Venkat Reddy Karrolla, vs. Income Tax Officer

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WP/26224/2024HC TelanganaHBHC01050907202424 September 2024Author: SUJOY PAUL,NAMAVARAPU RAJESHWAR RAO8 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed all three writ petitions. The Court noted that it was common ground between the parties that the reassessment process was modified by the Finance Act, 2021, and the respondents had not adhered to these modifications. The Court referred to its own previous common order dated September 14, 2023, in a batch of writ petitions (W.P. No. 25903 of 2022 and connected matters). In that order, the Court had held that the procedure adopted by the respondent-Department was in contravention of the Finance Act, 2021, and the directives of the Supreme Court in the case of Ashish Agarwal. Consequently, the impugned notices and consequential orders were quashed as being per se illegal. The High Court reiterated this finding and set aside the impugned notices and consequential orders in the present cases. Liberty was reserved to both parties to proceed in accordance with law as per paragraph 38 of the aforementioned order dated September 14, 2023, which allowed the Revenue to proceed from the stage of the Supreme Court's order in Ashish Agarwal as a one-time measure. No order as to costs was made.

What were the facts?

These three writ petitions (WP Nos. 26224, 26226, and 26241 of 2024) were filed by Venkat Reddy Karrolla, Mohd Abdul Naveed, and Pramila Devi Inani, respectively. The petitioners challenged assessment orders passed under Section 147 read with Section 144B of the Income Tax Act, 1961, for Assessment Years (AY) 2015-16, 2016-17, and 2019-20. They also challenged the notices issued under Section 148 of the Act. The core of their grievance was that these notices and consequential orders were issued by the Joint Assessing Officer (JAO) instead of the Faceless Assessing Officer (FAO), and that the respondents failed to adhere to the modified reassessment procedures introduced by the Finance Act, 2021. The petitioners sought a declaration that the assessment orders and notices were void, illegal, and contrary to natural justice, and also prayed for a stay of further proceedings.

What were the issues?

1. Whether the notices issued under Section 148 of the Income Tax Act, 1961, and the consequential assessment orders passed under Section 147 read with Section 144B are void and illegal due to procedural irregularities, specifically the failure to follow the reassessment procedure as modified by the Finance Act, 2021, and the issuance by an incorrect authority (JAO instead of FAO)? (Question of law and mixed fact and law, turning on Section 147, Section 148, and Section 144B of the Income Tax Act, 1961, and the Finance Act, 2021). Assessee's Contention: The reassessment process, having been modified by the Finance Act, 2021, was not properly followed by the respondents. The notices issued under Section 148 and the subsequent assessment orders are therefore bad in law and unsustainable. The issuance by the JAO instead of the FAO is also a procedural flaw. Revenue's Contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 144B

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
[ 3411 I TUESDAY, THE TWENTY FOURTH DAY OF SEPTEI\iIBER TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE NAMAVARAPU RAJESHWAR RAO WRIT PETITION NOs: 26224 26226 and 26241 OF 2024 WRIT PETITION NO: 26224 OF 2024 Between: Venkat Reddy Karrolla, S/o Ram Reddy Aged about S5years, Occ. Business, 4-7-8113, Road No.3,Revenue Colony, Sa ngareddy-502001 ...PETITIONER AND 1 lncome Tax Officer, Ward 9(1), Hyderabad, l.T. Towers, AC Guards, Masab Tank Hyderabad- 500004, Telangana The Principal Chief Commissioner of lncome Tax,, AP 85 TS, 1Oth Floor, C- Block, l.T.Towers, 10-2-3, A.C.Guards, Hyderabad -500004 Assessment Unit,, National Faceless Assessment Centre, lncome Tax Department, Ministry of Finance Room No. 401 , znd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi- 1 10003 ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, order or direction, more particularly one in the nature of Writ of Mandamus, declaring the Assessment Order dated 0710212024 passed by the 3rd respondent uts 147 r/w section 1448 of the lncome Tax Act for A.Y. 2015-16 vide DIN No. ITBA/ASTlsl14712023'241106061 1789(1)and the notice u/s 148 dated 19.O4.2O22 vide DIN No.|TBA/AST/S|14B-112022- 2311042783264(1), issued by the JAO (1st Respondent) instead of FAO (3rd Respondent) as void, illegal and contrary to the Principles of Natural Justice. 2 3 HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) lA NO: 1 OF 2024 Counsel for the Petitioner: SRI PARIKSHITH KUTUR Counsel for the Respondents: M/s. B.SAPNA REDDy, Jr. SC FOR INCOME TAX WRIT PETITION NO: 26226 0F 2024 Between: AND 1 IVohd Abdul Naveed, S/o Mohd Abdul eadeer, Aqed about 39 years, Occ Business, .No_ 23-2-46, Opp. Water tank. 'Mdgnatpura .ludifee-'Coit, Hyderabad- 500002. ...PETITIONER lncome Tax Officer, Ward 9('l), Hyderabad, l. T. Towers AC Guards, Masab Tank Hyderabad- 500004, Tetangana The.Principal Chief Commissioner of lncome Tax, Ap and TS, jOth Floor, C_ Block, l. T. Towers, 10-2-3, A. C. Guards, Hyderabad - 500004 Assessment Unit, National Faceless Assessment Department, Ministry of Finance Room No 4O1.- Jawaharlal Nehru Stadium, Delhi- .t 10003 2 3 Centre, lncome Tax 2nd Floor, E- Ramp, ...RESPONDENTS Petition under Article 226 of the constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High court may be pleased to issue a writ, order or direction, more particularly one in the nature of writ of Mandamus, declaring the Assessment order daled 14 02.2024 passed by the 3rd respondent uls 147 r/w section i44B ot the lncome Tax Act for A. y. 2016- 17 vide DIN No. IrBA/ASTtsl147t2o23- 24t1o6o}g1s47(1)and the notice u/s 148 dated 25. 03. 2023vide DrN No. TTBAiAST/S/148 1r2o22- Petition under section 1si cpc praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be pleased to stay all further proceedings pursuant to the Assessment order dated 07.02.2024 passed by the 3rd respondent u/s 147 rlw section 1448 of the lncome Tax Act tor A.Y 2017-18 vide DIN No. |rBA/ASTlst'r4712023-2411060611789(i) and may pass such other order(s) as the Honble court deems fit and proper in the interests of substantial justice, as othenvise the petitioner would be put to irreparable loss and serve injury. 2311051289717('1 ), issued by the JAO (1st Respondent) instead of FAO (3rd Respondent) as void, illegal and contrary to the Principles of Natural Justice. lA NO: 1 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings pursuant to the Assessment Order dated 14.02.2024 passed by the 3rd respondent uls 147 r/w section 1448 of the lncome Tax Act for A.Y 2016-17 vide DIN No. ITBA/AST/S/14712023' 2411060898547(1 )and may pass such other orde(s) as the Honble Court deems fit and proper in the interests of substantial justice, as otherwise the Petitioner would be put to irreparable loss and serve injury. Counsel for the Petitioner: SRI PARIKSHITH KUTUR Counsel for the Respondents: M/s. B.SAPNA REDDY, Jr. SC FOR INCOME TAX WRIT PETITION NO: 26241OF 2024 Between: Pramila Devi Inani, W/o. late Sri Venugopal lnani Aged about 8Syears, Occ Business, Rl/o 15- 9- 58, Maharaj Gunj, Hyderabad , Telangana - 500012. ...PETITIONER AND 1 2 lncome Tax Officer, Ward 9( 1), Hyderabad, Aaykar Bhawan, Opp LB Stadium, Basheerbagh Hyderabad- 500004, Telangana The Principal Chief Commissioner of lncome Tax, AP and TS, 1Oth Floor, C- Block, l. T. Towers, 10-2-3, A. C. Guards, Hyderabad - 500004 3. Assessment Unit, National Faceless Assessment Centre, Income Tax Department, tVinistry of Finance Room No. 401 , 2nd Floor, E- Ramp, Jawaharlal Nehru Stadium, Delhi- 1 10003 ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, order or direction, more particularly one in the nature of Writ of Mandamus, declaring the Assessment Order dated 19.03.2024 passed by the 3rd Respondent u/s 147 rlw section 144 B of the lncome Tax Act for A. Y. 2019- 20 vide DIN No. ITBA/AST/5114712023- 24116062930999(1) and the notice u/s 148 dated 31 .03.2023 vide DIN No.ITBA/AST/Sl14B_1l2o2i- 231105't809053(1), issued by the JAO (1st Respondent) instead of FAO (3rd Respondent) as void, illegal and contrary to the Principles of Natural Justice. Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings pursuant to the Assessment Order dated 19.03.2024 passed by the 3rd Respondent uls 147 r/w section 144 B of the lncome Tax Act for A. Y. 2019- 20 vide DIN No.ITBA/AST/S114712023- 24116062930999(1 ) and may pass such other orde(s) as the Honble Court deems fit and proper in the interests of substantial justice, as otherwise the Petitioner would be put to irreparable loss and serve injury. Counsel for the Petitioner: SRI PARIKSHITH KUTUR Counsel for the Respondents: M/s. B.SAPNA REDDY, Jr. SC FOR INCOME TAX

The Court made the following: COMMON ORDER lA NO: 'l OF 2024

THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE NAMAVARAPU RAJES}IWAR RAO WRIT PETITION NOS.26224 26226 e,2624L O? 2024 COMMON ORDER (per Hon'ble SP,J) Sri K. Parikshith, learned counsel, appears for the petitioner(s) and Ms. B.Sapna Reddy, learned Junior Standing Counsel for Income Tax Department, appea-rs for the respondents.

2.

Regard being had to the similarity of the question involved, on the joint request of the parties, the matters are alalogously heard ald decided by this common order'

3.

It is common ground taken by the learned counsel for the petitioner(s) that in furtherance of Finance Act, 2021, re' assessment process stood modified but the respondents have not taken care of it and therefore notices issued under Section 148 of the Income Tax Act, 1961 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 counsel 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 \ __.-_.--,

-t 2 1,4.O9.2023. The parties agreed that this matter may be disposed of in terms of the Common Order dated 74.09.2023 5 This Court in the said order dated 14.09.2023 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 Acl,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, supra.

36.

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 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 the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically.

37.

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.

38.

Since the Hon'ble Supreme Court had, in the case of Ashish Agarwal, supra, as a one-time measure exercising the powers under ArtictE 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 I I

3 To, BSR GJP W 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.

39.

No order as to costs."

6.

In view of the consensus arrived, the impugned Show Cause notices and consequential orders passed in this batch of writ 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 tn W.P.No.259O3 of 2O22. 7. The Writ Petitions are allowed. No costs. Interlocutory applications, if any pending, shail also stand closed. V. KAVITHA ASSISTANT REGISTRAR //// SECTION OFFICER

1.

The lncome Tax Officer, Ward 9(1), Hyderabad, Aaykar Bhawan, Opp LB Stadium, Basheerbagh Hyderabad- 500004, Telangana

2.

The Principal Chief Commissioner of lncome Tax, AP and TS, 1Oth Floor, C- Block, l. T. Towers, 10- 2- 3, A. C. Guards, Hyderabad - 500004

3.

The Assessment Unit, National Faceless Assessment Centre, lncome Tax Department, Ministry of Finance Room No. 4O1 , 2nd Floor, E- Ramp, Jawaharlal Nehru Stadium, Delhi- 110003

4.

One CC to SRI PARIKSHITH KUTUR, Advocate [OPUC]

5.

One CC to M/s. B.SAPNA REDDY, Jr. SC FOR INCOIVE TAX [OPUC]

6.

Two CD Copies

I I HIGH COURT DATED: 2410912024 oR THE si.4 oo o 27 1 L zlilt (r.( ,'.a Sn61 i.qr.i_ COMMON ORDER WP.Nos.26224,26226 AND 26241 of 2024 ALLOWING ALL THE WRIT PETITIONS, WITHOUT COSTS ."?s<b at) q

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