Bombay High Court
Prakash Pandurang Patil vs Income Tax Officer Ward 5 Panvel And Ors on 12 August, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-AS:32759-DB
916.WP10749_2024.DOC
Vidya Amin
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 10749 OF 2024
Prakash Pandurang Patil ... Petitioner
Versus
Income Tax Officer, Ward 5, Panvel & Ors. ... Respondents
Ms. Ritika Agarwal a/w. Ms. Ayesha Ansari, Ms. Yaminee Verma i/b.
Acelegal for the petitioner.
Mr. Akhileshwar Sharma for the respondents.
_______________________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
DATE 12 August, 2024
_______________________
P.C.
1. Rule. Rule made returnable forthwith. Learned counsel for the
respondents waives service. By consent of the parties, heard finally.
2. This Writ Petition under Article 226 of the Constitution of India is filed
challenging notice dated 5 April, 2022 issued by respondent no.1 to the
Petitioner under Section 148 of the Income Tax Act, 1961 (“the Act”), and also
a prior notice issued under Section 148A(b) and an order dated 5April, 2022
passed under Section 148(A)(d) of the Act. The Assessment Year in question
is AY 2018-19.
3. It is apparent that the impugned notice dated 5 April, 2022 issued under
Section 148 of the Act and the order of the same date under Section 148A(d)
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of the Act are issued by the Jurisdictional Assessing Officer (“JAO”) and not
under the mandatory faceless mechanism as per the provisions of Section 151A
of the Act. For a notice to be validly issued under Section 148 of the Act, the
Respondent No.2 would be required to comply with the provisions of Section
151A of the Act, so as to adhere to the faceless mechanism, as notified by the
Central Government by notification dated 29 March 2022. A Division Bench
of this Court in the case of Hexaware Technologies Limited Vs. Assistant
Commissioner of Income Tax & 4 Ors. 1 had considered the effect and
interpretation of the said provision. The relevant extract of the said decision
reads thus:-
35. Further, in our view, there is no question of concurrent
jurisdiction of the JAO and the FAO for issuance of notice under
Section 148 of the Act or even for passing assessment or
reassessment order. When specific jurisdiction has been assigned to
either the JAO or the FAO in the Scheme dated 29 th March, 2022,
then it is to the exclusion of the other. To take any other view in the
matter, would not only result in chaos but also render the whole
faceless proceedings redundant. If the argument of Revenue is to be
accepted, then even when notices are issued by the FAO, it would
be open to an assessee to make submission before the JAO and vice
versa, which is clearly not contemplated in the Act. Therefore, there
is no question of concurrent jurisdiction of both FAO or the JAO
with respect to the issuance of notice under Section 148 of the Act.
The Scheme dated 29th March 2022 in paragraph 3 clearly provides
that the issuance of notice “shall be through automated allocation ”
which means that the same is mandatory and is required to be
followed by the Department and does not give any discretion to the
Department to choose whether to follow it or not. That automated
allocation is defined in paragraph 2(b) of the Scheme to mean an
algorithm for randomised allocation of cases by using suitable1 (2024) 464 ITR 430
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technological tools including artificial intelligence and machine
learning with a view to optimise the use of resources. Therefore, it
means that the case can be allocated randomly to any officer who
would then have jurisdiction to issue the notice under Section 148
of the Act. It is not the case of respondent no.1 that respondent no.1
was the random officer who had been allocated jurisdiction.
36. With respect to the arguments of the Revenue, i.e., the
notification dated 29th March 2022 provides that the Scheme so
framed is applicable only ‘to the extent’ provided in Section 144B of
the Act and Section 144B of the Act does not refer to issuance of
notice under Section 148 of the Act and hence, the notice cannot be
issued by the FAO as per the said Scheme, we express our view as
follows:-
Section 151A of the Act itself contemplates
formulation of Scheme for both assessment,
reassessment or recomputation under Section 147 as
well as for issuance of notice under Section 148 of the
Act. Therefore, the Scheme framed by the CBDT,
which covers both the aforesaid aspect of the provisions
of Section 151A of the Act cannot be said to be
applicable only for one aspect, i.e., proceedings post the
issue of notice under Section 148 of the Act being
assessment, reassessment or recomputation under
Section 147 of the Act and inapplicable to the issuance
of notice under Section 148 of the Act. The Scheme is
clearly applicable for issuance of notice under Section
148 of the Act and accordingly, it is only the FAO
which can issue the notice under Section 148 of the
Act and not the JAO. The argument advanced by
respondent would render clause 3(b) of the Scheme
otiose and to be ignored or contravened, as according
to respondent, even though the Scheme specifically
provides for issuance of notice under Section 148 of
the Act in a faceless manner, no notice is required to be
issued under Section 148 of the Act in a faceless
manner. In such a situation, not only clause 3(b) but
also the first two lines below clause 3(b) would be
otiose, as it deals with the aspect of issuance of notice
under Section 148 of the Act. Respondents, being an
authority subordinate to the CBDT, cannot argue that
the Scheme framed by the CBDT, and which has beenPage 3 of 8
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laid before both House of Parliament is partly otiose
and inapplicable. ……..”
37. When an authority acts contrary to law, the said
act of the Authority is required to be quashed and set
aside as invalid and bad in law and the person seeking
to quash such an action is not required to establish
prejudice from the said Act. An act which is done by an
authority contrary to the provisions of the statue, itself
causes prejudice to assessee. All assessees are entitled to
be assessed as per law and by following the procedure
prescribed by law. Therefore, when the Income Tax
Authority proposes to take action against an assessee
without following the due process of law, the said
action itself results in a prejudice to assessee. Therefore,
there is no question of petitioner having to prove
further prejudice before arguing the invalidity of the
notice.
[Emphasis Supplied]
4. It is hence apparent that in the present case, the impugned order and the
notices issued by respondent no.1 are not in compliance with the Scheme
notified by the Central Government implementing the provisions of Section
151A of the Act. The Scheme, as tabled before the Parliament as per the
requirements of the said provision, is in the nature of a subordinate legislation,
which governs the conduct of proceedings under Section 148A as well as
Section 148 of the Act. Thus, in view of the explicit declaration of the law in
Hexaware Technologies Limited (supra), the grievance of the petitioner-
assessee insofar as it relates to an invalid issuance of the impugned order and
the notice is required to be accepted.
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5. Learned Counsel for the parties agree that in this view of the matter, the
proceedings initiated under Section 148 of the Act would not be sustainable
and are rendered invalid in view of the judgment rendered in Hexaware
Technologies Limited (supra).
6. Apart from the petitioner’s contention that the proceedings would stand
covered by the decision of this Court in Hexaware Technologies Limited
(supra), another contention as raised by the petitioner is in regard to the
impugned notice also being contrary to the decision of this Court in Siemens
Financial Services Pvt. Ltd. vs. Deputy Commissioner of Income Tax, Circle
8(2)(1), Mumbai & Ors.2. for the reason that the proceedings were initiated
well after the expiry of three years from the end of the relevant assessment year.
If this be so, the contention as urged on behalf of the petitioner is that the
sanction for initiating the reassessment ought to have been granted by the
authorities of the rank referred to in Section 151(ii) of the Act and not by the
authorities of the relatively lower rank under Section 151(i) of the Act. It is
submitted that the issue in this regard is no more res integra in view of the
pronouncement of this Court in Siemens Financial Services Pvt. Ltd. (supra)
as relied on behalf of the petitioner.
7. In Siemens Financial Services Pvt. Ltd., this Court held that the sanction
2 Writ Petition No. 4888 of 2022
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as granted by the authority would be rendered invalid in the case it is not
issued by the authorities specified in Clause (ii) in the event reassessment
proceedings were initiated well after the expiry of three years from the end of
the relevant assessment year. The following observations as made in Siemens
Financial Services Pvt. Ltd. are required to be noted, which reads thus:
“24. As per section 151 of the Act, the ‘specified authority’ who has to
grant his sanction for the purposes of section 148 and section 148A is the
Principal Chief Commissioner or Principal Director General or where
there is no Principal Chief Commissioner or Principal Director General,
the Chief Commissioner or Director General if more than three years
have elapsed from the end of the relevant assessment year. The present
petition relates to the AY 2016-17, and as the impugned order and
impugned notice are issued beyond the period of three years which
elapsed on 31 st March, 2020 the approval as contemplated in section
151(ii) of the Act would have to be obtained which has not been done by
the Assessing Officer. The impugned notice mentions that the prior
approval has been taken of the ‘Principal Commissioner of Income-tax –
8’ (‘PCIT-8’) which is bad in law as the approval should have been
obtained in terms of section 151(ii) and not section 151(i) of the Act and
the PCIT-8 cannot be the specified authority as per section 151 of the
Act. Further, even in the affidavit-in-reply, the department has accepted
that the approval obtained is of the ‘Principal Commissioner of Income-
tax – 8’ and, hence, such an approval would be bad in law.
25. TOLA, enacted on 29th September 2020 and came into force on
31st March 2020. It inter alia, provided for a relaxation of certain
provisions of the Income-tax Act, 1961. Where any time limit for
completion or compliance of an action such as completion of any
proceedings or passing of any order or issuance of any notice fell between
the period 20th March 2020 to 31st December 2020, the time limit for
completion of such action stood extended to 31st March 2021. Thus,
TOLA only seeks to extend the period of limitation and does not affect
the scope of section 151.
26. The Assessing Officer cannot rely on the provisions of TOLA and
the notifications issued thereunder as section 151 has been amended by
Finance Act, 2021 and the provisions of the amended section would have
to be complied with by the Assessing Officer, w.e.f., 1st April 2021.
Hence, the Assessing Officer cannot seek to take the shelter of TOLA as a
subordinate legislation cannot override any statute enacted by thePage 6 of 8
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Parliament. Further, the notification extending the dates from 31 st March
2021 till 30th June 2021 cannot apply once the Finance Act, 2021 is in
existence. The sanction of the specified authority has to be obtained in
accordance with the law existing when the sanction is obtained and,
therefore, the sanction is required to be obtained by applying the
amended section 151(ii) of the Act and since the sanction has been
obtained in terms of section 151(i) of the Act, the impugned order and
impugned notice are bad in law and should be quashed and set aside.”
8. The decision in Siemens Financial Services Pvt. Ltd. (supra) was
subsequently followed in Vodafone Idea Ltd. vs. Deputy Commissioner of
Income Tax, Circle-5(2)(1), Mumbai & Ors. 3 where the Court made the
following observations:
“3. The impugned order and the impugned notice both dated 7 th
April, 2022 state that the Authority has accorded the sanction is the
PCIT, Mumbai-5, The matter pertains to Assessment Year (AY) 2018-19
and since the impugned order as well as the notice are issued on 7 th April,
2022, both have been issued beyond a period of three years. Therefore,
the sanctioning authority has to be the PCIT as provided under Section
151(ii) of the Act. The proviso to Section 151 has been inserted only
with effect from 1st April, 2023 and therefore, shall not be applicable to
the matter at hand.
4. In this circumstances, as held by this Court in Siemens Financial
Services Private Ltd. vs. Deputy Commissioner of Income Tax & Ors.,
the sanctino is invalid and consequently, the impugned order and
impugned notice both dated 7th April, 2022 under section 148A(d) and
148 of the Act are hereby quashed and set aside.”
9. In the light of the above discussion, and when there is no dispute that
the Jurisdictional Assessing Officer (JAO) had no jurisdiction to issue the
impugned order and the impugned notices, the writ petition is required to be
allowed. It is accordingly allowed in terms of prayer clause (b) and (d), which
3 Writ Petition No. 2768 of 2022 dated 6 February, 2024
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reads thus:-
“(b) To issue a writ of Mandamus or direction or order in the
nature of Mandamus or writ of Certiorari or any other writ
under Article 226 of the Constitution of India, setting aside the
impugned order under section 148A(d) dated 05.04.2022.
(d) To issue a writ of Mandamus or direction or order in the
nature of Mandamus or writ of Certiorari or any other writ
under Article 226 of the Constitution of India, declaring that
the consequential notice dated 05.04.2022 issued under
section 148 as invalid.”
10. We make it clear that having disposed of this petition on the ground of
non-compliance with Section 151A of the Act, we have not expressed any
opinion on the other issues as raised in the Writ Petition, which are expressly
kept open.
11. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
Signed by: Vidya S. Amin
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Designation: PS To Honourable Judge
12 August, 2024
Date: 16/08/2024 14:15:21