M/S KARNAL MOTORS PVT. (EARLIER KNOWN AS KARNAL MOTORS) LTD vs. DY. COMMISSIONER OF INCOME TAX

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CWP/10805/2023HC Punjab & HaryanaPHHC01063940202313 November 2024Bench: MR. JUSTICE SANJEEV PRAKASH SHARMA,MR. JUSTICE SANJAY VASHISTH3 pages
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What did the High Court hold?

The High Court allowed the writ petition, setting aside the notice issued by the Jurisdictional Assessing Officer under Section 148A(b) dated 31.03.2023, the order issued under Section 148A(d) dated 21.04.2023, and the notice issued under Section 148 dated 21.04.2023, along with consequential proceedings. The Court held that circulars or instructions issued by the Board cannot override statutory provisions or render them obsolete. Legislative enactments with financial implications must be strictly followed. The Court found that by exercising powers under Sections 119 and 120, and Section 144B (7 & 8), authorities cannot usurp legal provisions for their convenience, causing hardship. Instructions and circulars can only supplement statutory provisions. Therefore, notices and proceedings initiated without conducting faceless assessment as envisaged under Section 144B were contrary to the Act and lacked jurisdiction. The revenue was granted liberty to follow the prescribed procedure if advised. The ratio decidendi is that faceless assessment procedures mandated by statute must be followed, and administrative instructions cannot override statutory mandates, especially when causing hardship to assessees.

What were the facts?

The petitioner, M/s Karnal Motors Private Limited, filed a writ petition before the High Court of Punjab and Haryana challenging notices and proceedings initiated under Section 148A and Section 148 of the Income Tax Act, 1961. The petitioner contended that these actions were taken without conducting the faceless assessment as envisaged under Section 144B of the Act. The revenue, represented by the Deputy Commissioner of Income Tax, argued that the circulars and instructions issued by the Board did not override statutory provisions. The assessment year(s) are not explicitly stated, nor is the specific amount in dispute. The procedural history involves the issuance of notices dated 31.03.2023 and 21.04.2023, and an order dated 21.04.2023, which are under challenge.

What were the issues?

1. Whether notices issued by the Jurisdictional Assessing Officer under Section 148A(b) of the Income Tax Act, 1961, and subsequent proceedings initiated without conducting faceless assessment as envisaged under Section 144B of the Act, are contrary to the provisions of the Act, 1961, and thus liable to be set aside? (Question of law and mixed fact and law, turning on Sections 144B, 148, and 148A of the Income Tax Act, 1961). Assessee's Contention: The assessment proceedings were vitiated as they were not conducted in a faceless manner as mandated by Section 144B of the Act. Revenue's Contention: The revenue argued that circulars or instructions could not override statutory provisions or make them otiose. They suggested a distinction from previously decided cases. The revenue relied on the powers contained in Sections 119 and 120 of the Act, 1961, as well as Section 144B (7 & 8).

Which sections of the Income-tax Act were involved?

Section 119,Section 120,Section 144B,Section 148,Section 148A

AI-generated summary — verify with the full judgment below

CWP-10805-2023 - 1 - IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 242-4 CWP-10805-2023

Decided on : 13.11.2024 M/S KARNAL MOTORS PRIVATE LIMITED (EARLIER KNOWN AS KARNAL MOTORS) . . . Petitioner(s) Versus DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE, AAYAKAR BHAWAN, SECTOR 12, KARNAL, HARYANA . . . Respondent(s) CORAM: HON’BLE MR. JUSTICE SANJEEV PRAKASH SHARMA HON'BLE MR. JUSTICE SANJAY VASHISTH PRESENT: Mr. S.K. Mukhi, Advocate for the petitioner(s). Ms. Gauri Neo Rampal, Sr. Standing Counsel (through V.C.) for the respondent(s) - revenue. **** SANJEEV PRAKASH SHARMA

, J. (Oral) 1. Both the counsel are ad idem that the issue involved in the present petition stands finally examined and concluded by this Court in CWP No.21509 of 2023 titled as Jasjit Singh vs. Union of India and others, decided on 29.07.2024, and by the Coordinate Bench in CWP No.15745 of 2024 titled as Jatinder Singh Bhangu vs. Union of India and others, decided on 19.07.2024. This Court in Jasjit Singh (supra) held as under: “16. We are in agreement with the view taken by the Coordinate Bench and hold that such circular or instructions by the Board could not have been issued to override statutory provisions or to make them otiose or obsolete. Legislative enactments having financial implications are required to be followed strictly and mandatorily. By exercising the powers contained in Sections 119 JAWALA RAM 2024.11.19 12:55 I attest to the accuracy and authenticity of this document

CWP-10805-2023 - 2 - and 120 of the Act, 1961 as well as Section 144B (7 & 8), the authorities cannot be allowed to usurp the legal provisions to their own satisfaction and convenience causing hardship to the assessees. It also leaves confusion in the minds of the taxpayers. In the opinion of this Court, instructions and circulars can be issued only for the purpose of supplementing the statutory provisions and for their implementation. 17. In view of the aforesaid discussion, there is no occasion to distinguish or take a different view as suggested by the learned counsel for the revenue from what has already been held by the Coordinate Bench. 18. Keeping in view the law laid down by the Coordinate Bench (supra), notices issued by the JAO under Section 148 of the Act, 1961 and the proceedings initiated thereafter without conducting the faceless assessment as envisaged under Section 144B of the Act, 1961, have been found to be contrary to the provisions of the Act, 1961 and accordingly notices dated 28.02.2023, 16.03.2023, 20.03.2024 and 30.03.2023 and order dated 30.03.2023, are set aside for want of jurisdiction. 19. The respondents-revenue would be, however, at liberty to follow the procedure as laid down under the Act, 1961 and proceed accordingly, if so advised. 20. All the writ petitions are allowed. The interim order passed by the Court shall stand merged with the present order.” 2. Keeping in view above, we allow this Writ Petition in the aforesaid terms. The observations and order passed above shall apply JAWALA RAM 2024.11.19 12:55 I attest to the accuracy and authenticity of this document

CWP-10805-2023 - 3 - mutatis mutandis to the present case. Accordingly, notice issued by the Jurisdictional Assessing Officer u/s 148A(b) of the Income Tax Act, 1961, dated 31.03.2023, order issued u/s 148A(d) of the Act, dated 21.04.2023 and notice issued u/s 148 of the Act, dated 21.04.2023, as well as consequential proceedings are set aside. 3. All pending applications also stand disposed of accordingly. (SANJEEV PRAKASH SHARMA) JUDGE (SANJAY VASHISTH) JUDGE November 13, 2024 J.Ram Whether speaking/reasoned: Yes/No Whether Reportable: Yes/No JAWALA RAM 2024.11.19 12:55 I attest to the accuracy and authenticity of this document

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