Bombay High Court
Sp Armada Oil Exploration Private … vs Deputy Commissioner Of Income Tax … on 12 August, 2024
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:12606-DB
912-WP-3503-2024.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3503 OF 2024
SP. Armada Oil Exploration Pvt. Ltd. ...Petitioner
Versus
Deputy Commissioner of Income Tax, Circle 3 (3) ...Respondents
(1) - Mumbai & Ors.
----
Mr. Paras Savla a/w Pratik Poddar & Rajnandini Shukla, for Petitioner.
Mr. Vipul Bajapayee, 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 17 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 2020-21.
3. On perusal of the record, it is apparent that the impugned notice dated
29 March, 2024 issued under Section 148A(b), the order passed thereon
under Section 148A(d) dated 17 April 2024 and the consequent notice dated
17 April 2024 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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912-WP-3503-2024.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
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912-WP-3503-2024.DOCsaid 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 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 thePage 4 of 9
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912-WP-3503-2024.DOCstatue, 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]
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),
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Mumbai & Ors.2, whereby in similar circumstances, this Court has allowed the
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 be pleased to issue a Writ of
Certiorari or any other appropriate writ, order or direction in the nature
of certiorari under Article 226 of the Constitution of India calling for
records of the Petitioner’s case pertaining to Assessment Year 2020-21,
and after examining the validity, legality and propriety thereof, quash
and set aside the impugned notice for re-assessment dated 17.04.2024
issued U/S 148 of the Act (Exhibit H) and impugned order dated
17.04.2024 u/s 148A of the Act(Exhibit G);”
8. On a question being asked to the learned counsel for the revenue that
whether the notice as impugned would not be hit by the provisions of Section
151A and as intreprated by this Court in Hexaware as also the order under
Section 148A(b) by Kairos (supra).
9. Learned counsel for the revenue is not in a position to justify that the
same would not be hit. He would infact say that the reply affidavit can be filed.
We are of the opinion that there is no need for the department to file a reply
once the position cannot be disputed that the Jurisdictional Assessing Officer
(JAO) has issued a notice under Section 148A(b) and passed an order thereon
2 Writ Petition (L.) No. 16918 of 2024 dt. 2-07-2024
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under Section 148A(d) as also has proceeded to issue the impugned notice
under 148. All this is outside the faceless mechanism and for such reason the
same cannot be sustained. There cannot be any other view except to allow the
petition being squarely covered by the decisions of this Court in Hexaware
(supra) and Kairos Properties Pvt. Ltd. Vs. Assistant Commissioner of Income-
tax, circle-15(1)(2), Mumbai & Ors.3.
10. The Learned counsel for the petitioner has also contended that the
notice under Section 148 as impugned which is also required to be held to be
illegal inasmuch as it does not satisfy the requirement of a three months notice
as incorporated in Section 148 vide Finance Act, 2023 w.e.f. 1 April 2023. His
contention is that the order under Section 148A(d) of the Act was passed on
24 April 2023 which is on a day after the amendments to Section 148 as
effected by Finance Act, 2023 were brought into effect that is from 1 April
2023. He submits that once the provision itself ordains that a notice of period
of three months from the end of the month in which such notice was issued in
that case, the impugned notice under Section 148 cannot provide for a period
of merely 30 days as set out in paragraph two of the impugned notice under
Section 148 which reads thus:
“2. I, therefore, propose to assess or reassess such income
or recompute the loss or the depreciation allowance or any
other allowance or deduction for the Assessment Year 2020-213 Writ Petition (L) No. 22686 of 2024 dated 05 August 2024.
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912-WP-3503-2024.DOCand I, hereby, require you to furnish, within 90 days from the
issue of this notice, a return in the prescribed form for the
Assessment Year 2020-21.”
11. We find substance in the contention as urged on behalf of the petitioner.
Certainly, by the Finance Act, 2023 Section 148 has stood amended whereby a
period of three months from the end of the month in which such notice under
the provision is issued or such further period as may be allowed by the
Assessing Officer on the basis of an application made in that regard by assessee,
was inserted. It would be appropriate to extract the relevant part of Section
148 to note the effect of the amendment as brought about by Finance Act,
2023 which reads thus:
“[Issue of notice where income has escaped assessment.
148. Before making the assessment, reassessment or
recomputation under section 147, and subject to the provisions
of section 148A, the Assessing Officer shall serve on the
assessee a notice, along with a copy of the order passed, if
required, under clause (d) of section 148A, requiring him to
furnish within [a period of three months from the end of the
month in which such notice is issued, or such further period as
may be allowed by the Assessing Officer on the basis of an
application made in this regard by the assessee], a return of his
income or the income of any other person in respect of which
he is assessable under this Act during the previous year
corresponding to the relevant assessment year, in the prescribed
form and verified in the prescribed manner and setting forth
such other particulars as may be prescribed; and the provisions
of this Act shall, so far as may be, apply accordingly as if such
return were a return required to be furnished under section 139;
[Provided also that anyh return of income, required to be
furnished by an assessee under this section and furnished
beyond the period allowed shall not be deemed to be a return
under section 139.]”
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….
12. 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.
13. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
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