NARAYANA GOUD ALLANKI, vs. Office of The Income Tax Officer

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WP/13029/2024HC TelanganaHBHC01024629202403 May 2024Bench: SUJOY PAUL,N.TUKARAMJI11 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the procedure for reassessment, as modified by the Finance Act, 2021, was mandatory. The respondent-Department's failure to undertake the subsequent proceedings under the substituted provisions, as laid down by the Finance Act, 2021, rendered the adopted procedure in contravention of the statute. This was also in direct contravention of the directives issued by the Supreme Court in the case of Ashish Agarwal. Consequently, the impugned notices and the proceedings drawn by the respondent-Department were found to be neither tenable nor sustainable. The Court quashed the notices and consequential orders as per se illegal. The Court also noted that the Supreme Court, in Ashish Agarwal, had permitted the Revenue to proceed under the substituted provisions as a one-time measure. Therefore, the right conferred on the Revenue was reserved to proceed further from the stage of the Supreme Court's order if they so desired. The Court allowed the writ petitions on this jurisdictional issue, reserving other issues raised by the petitioners to be raised in appropriate proceedings.

What were the facts?

This judgment consolidates multiple writ petitions filed by various assessees challenging notices and consequential orders issued under Section 147 read with Section 148A and Section 148 of the Income Tax Act, 1961. The assessment years involved range from 2015-16 to 2020-21. The petitioners contend that the reassessment proceedings were initiated without adhering to the modified procedure introduced by the Finance Act, 2021. The respondents are the Income Tax Officers, the Principal Chief Commissioner of Income Tax, and the National Faceless Assessment Center. The core of the dispute lies in the procedural irregularities in the issuance of notices for reassessment.

What were the issues?

1. Whether the notices issued under Section 148A(d) and Section 148 of the Income Tax Act, 1961, for reassessment are valid when the procedure prescribed by the Finance Act, 2021, has not been followed? (Question of law) Assessee's Contention: The assessees argued that the Finance Act, 2021, modified the reassessment process, and the respondents failed to adhere to these modifications. Consequently, the notices issued under Section 148 of the Act are unsustainable in law, and the consequential orders are also bad in law. They relied on the High Court's previous decision in a batch of writ petitions (W.P.No.25903 of 2022 and connected matters) decided on 14.09.2023. Revenue's Contention: The revenue did not record any specific arguments against the assessees' contentions in the provided text. The parties jointly agreed to dispose of the matter based on the previous High Court order.

Which sections of the Income-tax Act were involved?

Section 147,Section 148A,Section 148

AI-generated summary — verify with the full judgment below

[ 3403 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE THIRD DAY OF MAY TWO THOUSAND AND TWENTY FOUR PRESENT THE HON'BLE SRI JUSTICE SUJOY PAUL AND THE HON'BLE SRI JUSTICE N. TUKARAMJI WRIT PETITION NOs.1 2724 12912 12958 12966 12981 12988 & 130290F 2024 wP NO: 12724 OF 2024 Between: Padma Rani Surapaneni, D/o.Surapaneni Venkateshwar Rao, Aged about -69 vears. Occupatiori.Business, R/o. Flatno 6 Divya Apts Gouthaminagar, Po il4ancherial ' Adilabad-5o4208, Telangana, lndia PAN. BDXPS2604D Assessment Year' 201 5-16 ...pETtaoNER AND 1. Office Of The lncome Tax Officer Ward-1, Manchiriyal Telangana State. 2. The Principal Chief Commissioner Of lncome Tax, Telangana and A.P Hyderabail lT Towers AC Guards Masab Tank Hyderabad- 3. ohice of rhe lncome Tax Officer Ward 13 (3), Hvderabad a",r19?3?3nlX,3nr. 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 an appropriate writ, order or direction more particularly one in the nature of writ of Mandamus or any other appropriate writ, order, or Direction, declaring the order passed by the 3rd respondent completed the assessment u/s ,147 read with section 1448 of the lncome-tax Act Date of order 26-03-2024, DIN ITBA/AST/S/147t2O23-2411063383863(1) for the Assessment Year 2O15-16 determining the total income of Rs. 49,71,663/- as arbitrary, illegal, bad in law, without jurisdiction, void-ab-initio, violative of the principles of natural justice apart from being violative of Articles 1a, 19(1Xg)and 265 of the constitution of lndia and sec. 148A of the lncome Tax Act, 1961, and consequently set aside the same in the interests of justice Counsel for the Petitioner: SRI THANNERU CHAITANYA KUMAR i l, t. ll il

AND 'I . Office of The lncome Tax Officer, Ward 9('l ), Hyderabad, Telangana State. 2. The Principal Chief Commissioner Of lncome T-ax Telangana niO np, - Hyderabad, it Towers, AC Guards, I\4asab Tank Hydera6ad 3. The National Faceless Assessment Center, lncom-e Tax Depa(ment, New Delhi Petition under Articte 226 of rhe Consrirurion of tndia or"r;rint:i:i'';tll: circumstances stated rin the affidavit filed therewith, the High Cou( may be pleased lo issue an appropriate writ, order or direction more particularly one in the nature of writ of Mandamus, declaring the rmpugned notice dated. 29.03.2o24 for A.Y. 2017-18 passed u/s 148A(d) of the Act vide DtN No. |TBA/AST/Ft14BAt2O23- 241106359327 7(1) and the consequential set aside the notice u/s 14g dated 29.O3.2O24 vide DIN No. ITBA/ASTtst 1 48 _1 t2o23-24t 1063654853(1 ), issued by the JA0(1st respondent) instead of FAO(3rd respondent),as void. illegal, and contrary to the provisions of lncome-tax Act and contrary to the principles of Natural Justice Counsel for the Petitioner: SRI THANNERU CHAITANYA KUMAR Counsel for Respondents: Ms. B. SAPNA REDDY, COUNSEL FOR SRI J. V. PRASAD, SENIOR SC FOR INCOME TAX WP NO: '12958 OF 2024 Between: Counsel for Respondents: Ms. B. SAPNA REDDY, COUNSEL FOR SRI J, V. PRASAD, SENIOR SC FOR INCOME TAX WP NO: 12912 OF 2024 Between: Sudarshan Rao Kathula, S/o, Shanthaiah Kathula, Aqed about 67 vears. Occupation.Business R/o. H NO 10-2-i23 MAN/TLLAGUDEM , KHANiMAM 50700 1, Telangana, I nd ia PAN. BZt PK03B7E Assessment year. 1_OJJi,l?o".* Mohammed Samiuddin, S/o. lVlohammed Hameeduddin, Aged about 50 years,Occupation. Business, R/o. 18-8-'192/5/1 lndra Nagar, Midhani Road, Saidabad Hyderabad 500059,Telangana, lndia. pA-N. BeGpM1242p Assessment Y eat. 201 5-1 6 ...PETITIONER AND

1.

Office of The lncome Tax Officer Ward 9(1), Hyderabad, Telangana State. 2. The Principal Chief Commissioner of lncome Tax - Telangana and A.P, Hyderabad. lT Towers, AC Guards, Masab Tank, Hyderabad - 5O0 028, Telangana. 3. The National Faceless Assessment Center, lncorne Tax Department, New Delhi' ...RESP'NDENTS 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 an appropriate writ, order or direction more particularly one in the nature of Writ of lvtandamus, declaring the impugned notice dated. O4/O412O22 for A.Y. 201 5-16 passed u/s 1 4BA(d) of the Act vide DIN No. ITBA/AST/F|148A|2O22' 2311042500757(1) and the consequential set aside the notice u/s 148 dated. 0610412022 vide DIN No. ITBA/AST|SI14B 112022-2311042587413(1), issued by the JAO('1st respondent) instead of FAO(3rd respondent),as void, illegal, and contrary to the provisions of lncome-tax Act and contrary to the Principles of Natural Justice, Counsel for the Petitioner: SRI THANNERU CHAITANYA KUMAR Counsel for Respondents: Ms. B. SAPNA REDDY, COUNSEL FOR SRI J. V. PRASAD, SENIOR SC FOR INCOME TAX WP NO: 12966 OF 2024 Between: Prasada Rao Potu,, S/o. Bikshamaiah Potu, Aged about 52 years,Occupation. Business R:/o. 8-2-323 ,Main Road Balaji Nagar Khammam 50700 l,Telansana, I ndia. PAN. AOXPPs443BAssessment Year. 191+-,+g*- AND 1. Office of The lncome Tax Officer Ward 1,, Khammam, Telangana State. 2. The Principal Chief Commissioner of lncome Tax Telangana 4d- 4.i,' Hyderabad, lT Towers, AC Guards, Masab Tank, Hyderabad 500 o28' Telangana. 3. The Nitional Faceless Assessment Center,, lncome Tax Departrnent, New Delhi ...RESP.NDENTS Petition under Articte 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 an appropriate writ, order or direction more particularly one in the nature of writ of Mandamus, declaring the impugned notice dated. 29.03.2O24 for A.Y. 2017-18 passed u/s 148A(d) of the Act vide DIN No. |TBAJASTlFll4SAl2O23- 24t1o635g23g4( 1) and the consequential set aside the notice u/s 148 dated

I 29.03.2024 vide DIN No. ITBA/ASTlsll48 112023-2411063652253(1), issued by the JAO( I st respondent) instead of FA0(31d respondent),as void, illegal, and contrary to the provisions of lncome-tax Act and contrary to the principles of Natural Justice, Counsel for the Petitioner: SRI THANNERU CHATTANYA KUMAR Counsel for Respondents: SRI VIJHAY K. PUNNA SENIOR SC FOR INCOME TAX WP NO: 12981 OF 2024 Between: GUMMULA GANGARAM,, S/o, GUIVN/ULA POSULU, Aged about 53 years, Occupation. Business R/o. HNO 1-i38 NEW LOLAM, DILAWARPUR ADILABAD 504306,Telangana, lndia.PAN. AQYPG0346B Assessment year. 2017-18 ...PETITIONER AND 1. 2. Office Of The lncome Tax Officer, Office of The lncome Tax Officer Ward 1, Nirmal, Telangana State The Principa.l Clrief Commissioner of lncome Tax Telangana and A.p,, Hyderabad, lT Towers, AC Guards, I\i,lasab Tank, HydeEbad 500 029; Telangana. The National Faceless Assessment Center,, lncome Tax Department, New Delhi. Petition under Articte 22G of the Constirution of tndia orrriffii:i''fT[: circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue an appropriate writ, order or direction more particularly one in the nature of Writ of Mandamus, declaring the impugned notice dated. 21.02.2024 for 4.Y.2017-18 passed u/s 14BA(d) of the Act vide DtN No. |TBA/AST/FI14BA12O23 -2411061603722(1 ) and the consequentiat set aside the notice u/s 148 dated 27.02.2024 vide DIN No. ITBA/ASTlsl148 1t2O23-24t1O61607556(1), issued by the JA0(1st respondent) instead of FA0(31-d respondent),as void, iltegal, and contrary to the provisions of lncome-tax Act and contrary to the principles of Natural Justice Counsel for the Petitioner: SRI THANNERU CHAITANYA KUMAR Counsel for Respondents: Ms. J. SUNITHA, COUNSEL FOR .7

Ms. SUNDARI PISUPATI SENIOR SC FOR INCOME TAX WP NO: 12988 OF 2024 Between: HARISHA ENTERPRISES, Partner of the Firm Dornala Narayana, by-its S/o.Yadagiri Dornala, Aged about 52 years, Occupation. Business, Rl/O. Plot.No.29.1, Christian Colony Vanasthalipuram,Hayathnagar hyderabad 500070, Telangana, lndia PAN AAlFH00T4P Assessment ""r. _13?9,rll"r* Office of The Assistant Commissioner of lncome Tax DC/ACIT Circle-S(1), Hyderabad. Telangana State. The Principal Chief Commissioner Of lncome Tax Telangana And Ap, Hyderabad, lT Towers, AC Guards, Masab Tank, Hyderabad The National Faceless Assessment Cenler, lncome Tax Department, New Delhi' ...RESP.NDENT' Petition under Article 226 of lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue an appropriate writ, order or direction more particularly one in the nature of Writ of Mandamus, declaring the impugned notice dated. 29.03.2024 for A.Y.2O2O-21 passed u/s 148A(d) of the Act vide DIN No. ITBtuAST/F1148N2O23- 2411063639605( 1 ) and the consequential set aside the notice u/s 148 dated 29.03.2024 vide DIN No. ITBA/ASTlsl148 '112023-2411063651547(1), issued by the JAO(1st respondent) instead of FA0(3rd respondent),as void, illegal, and contrary to the provisions of lncome-tax Act and contrary to the Principles of Natural Justice Counsel for the Petitioner: SRI THANNERU CHAITANYA KUMAR Counsel for Respondents: Ms. B. SAPNA REDDY, cOUNSEL FOR SRI J. V. PRASAD, SENIOR SC FOR INCOME TAX P NO: 13029 OF 20 Between: AND 1. 2. 3. AND 1 NARAYANA GOUD ALLANKI,, S/o.LAXMA GOUD ALLANKI, Aged about 63years,Occupation.Business. Rlo.9-104122/1 Plot No !0 , Marylf1 lqgqr, Bollaram, Secunderabad 500010,Telangana, lndia. PAN. AHWA8612J Assessment Year' 201 5-16 ...pETrroNER Office of The lncome Tax Officer, Ward 10(1), Hyderabad', Telangana State

2.

The Principal Chief Commissioner of lncome Tax, Telangana 9!9 li, Hyderabail, lT Towers, AC Guards, Masab Tank, Hyderabad 500 028, Telangana 3. The C-entral Board of Direct Taxes,, Represented by its Chairman, Department of Revenue, Ministry of Finance, Government of lndia, secretariat Buildings, New Delhi - 1 10 001 , 4. The Na"tional Faceless Assessment Center,, lncome Tax Depa(ment, New Delhi. 5. The Union of lndia,, Represented by its Secretary to the Government, Department of Revenue, Ministry of Finance, New Delhi - ,,0 9.,J.r"o"o."r" Petition under Article 226 o'f lhe Constitution of lndra praying that in the circumstances stated,in the affidavit filed therewith, the High court may be pleased to issue an appropriate writ, order or direction more particularly one in the nature of Writ of Mandamus declaring the order passed by the lncome Tax Authorities (National Faceless E-ASseSSment Centre) completed the assessment lJts 147 read with section '1448 of the lncome-tax Act Date of Order 28-11-2023, DIN ITBA/AST tst 1 47 12023-2411 05830381 7('l ) for the Assessment Year 201 5-1 6 determining the total income of Rs. 29,04,7011 as arbitrary, rllegal,bad in law, without jurisdiction, void-ab-initio, violative of the principles of natural justice apart from being violative of Articles 14, 19(1Xg) and 265 of the constitution of lndia and Sec. 148A of the lncome Tax Act,1961, and consequently set aside the same in the interests of lustice. Counsel for the Petitioner: SRI THANNERU CHAITANYA KUMAR Counsel for Respondent Nos. 1 to 4: Ms. B. SAPNA REDDY' COUNSEL FOR SRI J. V. PRASAD, SENIOR SC FOR INCOME TAX Counsel for Respondent No. 5: SRI B' MUKHERJEE' COUNSEL FOR SRI GADI PRAVEEN KUMAR, DEPUTY SOLICITOR GENERAL The Court made the following: COMMON ORDER

THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE N. TUI(ARAMJI 12958 L2966 L29AL WRIT PETITION NOs.\2724 t29L2 12988 & 13o29 0F 2024 COMMON O ER: k)er Hon'ble Justice SujoY Paul) Sri Thanneru Chaitanya Kumar, learned counsel appears for the petitioner{s), Ms' B' Sapna Reddy' learned counsel represents Sri J.V. Prasad, learned Standing Counsel for the respondents-Income Tax Department in W'P'Nos'12724' 12912, l2gia, 12988 & 13029 of 2024, Sri Vijhay K Punna' learned Senior Standing Counsel appears for the respondents- Income Tax Department in W'P'No'12966 of 2024' Ms' J' Sunitha, learned Junior Standing Counsel represents Ms.Sundari R.Pisupati, learned Senior Standing Counsel for the respondents-lncome Tax Department in W'P'No'12981 of 2024 and Sri B. Mukherjee, Iearned counsel represents Sri Gadi Praveen Kumar, learned Deputy Solicitor General of India for the respondents-Central Government in all the writ petitions except in W.P.No. 12724 of 2024. 2. Regard being had to the similarity of the question involved, on the joint request of the parties' the matters are analogously heard and decided by this common order'

2 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, 196 I 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.259O3 ol 2O22 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.O9.2023. 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 1484, 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-Oepartment is in contravention to the statute i.e. the Finance Acq 2021, at the first instance. Secondly, it is also in direct contravention to the directives

3 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-Depa(ment 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 ofjurisdiction, 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 Article 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 th€ 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 in W.P.No.259O3 of 2022.

4 7. The writ petitions are allowed' No costs' Interlocutory applications, if any pending, shall also stand closed' sD/-A.v.s.PRASAD ASSIsTANTREGJtSf RAR //rRUE coPY// > SECTION OFFICER To, :ll:", +*i{i'"ru{eg;fj$q$"a.gt;'-1'g1T: j'" * ?lt"On,* of The lncome Tax officer' Ward 9(1)' Hvderabad' Telangana u. ?Lt"*r,,onrl Faceless Assessment Center' lncome Tax Department' New Delhi 6 ine orfice of-rte rncome rax officer w^ard 1" 5l'3flTgliJ?51t"1[l3i\il:" ? iilE 6iii"; 6f ih" ln"orn" Tax officer' office or I n' ' t ' Nirmat' Telangana tlrt?r, officer, ward 10(1 )' Hyderabad" Telangana 8. T'he Office of The lncon o ?Lt?""*rrt Board of Direct Taxes,, Eepresented.bv its chairman. DeDartmentotnevenuJ'lirnll-fri"tjiFlnln""'Goveinmentoflndia'Secretarrat 6'liJtist' New Delhi - XL33J;"* center,, lncome rax Department' New 1 0. The Nalional Faceless t[iU."lil6s,"rs'egff{i"[ft]":"fi ]#j3:lr"'-e1"r"6'33r:. 3ffi EEi:iu,"\,:l!+:f iir{s:"i:*:ffi ;l.ia'[,","1^ .3ffi 33iSi!:J_ffi IJt[1ts"'';ffi X,',""'fi llS:ltt j,;a:f,:B,,no,,topuc] .One CC to Sri Gadi Pravee - Two CD CoPies 11 12. 13 14 15 '16 17 MBC GJPs

HIGH COURT DATED: 0310512024 HE STA 14: ( D q oc tr E i\iN 202[ vza .L i r\) COMMO DER WRIT PETITION NOs.12724, 12912, 12958, 12966, 12981,12988 & 13029 0F 2024 ALLOWING THE WRIT PETITIONS @c'o-' WITHOUT COSTS € V 1*

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