Bal Reddy Kandhi vs. Income Tax Officer Ward 1

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WP/25304/2024HC TelanganaHBHC01048969202418 September 2024Bench: SUJOY PAUL,NAMAVARAPU RAJESHWAR RAO6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the writ petition. The Court noted that both parties agreed that the issue had been conclusively decided by this Court in a batch of writ petitions, specifically W.P.No.25903 of 2022, decided by a common order dated September 14, 2023. The Court referred to its previous order, which 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 held to be untenable and were quashed. As a result, all consequential orders were also quashed. The Court clarified that the right conferred on the Revenue to proceed further from the stage of the Supreme Court's order in Ashish Agarwal, supra, was reserved. The Court did not decide other issues raised by the petitioner, which were reserved to be raised in appropriate proceedings.

What were the facts?

The petitioner, Bal Reddy Kandhi, filed a writ petition before the High Court of Telangana at Hyderabad challenging an Assessment Order dated March 20, 2024, passed under Section 147 read with Section 144 of the Income Tax Act, 1961, for Assessment Year 2016-17. The petitioner also challenged the Notice under Section 148 dated March 28, 2023, and an order passed under Section 148A(d) dated March 28, 2023. The petitioner contended that the notice and consequential order were void, illegal, contrary to the Income Tax Act and principles of natural justice, and barred by limitation under Section 149. The petitioner argued that the reassessment process was modified by the Finance Act, 2021, and the respondents failed to adhere to these modifications.

What were the issues?

1. Whether the Notice issued under Section 148 of the Income Tax Act, 1961, is sustainable in law, considering the modifications to the reassessment process by the Finance Act, 2021? (Question of law) 2. Whether the consequential Assessment Order passed under Section 147 read with Section 144 of the Income Tax Act, 1961, is void and illegal due to procedural infirmities in the preceding notice? Assessee's Contentions: The petitioner argued that the respondents failed to follow the modified reassessment procedure introduced by the Finance Act, 2021. Consequently, the notice issued under Section 148 was bad in law, rendering the subsequent assessment order also bad in law. The petitioner relied on the principles of natural justice and statutory limitations prescribed under Section 149. Revenue's Contentions: The revenue did not explicitly record specific arguments against the petitioner's contentions in the provided text. However, the revenue was represented by learned Junior Standing Counsel, indicating their participation in opposing the writ petition.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 148,Section 148A,Section 149

AI-generated summary — verify with the full judgment below

t34111 Between: Bal Reddy Kandhi, S/o Yadireddy, Aged about 56 years, Occ.Agriculture, 1- 8211 , Varkatpally, Valigonda, Nalgonda, Telangana-508,1 12. HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) WEDNESDAY,THE EIGHTEENTH DAY OF SEPTEMBER TWO THOUSAND AND TWENTY FOUR PRESENT WRIT PETITION NO: 25304 OF 2024 ...PETITIONER AND 1 lncome Tax Officer Ward 1, Suryapet, lncome Tax Office, Krishna Nagar Colony, Suryapet, Telangana-5082'l 3. 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. National Faceless Assessment Centre, Delhi, The Assessment Unit, lncome Tax Department, National Faceless Assessmenl Centre, Delhi, Ministry of Finance, Room No. 4O1 ,2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi-'1 10003. 4. The Assessment Unit, lncome Tax Department, National Faceless Assessment Centre, Delhi, Ministry of Finance, Room No. 4O1,2nd Floor, E- Ramp, Jawaharlal Nehru Stadium, Delhi-1 10003 ...RESPONDENTS Petition under Article 226 of Ihe 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 dt. 2010312024 passed by the 1st respondenl uls 147 r.w.s'l44 of the lncome-tax Act for A.Y. 2016-17 vide DIN No. ITBA/ASTlsl14712023-2411062968969(1 ),which is passed as a consequence of the order passed u/s 14BA(d) dt. 28103/2023 vide DIN No. ITBtuAST/F/1 48A12022-231 I 05 1 499449(1 ) and the notice u/s 1 48 dl. 2810312023 vide DIN No.ITBA/AST/S1148 112022-2311051505584(1), issued by the JAO (1st respondent) instead of FA0(3rd respondent), as void, illegal, and contrary to the provisions of lncome{ax Act and contrary to the Principles of Natural Justice, apart from being barred by limitation as prescribed u/s '149 of the Act THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE NAMAVARAPU RAJESHWAR RAO

!.- lA NO: 1 OF 2024 Petition under section 15'1 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 dt. 20103/2024 passed by the'1 strespondent u/s 147 r.w.s144 of the lncome-tax Act for A.y. 2016-17 vide DIN No. ITBA/AST/S/14712023-2411062968969(1), and may pass such other order(s) as the Hon'ble court deems fit and proper in the interests of substantial justice, as otheruvise the Petitioner would be put to irreparable loss and severe injury. Counsel for the Petitioner: SRl. DUNDU SASHANK MANMOHAN Counsel for the Respondents: SRI BOKARO SAPNA REDDy (Jr. SC FOR lNcoME TAX) The Court made the following: ORDER

,/. THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI .IUSTICE NAMAVARAPU RAJESI{WAR RAO WRIT PETITION No.253O4 OF 2024 ORDER: (per Hon'ble Justice Sujoy Paul) Heard Sri Dundu Sashank Manmohan, learned counsel for the petitioner(s) and Ms.B.Sapna Reddy, learned Junior Standing Counsel for Income Tax Department, for the respondents. 2. The ground taken by the learned counsel for the petitioner(s) is that in furtherance of Finance Act, 2021, re- assessment process stood modilied but the respondents have not taken care of it ald therefore notice issued under Section 148 of the Income 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 dated 14.O9.2023. The parties agreed that this matter may be disposed of in terms of the Common Order dated 14 .O9 .2023. and other connected matters, decided by common order

2 4. This Court in the said order dated 14.09.2023 in W.P.No.259O3 of 2022, held as under: '35. In view of the aforesaid discussioBs, it is by now very ctear that the procedure to be fouoeed by the respondent- Departmetrt upon treatiag the notices issued for reassessr[elrt beiug under Section 148A, the subaequent Proceedlnga was mandatorily required to be undettake! under the substituted provislons as laid down under the Firance Act, 2021. Ilr the absence of which, we are constrained to hold that the procedure adopted by the respondeat-DepattEent is in contravention to the statute i.e. the Finaace Act, 2O2l' at the frrst instance. SecoEdly, it is also ia direct coDtraveDtion to the directives issued by the Hon'ble Supteae Court in the case of Ashish Agarwal, supra. 36. For all the aforesaid reasons, the impugned notices issued and the p.oceedings drawn by the respondent-Departmelt is treither teaable, nor sustailable. The notices so lssued and the procedure adopted beiag pet se illegal, deserves to be and sre accordiugly set aside/quashed. As a consequelce, all the impugned orders gettiag quashed, the consequeDtial orders passed by the respondeat DepartEent pursuart to the notices issued under Sectiou 147 alld 148 lPould also get quashed alrd it is ordered accotdingly. The reason we are quashing the consequential order is ou the Prilciples that when the initiation of the proceediugs itself was ptocedurally wrong, the subsequent orders also gets DuUilied automatically. 37. The preliminary objection raised by the Petitloner is sustaired and all these wdt petitions stands allowed on this very jurisdictioaal issue. Since the impugned trotices and ordets are getting quashed on the point ofjurisdiction, se are not inclined to proceed further and decide the other issues raised by the petitioael which stands reserved to be raised aBd contended in an appropriate proceedings. 38. Since the Hoa'bte Supreme court had, in the caae of Ashish Agarwat, supra, as a ole-time measur€ exercising the powers under Article 142 of the coastitutiou of India, permitted the Revenue to proceed under the substituted prowisions, and this court allowitrg th€ petitions only on the procedurat Ilaw, the right couferred otr the Revenue would \ \

3 To, remaiE reserved to -proceed furthet if they so want ftom the stage of the orde. of the Supreme Court in tbe case of Ashish Agarwal, supra. 39. No order as to costs." 5. In view of the consensus arrived, the impugned Show Cause notice and consequential orders passed in this writ petition are set aside. Liberty is reserved to both the parties to take respective stand ald to proceed in accordalce with law as per paragraph No.3B of the order dated 14.09.2023 in 6. The Writ Petition is allowed. No costs. Interlocutory applications, if aly pending, shall also stald closed. SD/- N. CHANDRA SE AR RAO ASSISTANT EGISTRAR //TRUE COPY// SE N OFFICER 1. lncome Tax Officer Ward 1, Suryapet, lncome Tax Office, Krishna Nagar Colony, Suryapet, Telangana-50821 3. 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. National Faceless Assessment Centre, Delhi, The Assessment Unit, lncome Tax Department, National Faceless Assessment Centre, Delhi, I\4inistry of Finance, Room No. 401 ,2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi-1 10003. 4- The Assessment Unit, lncome Tax Department, National Faceless Assessment Centre, Delhi, Ministry of Finance, Room No. 401 ,2nd Floor, E- Ramp, Jawaharlal Nehru Stadium, Delhi-1 10003 5. One CC to SRl. DUNDU SASHANK IMANIUOHAN Advocate [OPUCj 6. One CC to SRl. BOKARO SAPNA REDDY (Jr. SC FOR INCOI/E TAX) loPUCl 7. Two CD Copies KKS GJP 'tX/ W.P.No.25903 of 2022. \ I i

HIGH COURT DATE D: 1 810912024 ORDER WP.No.25304 of 2024 oR lHE S14 r4. 0 B iAI 2025 (, o .t a).i.t P4 fr-:HI1 !1. ALLOWING THE WRIT PETITION WITHOUT COSTS - nie) q0r' t\ "f ,,|[^t' / I I I

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