M/s Divyashakti Limited (formerly, M/s Divyashakti Granites Limited) vs. The Assistant Commissioner of Income Tax

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WP/26243/2024HC TelanganaHBHC01050903202424 September 2024Bench: SUJOY PAUL,NAMAVARAPU RAJESHWAR RAO6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the writ petition, setting aside the impugned show cause notice and consequential orders. The Court relied on its previous common order dated September 14, 2023, in a batch of writ petitions (W.P.No.25903 of 2022 and others). In that order, the Court had held that reassessment proceedings initiated under Section 148A, without following the substituted provisions laid down under the Finance Act, 2021, were in contravention of the statute and the directives of the Supreme Court in the case of Ashish Agarwal. Consequently, the impugned notices and proceedings were quashed as illegal. The Court noted that the Supreme Court, in Ashish Agarwal, had permitted the Revenue to proceed under the substituted provisions as a one-time measure, and this liberty was preserved. Therefore, the parties were granted liberty to take their respective stands and proceed in accordance with law as per paragraph 38 of the aforementioned order.

What were the facts?

The petitioner, M/s Divyashakti Limited, filed a writ petition challenging an order passed by the Assistant Commissioner of Income Tax under Section 148A(d) of the Income Tax Act, 1961, and a consequential notice issued under Section 148 of the Act, both dated August 29, 2024, pertaining to Assessment Year 2014-15. The petitioner contended that the reassessment proceedings were initiated without adhering to the modified reassessment process introduced by the Finance Act, 2021. The respondents are the Assistant Commissioner of Income Tax and the Chief Commissioner of Income Tax. The core of the dispute lies in the procedural validity of the reassessment notices and orders.

What were the issues?

1. Whether the notice issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2014-15 is sustainable in law, given the modifications brought about by the Finance Act, 2021, to the reassessment process? Assessee's contention: The reassessment proceedings, including the notice under Section 148 and the order under Section 148A(d), are illegal and unsustainable because the respondents failed to follow the procedure mandated by the Finance Act, 2021, which modified the reassessment process. The notice is bad in law, rendering the consequential orders also bad in law. Revenue's contention: The judgment does not record specific arguments from the revenue's side regarding the procedural validity of the reassessment notices. However, the revenue was represented by counsel during the hearing.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148

AI-generated summary — verify with the full judgment below

134',t11 IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE TWENTY FOURTH DAY OF SEPTEMBER TWO THOUSAND AND TWENTY FOUR PRESENT , THE HONOURABLE SRI JUSTICE SUJOYPAUL AND THE HONOURABLE SRIJUSTICE NAMAVARAPU RAJESHWAR RAO WRIT PETITION NO: 26243 OF 2024 Between: M/s Divyashakti Limited (formerly, M/s Divyashakti Granites Limited), 7-1-58, Divyashakti Complex, Ameerpet, Hyderabad - 500 016, Telangana. Represented by its Managing Director, Mr. Nallapati Hari Hara Prasad, S/o Mr. N.V.Rattaiah. ...PETITlONER AND 1 The Assistant Commissioner of lncome Tax, Circle 8(1), Hyderabad, Signature Towers, Opposite Botanical Gardens, Sy. No.. 6(P) of Kondapur, Sy No. 37(P) of Kothaguda, Serilingampally Mandal, Hyderabad - 500 084, Ranga Reddy District, Telangana. The Chief Commissioner of lncome Tax, Hyderabad, l.T. Towers, 10-2-3, AC Guards, Hyderabad - 500 004, Telangana. ...RESPONDENTS Petition under Article 226 of lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed ttrcrewith, the High Court may be pleased to issue a Writ of Mandamus or any other appropriate Writ, Order or Direction, declaring that. a. the order passed by the lst Respondent, u/s 148A(d) of the lncome Tax Act, 1961, dated 2910812024, bearing DIN and Letter No.. ITBA/COM/F/1712024-2511068137399(1), for the Assessment Year 2O14 - 15. and b. the notice issued by the lst Respondent, u/s 148 of the lncome Tax Act, 1961, dated 2910812024, bearing DlN. ITBA/ASTlMl148-112024-25/1068139637(1), for the Assessment Year 2014 - 15. as arbitrary, illegal, bad in law, void-ab-initio, violative of the principles of natural justice, apart from being violative of Articles 14 19(1Xg) and265 of the Constitution of lndia and Sec 1484 of the lncome Tax Act, 1961 , and to consequently set aside the same in the interests of justice. 2 ,ii;-d8rn ,

lA NO: 1 OF 2024 Petition under Section 1sl 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, including any recovery, pursuant to the notice issued by the 1 st Respondent u/s .r 48 of the lncome Tax Act, 1 961 , dated 2gtogt2o24, bearing DlN. lrBA/ASr,Mt148_1t2024-2s11068139637(1), for the Assessmenr Year 2014 - 15, pending disposal of the above Writ petition. Counsel for the Petitioner : SRI A.V.A.SIVA KARTIKEYA counsel for the Respondents: Ms.J.sUNrrHA (Jr. sc FoR rNcoME TAx) The Court made the following: ORDER

Y THE HONOURABLE SRI JUSTICE SUJOY PAUL AND THE HONOURABLE SRI JUSTICE ITAM.C.VARAPU RAJESHWAR RAO WRIT PETITION No.26243 OF 2o.24 ORDER: (per Hon'ble Justice Sujog paul) Heard Sri A.V.A.Siva Kartikeya, learned counsel for the petitioner(s) and Ms. J.Sunitha, learned Junior Standing Counsel for Income Tax Department, for the respondent(s). 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 and therefore, notice issued under Section 148 of the Income Tax Act, 196 1 calnot sustain judicial scrutiny. Since notice is bad in law, the consequential orders are also bad in law. 3. During the course of hearing, Iearned counsel for the parties agreed that curtains on this issue are frnally drawn by this Court in a batch of writ petitions, W.P.No.25903 of 2022 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, 14.09.2023.

2 4. This Court in the said order dated 14.09.2023 in W.P.No.25903 of 2022, held as under '35, In wiew of the aforesaid discussioEs' it is by aow very ctear that the procedure to be follosed by the respondent- Department upon treating the notlce6 issued for leassessment being under Sectioa 148A, the sub8equent proceedings was maudatorily required to be undertaken under the substituted provisions as l,aid down uBder the Firance Act, 2021. ln tltre absetrce of which, we are coqstrained to hold that the procedure adopted by the respoBdent-DePartEelt is in contravention to the statute i.e, the Finance Act,2O21' at the fr-rst instiDce. Secoadly, it is also itr direct contravention to the diiectives issued by the Hon'ble Supretne Court in the case of Ashish Agarrral, supra. 36. For att the aforesaid reasous, the impugned notices issued and the proceedings drawo by the reapoEdent-DepartEent is aeithcr tenable, tror sustainable. The Eotlce6 so issued aDd the procedure adopted beiag per se lllegal, deserves to be and are eccordingly set aside/quashed. As a consequence' all the iEpugned orders getting quashed, the coDsequential orders passed by the respondent DepartEent purauant to the lotices issued under Sectiou 147 aad 148 sould also get quashed atrd it iE ordered accordingly. The reasoB we are quashing the consequential order is on the priaciples that when the ilitiation of the proceediEgs itself was ptocedurally wrong, the aubsequent orders also gets aullilied autoEatically. 37. The preliminary objection raised 6y the petitioner is sustained and all these writ petitlons statrds allowed olr this very jurisdictional issue. Since the iEPugned notices aEd orders are gettiEg quashed oE the poltrt ofiurisdiction, we are uot inclined to proceed further and declde the other issues raised by the petitioner lrhich stands teeerved to be raised aad contended in a[ appropriate Proceedings. 38. Since the Hon'ble Supretle Court had, ia the case of Ashish Agartf,al, supra, as a o[e-tiEe Ereaaure exercisilg the poEers under Article 142 of the CoEstitutioE of India' permitted the Revenue to proceed under the substituted provisions, and thG Court allosing the Petitioas only on the procedural flaw, the right conferred on the Revetrue would remain reserved to proceed further if they so sant froE the

Y 3 To, stage of the ordcr of the SupreEte Court in the case of Ashish Agarwal, supra- 39. No order as to costs.- 5. In view of the consensus arrived, the impugned Show Cause notice arrd consequential 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 Iaw as per paragraph No.38 of the order dated 14.09.2023 in W.P.No.259O3 of 2022. 6. The Writ Petition is allowed. No costs. Interlocutory applications, if any pending, shall also stald closed. SD/- N.CHANDRA SEKHAR RAo //TRUE COPYII ASSISTANT R STRAR SECTI FFICER l I I 1 The Assistant Commissionet of lncome Tax, Crrcle g(1). Hyderabad. S["fi':]i(Ey:#k8l!Sii:,'.T;tf:,ffim.V;-jij.:St""J?ssSr,T, 5,an j1 $90_dy District, T6langana. gtriiil$-ft+h6^f ,ti{fl e's:lff :iii,:J;-"^1023Ac one cc to Ms.J SUNtrHa pi sc roH i'ilcoil'E'ia,il. [opuc] Two cD copies (o, ! vr'rrv\'/r,rr- rA^ 2 J 4 5 BSK LS 1

I I HIGH COURT DATED:2 4t09tZOZ4 ORDER WP.No.26243 of 2024 \B ALLOWING THE WRIT PETITION WTHOUT COSTS (* riz S T4, (' c li \t' ,l 1i l"A I ':. L' LI L .., i : ., t -.:- -t rl "r1

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