QUEST GLOBAL ENGINEERING SERVICES PRIVATE LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX

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WP/102094/2022HC KarnatakaKAHC02006998202219 September 2024Bench: JYOTI MULIMANI4 pages
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What did the High Court hold?

The High Court held that the order passed by the first respondent under Section 148A(d) of the Income Tax Act, 1961, and the notice issued under Section 148 of the Act for Assessment Year 2018-19 were bad in law. The reasoning was that as of the dates of issuance of the Section 148A(b) notice and the Section 148A(d) order, the regular assessment proceedings under Section 143(3) read with Section 144C(1) were still in progress and had not reached finality. The Court found that the issuance of the Section 148A(b) notice, the passing of the Section 148A(d) order, and the subsequent notice under Section 148 were therefore vitiated by this procedural defect. Consequently, the Court quashed both the order dated 31.03.2022 passed under Section 148A(d) and the notice dated 31.03.2022 issued under Section 148 of the Act. The principle established is that reassessment proceedings under Section 148A and Section 148 cannot be initiated or pursued when regular assessment proceedings are still pending and have not concluded.

What were the facts?

The petitioner, Quest Global Engineering Services Private Limited, filed its original return of income for Assessment Year 2018-19 on November 30, 2018, declaring a total income of Rs. 26,79,19,590. The case was selected for scrutiny, and a notice under Section 143(2) was issued. Subsequently, on September 30, 2021, a draft order was passed under Section 143(3) read with Section 144C(1), determining the assessed income at Rs. 116,37,79,303. On March 19, 2022, a notice under Section 148A(b) was issued proposing disallowance under Section 40(a)(i), with a compliance date initially set for March 25, 2022, later extended to March 26, 2022. The petitioner replied to this notice. An order under Section 148A(d) was passed on March 31, 2022, and a notice under Section 148 was also issued on the same date. The petitioner challenged these orders and notices before the High Court.

What were the issues?

1. Whether the order passed by the first respondent under Section 148A(d) of the Income Tax Act, 1961, and the notice issued under Section 148 of the Act for Assessment Year 2018-19 are valid, considering that the regular assessment under Section 143(3) read with Section 144C(1) was still in progress and had not reached finality at the time of issuance of these notices and orders. Assessee's contention: The issuance of the notice under Section 148A(b), the order under Section 148A(d), and the notice under Section 148 are bad in law and liable to be set aside because the regular assessment proceedings for the Assessment Year 2018-19 were ongoing and had not attained finality. Therefore, these actions taken under the reassessment provisions are vitiated. Revenue's contention: The judgment does not record any specific contentions from the revenue regarding the validity of the Section 148A(d) order and the Section 148 notice.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 143(2),Section 143(3),Section 144C(1),Section 40(a)(i)

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC-D:13374 WP No. 102094 of 2022

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 19TH DAY OF SEPTEMBER, 2024 BEFORE THE HON'BLE MS. JUSTICE JYOTI MULIMANI WRIT PETITION NO. 102094 OF 2022 (T-IT) BETWEEN:

QUEST GLOBAL ENGINEERING SERVICES PRIVATE LIMITED, NO.437/A, PLOT NO.2, AEQUS SPECIAL ECONOMIC ZONE, HATTARAGI VILLAGE, HUKKERI TALUKA, BELAGAVI, KARNATAKA-591 245, REPRESENTED BY ITS DIRECTOR, MR. RAMAN SUBRAMANIAN, AGE: 59 YEARS. …PETITIONER (BY SRI. K.R.PRADEEP AND MS. GIRIJA.G.P., ADVOCATES)

AND:

1.

ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, BELAGAVI, FEROZ KHIMJIBHAI COMPLEX, OPP. CIVIL HOSPITAL, DR. AMBEDKAR ROAD, BELAGAVI-590 001.

2.

PRINCIPAL COMMISSIONER OF INCOME TAX, HUBBALLI, C.R. BUILDING, NAVANAGAR, HUBBALLI-580 025. …RESPONDENTS (BY SRI.M.THIRUMALESH., ADVOCATE FOR R1-R2)

Digitally signed by THEJASKUMAR N Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC-D:13374 WP No. 102094 of 2022

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.

THIS WRIT PETITION IS LISTED FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, AN ORDER IS MADE AS UNDER: ORAL ORDER Sri.K.R.Pradeep., counsel for the petitioner and Sri.M. Thirumalesh., counsel for the respondents have appeared through video conferencing. 2. The captioned Writ Petition is filed seeking a Writ of Certiorari to quash the order dated 31.03.2022 passed by the first respondent under Section 148A(d) of the Income Tax Act, 1961 in DIN & Notice No.ITBA/AST/F/148A/2021- 22/1042401411(1) for the Assessment Year 2018-19 vide Annexure-B and the notice dated 31.03.2022 issued under Section 148 of the Income Tax Act, 1961 in DIN & Notice No.ITBA/AST/S/148_1/2021-22/1042401760(1) for the Assessment Year 2018-19 vide Annexure-A. 3. Heard the arguments and perused the Writ papers with utmost care.

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NC: 2024:KHC-D:13374 WP No. 102094 of 2022

4.

On 30.11.2018, the petitioner filed an original return of income declaring a total income of Rs.26,79,19,590/- (Rupees Twenty-Six Crore Seventy-Nine Lakh Nineteen Thousand Five Hundred and Ninety only) for the Assessment Year 2018-19. The case of the petitioner was selected for scrutiny and a notice under Section 143(2) of the Income Tax Act, 1961 was issued by the Income Tax Department. On 30.09.2021, a draft order was passed by the first respondent under Section 143(3) R/w Section 144C(1) of the Act determining the assessed income at Rs.116,37,79,303/- for the Assessment Year 2018-19. On 19.03.2022, a notice was issued under Section 148A(b) of the Act for the Assessment Year 2018-19 proposing to make disallowance under Section 40(a)(i) of the Act seeking compliance before 25.03.2022. A Corrigendum to Notice under Section 148A(b) of the Act was issued altering the compliance date to 26.03.2022. The petitioner replied to the notice. Suffice it to note that the department issued 148A(b) notice to Quest Global Engineering Services Private Limited on 19.03.2022 and an order under Clause (d) of Section 148A of the Act was passed on 31.03.2022. Subsequently, a notice

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NC: 2024:KHC-D:13374 WP No. 102094 of 2022

under Section 148 of the Act was also issued on 31.03.2022. It is pivotal to note that as of the date of issuance of (b) notice and (d) order, the regular assessment was in progress and had not reached finality. Hence, issuance of (b) notice, passing of (d) order and notice under Section 148 of the Act are bad in law. Therefore, they are liable to be set aside, so they are set aside. 5. The Writ of Certiorari is ordered. The order dated 31.03.2022 passed by the first respondent under Section 148A(d) of the Income Tax Act, 1961 in DIN & Notice No.ITBA/AST/F/148A/2021-22/1042401411(1) for the Assessment Year 2018-19 vide Annexure-B and the notice dated 31.03.2022 issued under Section 148 of the Income Tax Act, 1961 in DIN & Notice No.ITBA/AST/S/148_1/2021- 22/1042401760(1) for the Assessment Year 2018-19 vide Annexure-A are quashed. 6. Resultantly, the Writ Petition is allowed.

Sd/- (JYOTI MULIMANI) JUDGE TKN LIST NO.: 2 SL NO.: 21

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