Sukhanya Sunkireddy vs. Union of India

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WP/24325/2024HC TelanganaHBHC01046920202404 September 2024Bench: SUJOY PAUL,NAMAVARAPU RAJESHWAR RAO6 pages
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What did the High Court hold?

The High Court held that the procedure adopted by the respondent-Department in issuing the impugned notices and drawing proceedings was in contravention of the statute, specifically the Finance Act, 2021, and also in direct contravention of the directives issued by the Supreme Court in the case of Ashish Agarwal. Consequently, the impugned notices and proceedings were found to be neither tenable nor sustainable and were set aside/quashed as per se illegal. The Court reasoned that when the initiation of proceedings itself was procedurally flawed, subsequent consequential orders also get nullified automatically. The preliminary objection raised by the petitioner was sustained, and all writ petitions were allowed on this jurisdictional issue. The Court explicitly stated that it was not inclined to proceed further and decide other issues raised by the petitioner, which were reserved to be raised in appropriate proceedings. The Court noted that the Supreme Court, in the Ashish Agarwal case, had permitted the Revenue to proceed under the substituted provisions as a one-time measure under Article 142 of the Constitution, and since this Court was allowing the petitions only on procedural flaws, the right conferred on the Revenue would remain reserved to proceed further from the stage of the Supreme Court's order if they so desired. The writ petition was allowed, setting aside the impugned show cause notice and consequential orders, with liberty reserved for both parties to proceed in accordance with law as per paragraph 38 of the cited order.

What were the facts?

The petitioner, Sukhanya Sunkireddy, filed a writ petition before the High Court of Telangana at Hyderabad challenging an order passed by the Income Tax Officer, Ward 1, Mahabubnagar, under Section 148A(d) and a notice issued under Section 148 of the Income Tax Act, 1961, both dated March 21, 2023. These actions were related to the assessment year 2016-17. The petitioner contended that the reassessment process was modified by the Finance Act, 2021, and the respondents failed to adhere to these modifications, rendering the notice and consequential orders illegal. The respondents included the Union of India, the Income Tax Officer, the Principal Commissioner of Income Tax, and the National Faceless Assessment Center.

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, dated March 21, 2023, 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, due to non-compliance with the modified reassessment procedure under the Finance Act, 2021? (Question of law and fact, concerning Sections 148 and 148A of the Income Tax Act, 1961). Assessee's Contention: The reassessment process was modified by the Finance Act, 2021, and the respondents failed to follow these modified provisions, making the notice and subsequent orders unsustainable. Reliance was placed on the principles of natural justice and constitutional provisions. 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). No specific arguments were recorded for the revenue in this instance, other than their agreement to the disposal based on the precedent.

Which sections of the Income-tax Act were involved?

Section 148,Section 148A

AI-generated summary — verify with the full judgment below

[ 3411 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY, THE FOURTH 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: 24325 OF 2024 Between: Sukhanya Sunkireddy, W/o. Sunikreddy Ravinder Reddy Aged about 64 years, Occ.Business, R/o. 1-3-1271 6 Rajendranagar, Mahabubnagar, Mahabubnagar 509001, Telangana, Hyderabad. AND ...PET|T|ONER 1. Union of lndia, Ministry of Finance Rep. by its Secretary, 166-B North Block, New Delhi - I 10 00'1 2. lncome Tax Officer, Ward 1, Il4ahbubnagar lTO, Deo Office Road, Mahbubnagar, 509001 3. The Principal Commissioner, of lncome Tax - lV Hyderabad lT Towers, Masab Tank, Hyderabad. Telangana - 500004. 4. The National Faceless Assessment Center lncome Tax Department, Ministry of Finance Govt. of lndia, New Delhil .,.RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the clrcumgtances 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 21 .03.2023 u/s. 148A(d) and Notice issued by the Respondent No.2 under Section 148 of the lncome Tax Act, 1961dated 21 .03.2023 as 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 21 .03.2023 u/s. 148A(d) and Notice issued by the Respondent No.2 under Section 148 of the lncome Tax Act, 1961 dated 21 03.2023 calling for the return of income of the Petitioner for AY 2016-17 and any consequent proceedings as lacking in jurisdiction.

Counsel for the Petitioner: SRI P.SRIKANTH RAO Counsel for the Respondent No.1 : SRI A.KRANTI KUMAR REDDY, SC FOR CENTRAL GOVT. Counsel for the Respondent Nos.2 TO 4: M/s. B.SAPNA REDDY, Jr. SC FOR ITD The Court made the following: ORDER

THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI .IUSTICE NAMAVARAPU RA'IESHWAR RAO WRIT PETITION No.2432SoF 2024 ORDER: (per Hon'bte Justice Sujog Paul) Sri P.Srikanth Rao, learned counsel for the Sri A.Kranthi Kumar Reddy, learned Standing Central Government, for respondent No ' 1 and Reddy, learned Junior Standing Counsel for Heard petitioner(s), Counsel for Ms.B.SaPna Income Tax Department, for respondent Nos'2 to 4' 2. The ground taken by the learned counsel for the petitioner(s) is that in furtherance of Finance Act' 2O2l' re- assessment process stood modified but the respondents have not taken care of it and therefore notice issued under Section 148 of the lncome Tax Act, 196 1 cannot sustain judicial scrutiny. Since notice is bad in law' the consequential orders are also bad in law. 3. 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 andotherconnectedmatters,decidedbycommonorder

2 dated 14.09.2023. The parties agreed that this matter may be disposed of in terms of the Common Order dated 14 .O9 .2023. 4. This Court in the said order dated 14.09.2023 in W.P.No.25903 ol 2022, heid as under: "35. In view of the aforesaid discussions, it is by noq, very clear that the procedure to be followed by the tespondent- Department upon treatitrg the notices issued for reassessment being under Sectlon 148A, the subsequent proceedings was mandatorily requir€d to be undcltaken under the substltuted provisions as laid dowr under the finance Act,2021. In the absence of which, we are constrained to hold that the procedure adopted by the respondent-Department is in contravention to the statute l.e. the Finance Act, 2O21, at the first instance. SecoEdly, it i6 elso iE direct contrawention to the directivcs issued by the HoE'ble Supreme Court in the case of Ashish Agarwal, Eupra. 36. For all the aforesaid reasons, the impugred notices issued and the proceedings drawn by the respondent-Department is neither tenable, nor sustaioable. 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 ordera getting quashed, the consequential ordets passed by the respondent D€partment pursuant to the notices issued under Section 147 and 148 would also get quashed end it is ordered accordingly. The reason we are quashing the consequential order is on the principles that r.yhen the initiation ol the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically. 37. The preliminery objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned flotices and orders are Bctting quashed oD the point ofjurisdiction, we are not inclined to proceed further and declde thc other issues raised by the petitioner Ehich stands reserwed to be raised and contended in an appropriate proceedlngs. 38. Since the Hon'ble Supreme Couft had, in the case of Ashish Agarttral, supra, a6 a one-time measure exercising the poq'ers under Article 142 of the Constitution of India,

3 pennitted the Reveauc to proceed uader the substituted provlslons, and thi6 Court allowltrg the Petitlols only on the procedutal flaw' the rlght colfered oo the Revenue would remain reserved to proceed further if they so want from the stage of the ordet of the Supreme court iu the case of Ashish Agarwal, supra. 39. No ord€r as to costs." 5. In view of the consensus arrived, the impugned Show Cause notice and consequentia-i orders passed in this writ petition 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.25903 of 2022. 6. The Writ Petition is allowed' No costs. Interlocutory applications, if aly pending, shall also stand closed. SD/-K. VENKAIAH ASSISTAN REGI TRAR /,TRUE COPY// SE N OFFICER To The Secretary, Union of lndia' Ministry of Finance 166-8 North Block' New '-?'i.;tilf3lticer, ward 1' Mahbubnasar lro' Deo orrice Road' Ir/ahbubnagar' 5uvuu I . :r. of lncorne Tax - lV Hyderabad lT Towers. The PrinciPal Commtsstone Yf,: ftt kl5, li:; m, l"l: L%1lt "??:l'Xi o m e r a x D e p a rtm e nt' Ivr i n i stry H#33i':E["','ii[fft +tr#i{hsr",'.i:",'3ru3'"=*'*o'oou' 8I"'& to M/s B.SAPNA REDDY' Sc FoR ITD [oPUC] Two CD CoPies / 1. 2 4 ? ki 7 a PSK. BS

HIGH COURT DATED:0410912024 ORDER WP.No.24325 of 2024 ALLOWING THE WRIT PETITION WITHOUT COSTS. S 1 1 i tlli; /'. tA r4- ( -\{ 9\L ':. 1l itt I T a I \ t \r-9 \.*\i--\ 2 {] )./ /,t /o /3/ /toz*

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