been observed in paragraphs
I r) 36,37 and 38 cfthe trciei" wiich, for ready reference, is reprod;ceci hereunder:
For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respondent_ Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set asideiquashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent-Department pursuant to lhe notices issued under Section 147 and l4Bwould also get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullifi ed automatically.
The preliminary objection raised by the petitioner is suslained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petitioner which stands reserved to be raised appropriate proceedings. and contended in an 38. Since the Hon'ble Supreme Court had, in the case ofAshish Agaruval, supra, as a one-time measure exercising the powers under Article 142 of the Constitution of lndia, permifted the Revenue to proceed under tlie substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right ii
L7 conferred on the Revenue would remain reserved to proceed further if they so want from the stage of the order of the Supreme Court in the case ofAshish Agarwal, supra.
We would only further like to make observations that since we are inclined to dispose of the instant writ petition, conscious of the fact that the earlier order of this High Court in the case of Kanakala Ravindra Reddy (l supra) is subjected to challenge before the Hon'ble Supreme Court in SLP No'3574 of 2024' preferred by the Income Tax Department, we make it clear that allowing of the instant writ petition is subject to outcome of the aforesaid SLP preferred by the Revenue against the decision of this High Court in the case of Kanakala Ravindra Refuly (l supta)' This, in other words, would mean that either of the parties, if they so want, may move an appropriate petition seeking revival of this writ petition in the light of the decision of the Hon'ble Supreme Court in the pending SLP on the very same issue'
Accordingly, the instant writ petition stands allowed in favour of the assessee so far as the issue of jurisdiction is concerned. As. a consequence, the impugned notice under challenge under Sections 148-A and 148 stands set aside/quashed' I(
The consequential orders, if any, also stand set aside/quashed in similar terms as have been passed by this High Court in the case of Kankanala Ravindra Reddy (l supra). There shall be no order as to costs. stand closed. Two CD Coptes 18 //// SD/.MOHD. ISMAIL DEPUTY REGISTRAR 6rr- ON OF Consequently, miscellaneous petitions pending, if any, shall To, TJ GJP SECTI FICER 1 lncome Tax Officer.. War.t B(.1 ), Hyd^erabad Signature Towers, Sy. No. 6(p) of [;!! %'Ji:: T3g1tl "?ryd r??t; "i i c;;#;'"s'" lf; i,t 5,,,, rv n H o iii,rc i' -' Principal Commissioner of I f #S[r*f+j*Ui:'i,Ar,r-, H"?,'3'S?lly;3#ffi ,,i; Rr* *dn?jll "' JiE [*T3jf:sff:,i:R?Tffi?; centre, Income rax Deparrment A/inisrry One CC to Sri polkampally pavan Kumar Rao, Advocate tOpUCJ One CC to Azls. J. Sunitha (JUN|OR SC for tncome Tax) [OpUC] 2 J 4 6. e ,
t I HIGH COURT DATED:24104t2025 ORDER WP.No.5109 of 2O2S ALLOWING THE WRIT PETITION WITHOUT COSTS :- ti eo h/- ( g Tl-lE 5 -'i-- ,ri i^\'c^\., 10 sEP 2w t{
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