Srinivas Rao Kolla vs. Union of India

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WP/23808/2024HC TelanganaHBHC01045780202402 September 2024Bench: SUJOY PAUL,NAMAVARAPU RAJESHWAR RAO7 pages
AI SummaryAllowed

What did the High Court hold?

The High Court, in a common order, allowed the writ petitions. The Court noted that it was common ground that the respondents had not followed the modified reassessment process introduced by the Finance Act, 2021, rendering the notices issued under Section 148 of the Income Tax Act, 1961, unsustainable. The Court relied on its previous decision in W.P. No. 25903 of 2022 dated September 14, 2023. In that prior judgment, the Court 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 proceedings were quashed as being per se illegal and lacking jurisdiction. The Court further clarified that the right conferred on the Revenue to proceed further, as permitted by the Supreme Court in the Ashish Agarwal case, would remain reserved. The impugned show cause notices and consequential orders in the present batch of writ petitions were set aside, with liberty reserved for parties to proceed in accordance with law as per paragraph 38 of the earlier order.

What were the facts?

These three writ petitions (WP No. 23798/2024, WP No. 23808/2024, and WP No. 23821/2024) were filed before the High Court for the State of Telangana at Hyderabad. The petitioners are individuals challenging orders and notices issued under Section 148A(d) and Section 148 of the Income Tax Act, 1961. The assessment years involved are AY 2018-19 and AY 2017-18. The petitioners sought to declare these orders and notices as illegal, arbitrary, void ab initio, and violative of constitutional provisions and principles of natural justice, consequently seeking their setting aside. The respondents include the Union of India, the Income Tax Officer/Ward Officer, the Principal Commissioner of Income Tax, and the National Faceless Assessment Centre.

What were the issues?

1. Whether the order passed under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act, 1961, are illegal, arbitrary, bad in law, void ab initio, and violative of the principles of natural justice and Articles 14, 19, and 265 of the Constitution of India, thereby lacking jurisdiction. Assessee's Contention: The petitioners argued that the reassessment process, as modified by the Finance Act, 2021, was not followed by the respondents. They contended that the notices issued under Section 148 of the Income Tax Act, 1961, are unsustainable in law due to procedural flaws. Consequently, the consequential orders are also bad in law. Revenue's Contention: The judgment records that the parties agreed to dispose of the matter based on a previous common order passed by the High Court in a batch of writ petitions (W.P. No. 25903 of 2022 and connected matters) decided on September 14, 2023. The judgment does not record specific arguments from the revenue for these particular petitions, but implies their agreement to the previous ruling.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148

AI-generated summary — verify with the full judgment below

134111 HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) MONDAY,THE SECOND DAY OF SEPTEMBER TWO THOUSAND AND TWENTY FOUR PRESENT . THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE NAMAVARAPU RAJESHWAR RAO WRIT PETITION NO: 23798,23808 AND 2382't OF 2024 WRIT PETITION NO:237 98 0F 2024 Between: AND 1. 2 J 4 Vijaya^Bhaskar B_odduluri, _S/o. Subramanyam Naidu, Aged about 4g years. Occ-. Business, R.o. 8-802, Mayflower platinum Vivekalnanda Naoar.'Neai I.l9^jrt{SS, Mallapur, VIC, Uppat, Tetangana, HyOeraUiO 'eAtrr AKGPBl34OL ...PETITIONER Union of.lndia, llinistry of Finance Rep. by its Secretary, 166-8 North Block, New Delhr - 1 10 001 lncome Tax Officer, Circle 12(1) Hyderabad Aayakar Bhavan, Opp. LB Stadium. Basheerbagh, Hyderabad, 500004. The Principal Commissioner of lncome Tax - l, Hyderabad lT Towers, Masab Tank. Hyderabad. Telangana - 500004. The National Faceless Assessment.C,entre, Income Tax Department, Ministry of Frnance Govt of lndia, New Delhi. ...RESPONDENTS Petition under Anide 226 of the Constitution of lndia praying that in the circumstances stated tn the affidavit filed therewith, the High Court may be pleased to i. lssue a Wrrt, Order or Direction more particularly, one, in the nature of Writ of Mandamus, declaring the order passed by the Respondent No.2 in passing the Order dated 0410412022u1s. 148A(d) and Notice issued by the Respondent No.2 under Section 148 of the lncome Tax Act, '1961 dated 04t04t2022 as iltegal, arbitrary, bari in law, vord ab initio, vio{ative of the principles of natural justice and being violative of Articles 14,19 and 265 of the Constitution of lndia and consequently, ii Set aside the Order dated 0410412022u1s. 148A(d) and Notice issued by the Respondent No.2 under Section 148 of the lncome Tax Act, 1961 daled 0410412022 calling for the return of income of the petitioner for A 20.18-.lg and any consequent proceedings as lacking in jurisdiction_

,..PETITIONER AND 1. Union of lndia, Ministry of Finance Rep. by its Secretary, '166-8 North Block, New Delhi - 1 10 001 . 2. Sai Sankar Kocharla, Ward 6(1), Hyderabad I T Tower, AC Guards, Masab Tank, Hyderabad, Telangana, 500004 3. Principal Commissioner of lncome Tax I Hyderabad, lT Towers, AC Guards, Masab Tank, Hyderabad, Telangana 4. The National Faceless Assessment Centre, lncome Tax Department Ministry of Finance Govt- of lndia, New Delhi ...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 i. lssue a Writ, Order or Directron more particularly, one, in the nature of Writ of Mandamus, declaring the order passed by the Respondent No.2 in passing the Order dated 12.03.2024u1s. 14BA(d) and Notice issued by the Respondent No.2 under Section 148 of the lncome Tax Act, 196'l daled 12.03.2024as illegal, arbitrary, bad in law, void ab initio, violative of the principles of natural justice and being violative of Articles '14,19 and 265 of the Constitution of lndia and consequently, ii. Set aside the Order dated 12.03 2024u1s 148A(d) and Notice issued by the Respondent No 2 under Section '148 of the lncome Tax Act, 1961 dated 12.03.2O24calling for the return of income of the Petitioner for AY 2017-18 and any consequent proceedings as lacking in jurisdiction. WRIT PETITION NO: 23821 OF 2024 Between: WRIT PETITION NO: 23808 OF 2024 Between: AND 1 Srinivas Rao Kolla, Sio. Sesha Rao K Aged.58 years, Occ.Business, Rl/o. 'l- 11-252-A-3 Jabbar Apartments, Begumpet Hyderabad Telangana, lndia, 500016 Pan. AORPK9628M Mary Usha Rani Reddymas, D/o. Jacobaiah Chowdary Bellam Konda Aged. 58 Years, Occ.Business R/o. H No 7-15 Nallabelly, Karunya Jyothi High School, Warangal Telangana, lndia, 506349, Pan. CCGPM7761J 2 3 ...PETITIONER Union of lndia, Ministry of Finance Rep by its Secretary, 166-8 North Block, New Delhi - 1 10 001 Income Tax Officer Ward 15(1), ITO Office Door No 1-8-610, 3rd Floor, Mayuri Complex, Nakallagutta, Hanamkonda, Warangal, Telangana The Principal Commissioner of lncome Tax - l, Hyderabad lncome Tax Towers, AC Guards, Masab Tank, Hyderabad, Telangana 500004

4.

The National Faceless Assessment Centre, lncome Tax Department Ministry of Finance Govt. of lndia, New Delhi ...RESPONDENTS Petition under Nlicle 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to i. lssue a Writ, Order or Direction more particularly, one, in the nature of Writ of Mandamus, declaring the order passed by the Respondent No.2 in passing the Order dated 25.O4.2O22u1s. 148A(d) and Notice issued by the Respondent No.2 under Section 148 of the lncome Tax Act, 1961 dated 26.04.2022as illegal, arbitrary, bad-in law, void ab initio, violative of the principles of natural justice and being violative of Articles 14,19 and 265 of the Constitution of lndia and consequently. ii. Set aside the Order dated 25.O4.2022u1s. 148A(d) and Notice issued by the Respondent No.2 under Section 148 of the lncome Tax Act, 1961 25.04.2022calling for the return of income of the Petitioner for AY 2018-19 and any consequent proceedings as lacking in jurisdiction. Counsel for the Petitioners: SRl. P SRIKANTH RAO Counsel for the Respondent No.1: SRI BALAK Counsel for the Respondent NOs.2 to 4: SRI MS. B. SAPNA REDDY SC FOR INCOME TAX Department The Court made the Following : COMMON ORDER

THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE T{AMAVARAPU RAJESI{WAR RAO U'RIT PETITIO N r{os.23798 23AOa AND 23azt oF 2024 coMMON ORDER (per Hon'ble SP,J) Sri P. Srikanth Rao, learned counsel' appears for the petitioner(s), Sri K.Bala, learned Standing Counsel for Central Government, appea-rs for the respondent(s)-Centra-l Government and Ms.B.Sapna Reddy, learned Junior Standing Counsel for Income Tax Department, appears for the respondent(s)- Income Tax Department. 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' 3. It is common ground taken by the learned counsel for the petitioner(s) that in furtherance ol Finance Act 2O2l' re- assessment process stood modified but the respondents have not taken care of it and therefore notices issued under Section 148 ofthelncomeTaxAct,lg6lcannotsustainjudicialscrutiny. 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 i I I I I I ! t i 1 ! i

2 this Court in a batch of writ petitions, W.P.No.25903 of 2O22 and other connected matters, decided by common order dated 14.09.2023. 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.25903 of 2022, held as under: "35. ln view of the aforesaid discussions, it is by now very clear that the prccedure 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-Depaltment is in contravention to the statute i.e. the Finance Act, 2021, at the first instance. Secondly, it is also an direct contravention to the directives issued by the Hon'ble Supreme court in the case of Ashish Agarwal, suPra. 36. For atl the aforesaid reasons, the impugned notices issued and the proceedings dralyn by the respondent-Oepartment is neither tenable, nor sustainable. The notices so issued and the Procedure adopted being per se illegal, deserves to be and are accordingly set asiderquashed- 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 1r[8 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 iurisdiction, we are not inclhed to proceed furth€r 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 lhe powers under

't / / 3 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 the Revenue would remain resewed 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 ngtices and consequential orders passed in this batch of writ petitions are set aside. Liberty is reserved to both t-he parties to take respective stand and to proceed in accordance with law as per paragJaph No.38 of the order dated 14.09'2023 in W.P.No.25903 of 2022. 7 The Writ Petitions are allowed. No costs. Interlocutory applications, if any pending, sha1l also //TRUE COPY// stand closed. ior- p paotrmee*ES,EFRRI , ^r$-' SECTIONOFFICER / To, KKS GJP , Bi]B[, "^lJlogflliliil"d 3[[]""""" Rep bv its secretary 166-8 North ,34?t?,la:"t#ffi "3ii:Frl'"$:J:351'o'o',^"akarBhavan'oppLB i The National Faceless Assessment.Centre' lncome Tax Department' " ruiiii.iii'Ji'FlnanE cout. of lndia, New Delhi 4 Sai Sankar Kocharla, Ward 6(1)' Hyaelq!9{ I T Tower' AC Guards' - ilE;b't;;i, Hvoerauao, Telirisaria' 500004 'i,H;xliJsar",:fff^l#3,BJ,UlJ:3,*Xff "?"'ft:|"xJ;??:l;fJ:Ii""'' .+:i5;J:lrL::[T'.fi :".:"r'f lL?l?tE"lil;JTJr,"J;:i:lt["dffi '"" 7. One CC to SRl. P SRIKANTH RAO Advocate [OPUCI 8, One CC to SRl. BALA K Advocate [OPUC] g One CC to SRI MS. B SAPNA REDDY SC FOR INCOME TAX DEPT toPUCI 10. Two CD CoPies S(

HIGH COURT DATED:02l0gl2024 COMMON ORDER fr /i:* ! r') | ,: \r i, \-. ,,4 >*' E SI4r\c 1 I CE[ 2024 P C WP.Nos.23798,23808 AND 23821 of 2024 ALLOWING THE WRIT PETITIONS WITHOUT COSTS \>.((*a -&fi

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