Bombay High Court
Rakesh Rathi-2018-19 vs Income-Tax Officer-26(2)(1) on 12 August, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:12442-DB
941-WPL-24554-2024.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO. 24554 OF 2024
Rakesh Rathi ...Petitioner
Versus
Income Tax Officer 26(2)(1)- Mumbai & Ors. ...Respondents
----
Dr. K. Shivaram i/b Mr. Shashi Bekal, for Petitioner.
Mr. Ravi Rattesar, for 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 has
been filed to challenge a notice dated 6 April, 2024 (” impugned notice”)
issued to the Petitioner under Section 148 of the Income Tax Act, 1961 (” the
Act”), and also the underlying prior notice and order under Section 148A(b)
and Section 148A(d) of the Act, respectively. The reassessment under
Section 148 of the Act has been initiated in respect of returns filed by the
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Petitioner-Assessee for the Assessment Year 2018-19.
3. On perusal of the record, it is apparent that the impugned notice dated
24 March, 2022 issued under Section 148A(b), the order passed thereon
under Section 148A(d) dated 6 April, 2022 and the consequent notice dated
6 April, 2022 issued under Section 148 of the Act are all issued by the
Jurisdictional Assessing Officer (“JAO”) and not by a Faceless Assessing
Officer (“FAO”), as is required by the provisions of Section 151A of the Act.
4. To give effect to the provisions of Section 151A, the Central
Government has issued a Notification dated 29 March 2022 whereby a
faceless mechanism has been introduced. Thus, necessarily in resorting to a
procedure under Section 148A and the consequent notice to be issued under
Section 148 of the Act, the Assessing Officer is required to adhere to the
provisions of Section 151 read with the Notification. Thus, for a notice to be
validly issued for reassessment under Section 148 of the Act, the
Respondent-Revenue would need to be compliant with Section 151A, which
has been interpreted and analysed in detail by a Division Bench of this Court
in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of
Income Tax & 4 Ors. 1 (“Hexaware”). The Division Bench has clearly
declared the law as follows :
1 (2024) 464 ITR 430
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941-WPL-24554-2024.DOC35 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 29th 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 suitable
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:-
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941-WPL-24554-2024.DOCSection 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 been
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
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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]
5. In the present case, it is apparent that the Respondent-Revenue has not
complied with the Scheme notified by the Central Government pursuant to
Section 151A(2) of the Act. The Scheme has also been tabled in Parliament
and is in the character of subordinate legislation, which governs the conduct of
proceedings under Section 148A as well as Section 148 of the Act. In view of
the explicit declaration of the law in Hexaware, the grievance of the Petitioner-
Assessee insofar as it relates to an invalid issuance of a notice is sustainable and
consequently, the very manner in which the proceedings have been initiated,
vitiates the proceedings.
6. Learned Counsel for both the parties agree that the proceedings initiated
under Section 148 of the Act would not be sustainable in view of the judgment
rendered in Hexaware. Learned Counsel for the Petitioner-Assessee has also
drawn our attention to a recent decision of this Court in Nainraj Enterprises
Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax, Circle-4(3)(1),
Mumbai & Ors.2, whereby in similar circumstances, this Court has allowed the
2 Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024
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petition considering the provisions of Section 151A of the Act.
7. In the light of the above discussion, and as there is no dispute that the
JAO had no jurisdiction to issue the impugned notice, the Writ Petition is
accordingly allowed in terms of prayer clause [a] which reads thus :
“(a) That this Hon’ble Court may be pleased to issue a Writ of
Certiorari or a Writ in the nature of Certiorari or any other appropriate
Writ, order or direction, calling for the records of the Petitioner’s case
and after going into the legality and propriety thereof, to quash and set
aside (i) Reassessment Order dated March 21, 2024 passed under
section 147 read with section 144 of the Act (Ex-A); (ii) Penalty Notice
dated March 21, 2024 issued under section 271AAC of the Act (Ex-B);
(iii) Penalty Notice dated March 21, 2024 issued under section 270A
of the Act (Ex-C) (iv) Notice of Demand along with the computation
issued under section 156 of the Act dated Febluary 16,2024 (Ex-D);
(v) Notice under section 148 of the Act dated April 06, 2022 (Ex-E);
(vi)Order dated April 06, 2022, passed under section 148A (d) of the
Act (Ex-F); (vii) Notice under section 148A(b) of the Act dated March
24, 2022 (Ex-G);.”
8. 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 raised in the Writ Petition. The other questions
raised in this petition are not being answered since it is not necessary to do so.
9. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
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