KAMARAJ PRIYA,TIRUVARUR vs. ITO, WARD-1,, TIRUVARUR

issuance of notice u/s.148 of the Act shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred u/s.148 of the Act for issuance of notice and in a (AY 2019-20) Kamaraj Priya faceless manner to the extent providing in Section 144B of the Act with reference to making assessment/re-assessment of total income or loss of the assessee. We find that the impugned notice u/s.148 dated 28.03.2024 has been issued by the Income Tax Officer, Ward 1, Tiruvarur i.e; (JAO) and not by the NFAC which is not in accordance with the aforesaid Scheme. We also find that the impugned notice u/s 148 has been issued after CBDT Notification dated 29.03.2022. Hence, the aforesaid CBDT Notification dated 29.03.2022 is directly applicable in this case.

6. The Hon’ble Telangana High Court in Kankanala Ravindra Reddy Vs ITO (2023) 156 taxmann.com 178 (Telangana) and Hon’ble Bombay High Court in Hexaware Technologies Ltd Vs ACIT (2024) 464 ITR 430 (Bom) has decided the controversy in favour of the assessee.

7. Furthermore, the Hon’ble Telangana High Court in M/s Ta Infra Projects Limited Vs The DCIT [Writ Petition Nos.26645, 26654, 26667, 28497, 26788 of 2024 and 12437, 9561, 14549, 14664, 14674, 12873 of 2025 dated 14.07.2025], following the judgments of the Hon’ble Telangana High Court in Kankanala Ravindra Reddy Vs ITO (2023) 156 taxmann.com 178 (Telangana) and Hon’ble Bombay High Court in Hexaware Technologies Ltd Vs ACIT (2024) 464 ITR 430 (Bom) has set aside the notices issued u/s 148 by JAO.

(AY 2019-20) Kamaraj Priya 8. Further, the Hon’ble Telangana High Court in Sri Venkatramana Reddy Patloola Vs DCIT [Writ Petition Nos.13353, 16141 and 16877 of 2024 dated 24.07.2024], following the judgments of the Hon’ble Telangana High Court in Kankanala Ravindra Reddy Vs ITO (2023) 156 taxmann.com 178 (Telangana) and Hon’ble Bombay High Court in Hexaware Technologies Ltd Vs ACIT (2024) 464 ITR 430 (Bom) has set aside the notices issued u/s 148 and held as under:

In view of the consensus arrived at, this Writ Petition is allowed in terms of order passed in W.P.No.13353 of 2024 and batch. The direction contained in the said order shall apply mutatis mutandis to this case with full force. No costs.

10. The revenue further filed Special Leave Petition (Civil) before the Hon’ble Supreme Court vide SLP(C) No.018753/2025, Diary No (s).33956/2025 titled ADIT (INT TAXN) 2 HYD & ANR Vs DEEPANJAN ROY, challenging the judgment of the Hon’ble Telangana High Court passed in (AY 2019-20) Kamaraj Priya Writ Petition No.23573 of 2024 dated 29.08.2024. However, the Hon’ble Supreme Court upon hearing the counsel the made the following order 16-07-2025 as under:

1. Delay condoned.

2. Exemption Application is allowed.

4. Pending applications, if any, shall also stand disposed of. 11. We further note that the revenue’s SLP(C) No. 021188/ 2024 in the case of Hexaware Technologies Ltd against the judgment of the Hon’ble Bombay High Court in Hexaware Technologies Ltd Vs ACIT (2024) 464 ITR 430 (Bom) is still pending adjudication before the Hon’ble Supreme Court.

12. The Supreme Court in a landmark judgement in the case of Kunhayammed v. State of Kerala [2000] 113 Taxman 470/245 ITR 360 (SC) has summarised the doctrine of merger as follows:- "Where an appeal or revision is provided before a superior forum against an order passed by a Court, Tribunal or any other authority and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges with the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law"

The Supreme Court in the aforesaid case has concluded as follows:-

(i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior (AY 2019-20) Kamaraj Priya forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. The first stage is upto the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal. (iii) The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter. (iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed. (v) If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties. (vi) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation.

"………..Though loosely an expression "merger of judgement, order or decision of a Court or forum into the judgement, order or decision of a superior forum" is often employed, as a general rule, the judgment or order having been dealt with by a superior forum and having resulted in confirmation, reversal or modification, what merges is the operative part, i.e., the mandate or decree issued by the Court which may have been expressed in positive or negative form. For example, take a case where the subordinate forum passes an order and the same, having been dealt with by a superior forum, is confirmed for reasons different from the one assigned by the subordinate forum, what would merge in the order of the superior forum is the operative part of the order and not the reasoning of the subordinate forum, otherwise there would be an apparent contradiction. However, in certain cases, the reasons for the decision can also be said to have merged in the order of the superior Court if the superior Court has, while formulating its own judgment or order, either adopted or reiterated the reasoning, or recorded an express approval of the reasoning, incorporated in the judgment or order of the subordinate forum."

2. The contention of Mr. Anand Chaudhuri, learned counsel for the petitioners is that the issue is no more res integra inasmuch as there have been multiple judicial pronouncements stating that it is the FAO, that shall have the requisite jurisdiction to issue notices under Section 148 of the Act. In this regard, he has referred to the following judgments of various High Courts:- a. Hexaware Technologies Ltd. v. ACIT [2024] 162 taxmann.com 225 (Bombay HC); b. Prakash Pandurang Patil v. ITO [2024:BHC-AS:32759-DB] (Bombay HC); c. Sri Venkataramana Reddy Patloola v. DCIT [W.P. Nos. 13353, 16141 & 16877 of 2024] (Telangana HC); d. Deepanjan Roy v. ADIT (International Taxation)-2 [W.P. No.23573 of 2024] (Telangana HC); e. Jatinder Singh Bhangu v. Union of India [CWP 15745 of 2024] (Punjab & Haryana HC); f. Royal Bitumen (P.) Ltd. v. ACIT [2024] 164 taxmann.com 606 (Bombay HC); g. Everest Kanto Cylinder Ltd. v. DCIT/ACIT [2024] 165 taxmann.com 192 (Bombay HC); h. Sundaram Multi Pap Ltd. v. ACIT [2024] 164 taxmann.com 608 (Bombay HC); i. Venus Jewel v. ACIT [2024] 164 taxmann.com 414 (Bombay HC).

(AY 2019-20) Kamaraj Priya 3. He states that the Revenue carried some of these judgments in appeal, and the Supreme Court has since conclusively settled the issue, by dismissing the SLP in Deepanjan Roy (Supra) and Prakash Pandurang Patil (Supra). According to him, the latter dismissal was on the merits of the case as is clear from the order of the Supreme Court, the relevant portion whereof is reproduced as under:- “2. Even otherwise, we see no reason to interfere with the impugned order passed by the High Court.

3. The Special Leave Petition is, therefore, dismissed on the ground of delay as well as merits.” His submission is that the Supreme Court has settled the law under Article 141 of the Constitution of India and laid down that only FAO would have the jurisdiction to issue notices under Section 148 of the Act.

5. He submits that the contrary view propounded by a co-ordinate bench of this Court in T.K.S. Builders (P.) Ltd. v. ITO, [2024] 167 taxmann.com 759 (Del.), followed in M/s Mala Petrochemicals and Polymers v. ITO, WP(C) 12011/2025 and Mehak Jagga v. ITO, WP(C) 13149/2025, recognising a supposed concurrent jurisdiction of JAO and FAO, is ex facie per incuriam, as it disregards the statutory mandate of Section 151A and binding law under Article 141. The doctrine of per incuriam, as settled by the Supreme Court in Hyder Consulting (UK) Ltd. v. State of Orissa, (2016) 6 SCC 362, squarely applies since the decision of this Court was rendered in disregard of binding pronouncements of the Supreme Court and is thus not good law.

8. He states that in any case, the order of the Supreme Court in Prakash Pandurang Patil (Supra) does not state reasons for dismissal, and as such, it is a dismissal in limine. As such, the order does not read down the judgment in T.K.S. Builders (Supra) or affirm the judgment of the Bombay High Court in Hexaware Technologies Ltd. (Supra), as has been claimed by Mr. Chaudhuri.

13. In Fuljit Kaur vs. State of Punjab and Others, (2010) 11 SCC 455, the Supreme Court in paragraph 7 has held as under:- “7. There is no dispute to the settled proposition of law that dismissal of the special leave petition in limine by this Court does not mean that the reasoning of the judgment of the High Court against which the special leave petition has (AY 2019-20) Kamaraj Priya been filed before this Court stands affirmed or the judgment and order impugned merges with such order of this Court on dismissal of the petition. It simply means that this Court did not consider the case worth examining for the reason, which may be other than merit of the case. Nor such an order of this Court operates as res judicata. An order rejecting the special leave petition at the threshold without detailed reasons therefore does not constitute any declaration of law or a binding precedent.” (Emphasis supplied) 14. In this regard, we may refer to the judgment of the Supreme Court in State of Orissa and Another vs. Dhirendra Sundar Das and Others, (2019) 6 SCC 270, wherein it was observed as under:- “9.27. It is a well-settled principle of law emerging from a catena of decisions of this Court, including Supreme Court Employees’ Welfare Assn. V. Union of India [Supreme Court Employees’ Welfare Assn. V. Union of India, (1989) 4 SCC 187, paras 22 and 23 : 1989 SCC (L&S) 569] and State of Punjab v. Davinder Pal Singh Bhullar [State of Punjab v. Davinder Pal Singh Bhullar, (2011) 14 SCC 770, paras 112 and 113 : (2012) 4 SCC (Civ) 1034 : (2012) 4 SCC (Cri) 496 : (2014) 1 SCC (L&S) 208] , that the dismissal of an SLP in limine simply implies that the case before this Court was not considered W.P. (C) 15024/2024 & connected matters Page 8 of 13 worthy of examination for a reason, which may be other than the merits of the case. Such in limine dismissal at the threshold without giving any detailed reasons, does not constitute any declaration of law or a binding precedent under Article 141 of the Constitution.” (Emphasis supplied) 15. Even in the judgment in Kunhayammed and Others (Supra) relied upon by Mr. Chaudhuri, the Supreme Court has observed as under:- 40. A petition seeking grant of special leave to appeal may be rejected for several reasons. For example, it may be rejected (i) as barred by time, or (ii) being a defective presentation, (iii) the petitioner having no locus standi to file the petition, (iv) the conduct of the petitioner disentitling him to any indulgence by the court, (iv) the question raised by the petitioner for consideration by this Court being not fit for consideration or deserving being dealt with by the Apex Court of the country and so on. The expression often (AY 2019-20) Kamaraj Priya employed by this Court while disposing of such petitions are — “heard and dismissed”, “dismissed”, “dismissed as barred by time” and so on. May be that at the admission stage itself the opposite party appears on caveat or on notice and offers contest to the maintainability of the petition. The Court may apply its mind to the merit worthiness of the petitioner's prayer seeking leave to file an appeal and having formed an opinion may say “dismissed on merits”. Such an order may be passed even ex parte, that is, in the absence of the opposite party. In any case, the dismissal would remain a dismissal by a non-speaking order where no reasons have been assigned and no law has been declared by the Supreme Court. The dismissal is not of the appeal but of the special leave petition. Even if the merits have been gone into, they are the merits of the special leave petition only. In our opinion neither doctrine of merger nor Article 141 of the Constitution is attracted to such an order. Grounds entitling exercise of review jurisdiction conferred by Order 47 Rule 1 CPC or any other statutory provision or allowing review of an order passed in exercise of writ or supervisory jurisdiction of the High Court (where also the principles underlying or emerging from Order 47 Rule 1 CPC act as guidelines) are not necessarily the same on which this Court exercises discretion to grant or not to grant special leave to appeal while disposing of a petition for the purpose. Mere rejection of a special leave petition does not take away the jurisdiction of the court, tribunal or forum whose order forms the subject-matter of petition for special leave to review its own order if grounds for exercise of review jurisdiction are shown to exist. Where the order rejecting an SLP is a speaking order, that is, where reasons have been assigned by this Court for rejecting the petition for special leave and are stated in the order still the order remains the one rejecting prayer for the grant of leave to appeal. The petitioner has been turned away at the threshold without having been allowed to enter in the appellate jurisdiction of this Court. Here also the doctrine of merger would not apply. But the law stated or declared by this Court in its order shall attract applicability of Article 141 of the Constitution. The reasons assigned by this Court in its order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other court, tribunal or authority to express any opinion in conflict with or in departure from the view taken by this Court because permitting to do so would be subversive of judicial discipline and an affront to the (AY 2019-20) Kamaraj Priya order of this Court. However this would be so not by reference to the doctrine of merger.

17. Mr. Chaudhuri has endeavoured to demonstrate that the reasons assigned by the Supreme Court, in Prakash Pandurang Patil (Supra), which we have reproduced in paragraph 3 above, would make it clear that the SLP has been dismissed both on merits and on delay. According to him, this would mean that by necessary implication, the judgment in Hexaware Technologies Ltd. (Supra), relied upon by the Bombay High Court in the impugned judgment therein, would stand affirmed and the judgment of this Court in TKS Builders (Supra) would stand negated. This plea does not appeal to us, for the reason that the Supreme Court has only dismissed the SLP without dealing with the issue. Going by the above discussed judicial pronouncements, the same cannot be said to have set aside TKS Builders (Supra). That apart, we find that the SLP preferred against TKS Builders (Supra) is still pending adjudication before the Supreme Court.

(AY 2019-20) Kamaraj Priya 19. Though there is no dispute on the proposition of law laid down in Hyder Consulting (UK) Ltd. (Supra), the same would not come to the rescue of the petitioners in the peculiar facts of this case.

3. Learned Single Judge thereafter directed the matter to be placed before the Chief Justice for constituting a Division Bench to consider the divergent views. It is, therefore, all these matters were listed before us today.

4. We follow the law as laid down in Hexaware Technologies Ltd (supra), the said judgment was authored by one of us (Chief Justice), that it is mandatory for the FAO to issue the concerned notices and issuance thereof by the JAO would make the notice invalid.

(AY 2019-20) Kamaraj Priya 6. Admittedly, learned Additional Solicitor-General, in fairness, states that there is no stay. Therefore, the law as laid down by Hexaware Technologies Ltd (supra) applies.

7. It is clarified that if the Apex Court reverses the judgment of Hexaware Technologies Ltd (supra), parties will be governed by the decision of the Apex Court.

8. Keeping open all rights and contentions of parties, including liberty to apply to this Court, in case the Revenue succeeds before the Apex Court, for revival of these petitions, the notices issued in these petitions are quashed and set aside.

9. In these petitions, apart from the issue of notices issued by JAO instead of FAO, all or many of the issues which were considered in Hexauxare Technologies Ltd (supra) are involved.

10. To the extent the issues raised in Hexaware Technologies Ltd (supra) are not covered, those are kept open to be raised at the appropriate stage.

11. With the liberty as noted above, all petitions stand disposed of holding in favour of assessees. There will be no order as to costs. Consequently, the interim applications also stand disposed of.

(AY 2019-20) Kamaraj Priya 18. In the result, appeal filed by the assessee is allowed in terms above.