Primary Agriculture Co-Operative Society Limited Chinnakalvala vs. The Assistant Commissioner of Income Tax
What did the High Court hold?
The High Court allowed the writ petitions, setting aside the impugned show cause notices and consequential assessment orders. The Court's decision was based on a prior common order dated September 14, 2023, in W.P. No. 25903 of 2022 and connected matters. In that order, the Court had held that the respondent-Department's procedure for reassessment, particularly concerning notices issued under Section 148A, was in contravention of the substituted provisions of the Finance Act, 2021, and the directives of the Supreme Court in the case of Ashish Agarwal. Consequently, the notices and proceedings were deemed illegal and quashed. The Court reasoned that when the initiation of proceedings is procedurally flawed, subsequent orders automatically become nullified. The liberty was reserved for both parties to proceed in accordance with law as per paragraph 38 of the aforementioned Supreme Court order.
What were the facts?
The petitioners are Primary Agriculture Co-Operative Societies, challenging assessment orders passed by the National Faceless E-Assessment Centre for the Assessment Year 2018-19 and 2016-17. The assessments were completed under Section 147 read with Section 144B of the Income Tax Act, 1961, determining substantial total incomes for each society. The petitioners contend that the assessment orders are arbitrary, illegal, without jurisdiction, void-ab-initio, and violative of natural justice and constitutional provisions. The core of the challenge lies in the procedure followed for reassessment, which the petitioners argue did not adhere to the modifications introduced by the Finance Act, 2021.
What were the issues?
1. Whether the reassessment proceedings initiated under Section 147 read with Section 144B of the Income Tax Act, 1961, are valid when the procedure followed contravenes the substituted provisions laid down by the Finance Act, 2021? (Question of law) Assessee's Contention: The petitioners argue that the respondents failed to follow the modified reassessment process as per the Finance Act, 2021. They contend that the notices issued under Section 148, and consequently the assessment orders, are bad in law because the prescribed procedure was not followed. They rely on the principle that procedural flaws render subsequent actions unsustainable. Revenue's Contention: The judgment records an agreement between the parties that the matter could be disposed of in terms of a previous common order passed by this Court in a similar batch of writ petitions. Therefore, no specific arguments were presented by the revenue against the petitioners' claims in this instance.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
The Court made the following: COMMON ORDER
THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE NAMAVARAPU RAJESHUTAR RAO WRIT PETITION NOS.25378 .25379.25381, 25393. 254L3,254L7 2 Regard being had to the similarity of the question involved, on the joint request of the parties, the matters are ana-logously heard and decided by this common order
It is common ground taken by the learned counsel for the petitioner(s) that in furtherance of Finance Act, 2027, re_ assessment process stood modified but the respondents have not taken care of it and therefore notices issued under Section 148 N{p 2542A OF 2024 COMMON ORDER (per Hon'bte Sp,J) Sri Thanneru Chaitanya Kumar, learned counsel appears for the petitioner(s), Ms. J.Sunitha, learned Junior Standing Counsel for Income Tax Department, appears for the respondent(s)-lncome Tax Department in W.P.Nos.25378 and 25417 of 2024, Ms.B.Sapna Reddy, learned Junior Standing Counsel for Income Tax Department, appears for the respondent(s)-lncome Tax Department in W.P.Nos.2S379, 25381, 25393,25413 and 25428 of 2024 and Sri B. Mukherjee, learned counsel representing Sri Gadi Praveen Kumar, learned Deputy Solicitor General of India, appears for the respondent(s)-Central Government in all the writ petitons. I
2 ol the Income Tax Act, 196 1 cannot sustain judicial scrutiny. Since notices are bad in law, the consequential orders are also bad in law. 4 During the course of hearing, learned counsei for the parties agreed that curtains on this issue are finally drawn by this Court in a batch of writ petitions, W.P.No.25903 of 2022 and other connected matters, decided by common order dated 14.O9.2023. The parties agreed that this matter may be disposed of in terms of the Common Order dated 14.09.2023. 5 This Court in the said order dated 74.O9.2023 in W.P.No.259O3 of 2022, held as under:
"35. ln view of the aforesaid discussions, it is by now very clear that the procedure to be followed by the respondent-Department upon treating the notices issued for reassessment being under Section '148A, the subsequent proceedings was mandatorily required to be undertaken under the substituted provisions as laid down under the Finance Act, 2021. ln the absence of which, we are constrained to hold that the procedure adopted by the respondent-Department is in contravention to the statute i.e. the Finance Act, 2021, at the first instance. Secondly, it is also in direct contravention to the directives issued by the Hon'ble Supreme Court in the case of Ashish Agarwal, su pra.
Foi 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 aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent Department pursuant to the notices issued under Section 147 and 148 would also get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when
3 the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically.
The preliminary objection raised by the petitioner is sustained 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 and contended in an appropriate proceedings.
Since the Hon'ble Supreme Court had, in the case of Ashish Aganval, supra, as a one-time measure exercising the powers under Afticle 142 of the Constitution of lndia, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right 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 of Ashish Agarwal, supra.
No order as to costs." In view of the consensus arrived, the impugned Show 6 Cause notices and consequentia-l orders passed in this batch of ',{,rit petitions are set aside. Liberty is reserved to both the parties to take respective stand and to proceed in accordance with law as per paragraph No.38 of the order dated 14.09.2023 in W.P.No.259O3 of 2022 7 The Writ Petitions are allowed. No costs. Interlocutory applications, if any pending, shall a,lso stand closed. //' SECTION FICER
The Assistant Commissioner of lncome Tax, Circle '1, Karimnagar, lncome Tax Office, Aayakar Bhavan, Near Natra.j Theatre, Karimnagar Telangana State.
The lncome Tax Officer Ward-1. Khammam/ lncome Tax Office, Raieev Grunt, Rajiv Chowk, Near Kinnerasani Theatre, Khammam, Telangana Stale.
The Principal Chief Commissioner of lncome Tax-, Telangana and AP, Hyderabad, lT Towers. AC Guards, Masab Tank, Hyderabad -500 028, Telangana. ,1. The National Faceless Assessment Center, lncome Tax Department, New To, DM, SD/.MOHD. ISMAIL ASSISTANT REGIS/RAR w \
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The chairman, central Board of Direct r-axes. Department of Revenue, \ yinistry of Finance, Governmeni oiinoli, sec,e-t"rriEriri"iib.] New Dethi I '1 10 001 6 Jle Secretary to the Government Department of Revenue, Ministry of Finance, New Delhi, Union of lndia. 7 One CC to SRI THANNERU CHAITANYA KUMAR, Advocate [OpUC] B. One CC to M/s J.SUNITHA, Jr SC FOR TNCOME rAX [OPUC]
One CC to M/s B.SAPNA REDDY, Jr SC FOR INCOME TAX IOPUC] 'l0.one cc to SRI GAD| PRAVEEN KUMAR, DEpury solrcrroR GENERTAL OF lNDlA, High Court for the State of Telangana at Hyderabad lOpUCi- ' - 'I 1. Two CD Copies BSR BS
HIGH COURT DATED: 2010912024 eo({ -t l.,r E s l4 , I i 1s r{orr flt l' D P4rcHEo COMMON ORDER WP.Nos.25378, 25379, 25381, 25393, 25413, 25417 AND 25428 0F 2024 ALLOWING ALL THE WRIT PETITIONS, WITHOUT COSTS U t2 | /'/ \eW p
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