Chandra Sekhara Re_ddy Avuthu v. procedure laid down in the Finance Act 2021 which mandates

Judgment

2. lncome Tax Officer, Ward 14(1), lncome Hyderabad, Telangana - 500004 The Principal Commissioner of lncome Tax-|, Tank, Hyderabad, Telangana - 500004 Tax Towers, IVIasab Tank, lncome Tax Towers, I\rlasab ...RESPONDENTS Petition under Article 226 of the Constrtution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to i. lssue a Writ, Order or Direction more particularly, one, in the nature of Writ of lVlandamus, declaring the action of the Respondent No. 1 in issuing the Notice dated 29-06-2022 ti/S 148 calling for the return of income tot Ay. 2017-18 as arbitrary, illegal, and without jurisdiction ii_ To set aside the notice issued by Respondent No. 1 u/s 148 of the lncome Tax Act, '1 961 dated 29-06-2022 calling for the return of rncome of the Petitioner for AY. 2017-18 and consequent proceedings as lacking in jurisdiction in terms of the amendment in the Act and procedure laid down in the Finance Act 2021 which mandates the authorities to initiate proceedings pertaining to reassessment u/s 148, in a faceless manner through automated allocation, as is provided uls 1448 of the Act rather than being, proceeded by the Jurisdictional Assessing Officer under the lncome Tax Act, 1961 Counsel for the Petitioner: SRl. POLKAMPALLY PAVAN KUMAR RAO Counsel for the Respondents: Ms. BOKARO SAPNA REDDY (Jr. SC FOR INCOME TAX) The Court made the following: ORDER THE IIONOURABLE SRI JUSTICE P.SA]\I KOSHY AND THIT HONOURABLE SRI JUSTICE NARSN{G RAO NANDIKONDA W.P.No.7647 OF 2025 Q.RDEB, @er Hon'ble Sri Justice P.Sam Koshy) Heard Mr. Polkampally Pavan Kumar Rao, 1t:arned counsel for the petilioner and Ms. B.Sapna Reddy, [,:r.rned Junior Standing Counsel for the Income Tax Department c'respondent Nos. 1 an,l 2. Perused the record

2. This is a writ petition where the proceedirrlrs are either challenged to the notices which were issued under S':ction l48A and 148 ,rf the Income Tax Act, 1961 (for short'tte Act') or the assessment orders those have been passed under Ser:tion 147 of the Act lvhich have been assailed.

3. This writ petition is being taken up today onll r'n one of the grounds, that the notices issued under Section l4iilr of the Act and the subsequent initiation of proceedings under lie';tion 148 of the Act by the jurisdictional Assessing Officer, wh::r'las in terms of the amendment that was brought to the Income Tirx Act by way of Finance Act, 2021 w.e.f., 01.04.2021 onwards, proceedings 2 (' under Section 148,4 of the Act as also under Section 148 of the Act ought to have also been issued and proceeded in a faceless manner.

4. The contention of the petitioner is that the issue of proceedings being in violation of the Finance Act, 2021 i.e., the impugned notices under Section 148,4' and Section 148 ofthe Act not being issued in a faceless manner, have already been dealt with and decided by this Court in the case of KANKANALA RAVINDRA REDDY vs. INCOME-TAX OFFICERT decided on 14.09.2023 whereby a batch of writ petitions were allowed and the proceedings initiated under Section 148,,4. as also under Section 148 of the Act were held to be bad with consequential reliefs on the ground of it being in violation of the provisions ofSection 151A of the Act read with Notification 1812022 dated,29.03.2022. The said judgment passed by this Courl has also been subsequently followed in a large number of writ petitions which were allowed on similar ' [(2023) 156 taxmann.com 1 78 (Telangana)] t+*' "ir{ trq' ., ! i

5. Down the line, we find that the same issur, lras also been decided against the Revenue by vanous Higli Courls i.e., by the Bombay High Court in the case o1' IITEXAWARE TECHNOLOGIES LTD., vs. ASSISTANT COI'IIv{ISSIONER OF INCOME TAX & OTHERS2, Gauhati High C crrt in the case of RAM NARAYAN SAH vs. UNION OF INDL{ ', Punjab and Haryana High Court in the case of JATINDER SINGH BANGU vs. UNION OF INDIA4, and Telangana High Coult in the case of SRMNKATARAMANA REDDY PATLOOI,TL'rs. DEPUTY COMMISSIONER OF INCOME TAX5 where tlrr, issue was in respect o I international taxation, Bombay High Cou t in the case of ABHIN ANILKUMAR SHAH vs. INCOMB T'I',\t. OFFICER, INTERNATIONAL TAXATION6 which is again ,,rr intemational taxation and central circle, High Court of Himachal Irradesh in the case of GOVIND SINGI{ vs. INCOME TAX OFFICERT, Gujarat High Court in the case of llL{NSUKHBHAI 'lzoz+1464 rrR 430 (Bom) '[(2024) 156 taxmann.com 478 (Gauhati)] 'l(2024) 165 taxmann.com 115 (Punjab & Haryana)l '[2024) 167 taxmann.corn 41 1 (Telangana)] " 12024) 166 taxmann.com 679 (Bombay)l ' 12024) I 65 taxmann.com I 13 (Himachal Pradesh)l 4 a) DAIfYABHAI RADADIYA vs. INCOME TAx OFFICE& WARD 3(3X5)8, Jharkand High Court in the case of SHYAM SUNDAR SAW vs. UNION OF lNDIAe, Rajasthan High Court in the case of SHARDA DEVI CHHAJER vs. INCOME TAX OFFICER & ANOTHER and batch of writ petitionslo which stood decided on 19.03.2024. Similar views have also been taken by the Division Bench of Calcutta High Court in the case of GIRDHAR GOPAL DALMIA vs. UNION OF INDIA & ORS (M.A.T 1690 of 2023), decided on25.09.2024.

6. Even though the same issue having been decided by a large number of High Courts, we are still confronted with large frling of identical matters on daily basis ranging between 5 to 10 writ petitions. That upon the instructions being sought from the Department, they have been taking a solitary ground that the decision of the Bombay High Court in the case of llexaware Technologies Ltd., (2 supra) as also the one which has been decided by this Court in the case of Kanakalu Ravindra Reddy r2o24SCC Online Guj 4012 '2025 SCC Online lhar 287 12023 : RI-JD :49 84-DB l ( I I I I i I I |. l I I i I I I I I I i I I t I I Y#g^nl;_7 ::i/' 5 - I I I I I I i I I I ! I I I I I I i I i i I l (1 supra) has been subjected to challenge in a lipecial Leave Petition i.e., SLP No.3574 of 2024 before the FIor'ble Supreme Court and the Hon'ble Supreme Court is seized t:f the matter. In addition, there are about 1200 SLPs also filed aris Lng out of the same isstLe being decided by various High Courts

1. To a query being put to the learned counsel f,,rr the Revenue, they hav,: categorically accepted the fact that there is no interim order grirnteri by the Hon'ble Supreme Court irr lny of these matters pending before it. Meanwhile, fresh rv i . petitions of identical nature are being piled up before this Bench on daily basis and the pendency is getting increased on matter u h ch otherwise has alrea<ly been dealt and decided by this very High t.)our1 itself.

8. On the one hand, even though the order ol'tl'is Court that was passed as early as on 14.09.2023 and more [6 months have lapsed, till date, we do not find any remedial stcps having been taken by the Income Tax Department to take apprrlrriate steps to either hold back issuance of notice under Section l,1iiA and under Section 148 of the Act by the jurisdictional Asso:ising Officer, rather the authorities concerned in the teeth of serio:; of decisions 6 ..':.. by all the major High Courts tn India are continuously sti11 initiating proceedings under Section 1484 of the Act and also initiating proceedings under Section 148 of the Act in contravention to the amendments brought into the Income Tax Act pursuant to the Finance Act,2020 as also the Finance Act2021.

9. Upon a query being put as to why can't this writ petition be disposed of in the teeth of the decision rendered by this Court in the case of Kanakala Ravindra Reddy (1 supra), leamed Standing Counsel for the Incomc Tax Departrne nt contends that those would unnecessarily burden the Income Tax Departrnent where they would be required to file equal number of SLPs before the Hon'ble Supreme Court and it would be further burdening the exchequer of the Union of India. [t was also the contention of the learned Standing Counsel that no prejudice would be caused to the interest of the petitioners in case if this writ petition is kept pending till the finalization of the SLPs pending before the Hon'ble Supreme Court and the fact that the petitioner is already enjoying the benefit of interim protection. Nonetheless, on the earlier query of this Court as to why the Income Tax Department have not come out with a mechanism to issue appropriate instructions or to take

4.1s.& appropriate sleps in ensuring that proceedings undt.r'section l48A of the A<:t as also the assessment orders undcr Scr:t on 148 of the Act are k.ept in a hold in the light of the decisions lt:dcided by the various lJigh Courts, it was submitted by the lcarned Standing Counsel :hat rhe said steps can only be taken at thc l..vel o1'CBDT as any such sieps would have to be taken Pan Indrtr ,Lnd oannot be limited tc, any of these jurisdictional High Courts

10. As a result of which, rvhat we are facing is stc.,p increase of litigation dav in and day out even though various c,rl,:rs havc been passed b1' this High Court allowing writ petitions orr he very same issue. The Income Tax authorities concemed are st I even now rn 2025 alsc initrating proceedings in contravention ro llle provisions of Sectiorr l5lA of the Act and as a result by nou,, n'ore than 600 to 700 petitio:rs have been already got piled up lrcf .rre ttiis High Coult on an issue which otherwise stands squarelr, .:r'vered by the judgment o1- this Court in the case of Kanakala Rtvirulra Reddv (1 supra). What is also surprising is the fact thar though while allowing the writ petitions in the case of Kanatir,,la Ravindra Reddy (l supra), the Division Bench while reservirrlr the right of the Revetrue, has also protected the interest of .h,r petitioners 8 insofar as the liberty which was granted to the Revenue for initiating fresh proceedings strictly in accordance with the amended provisions of the Act, as amended by the Finance Act, 2020 and the Finance Act,202l. The petitioner assessee would be entitled to challenge or raise the other legal objections if the Revenue initiates fresh proceedings. The Department has made no endeavour in availing the said liberty that was reseled for the Revenue. On the contrary, they have been still sticking on to the stand, which this High Court as well as many other High Courls already held to be bad.

11. It appears that because ofthe aforesaid liberty that this High Court had granted permitting the Revenue for initiating fresh proceedings as a one-time measure in a faceless manner, the Income Tax Department wants to take advantage of the same by protracting these proceedings which would enable them to meet the limitation that would otherwise come in the way. Likewise, if the writ petition is kept pending for a considerable long period of time and finally at a later stage if the Hon'ble Supreme Court conf,trms the decision taken by this High Court as also by the other High Courts in which the SLPs are still pending, the Income Tax 'l I' I l l, l, I j i 1 9 Depaftment would get the advantage of the liberty tha . is otherwise protected in favour of the Revenue for initirti rn of fresh proceedings from the disposal ofthese matters at a ut lh later stage which would be advantageous and benefrcial to th: Revenue and would be equally disadvantageous and detrimental s,r l-ar as interest of the assesses are concemed. As a consequence, t.rt: Income Tax Departrnent gets an extended period of time for ini.iltion of fiesh proceedings.

12. The: alarming trend of docket explosion in this (. ourt, despite the clear precedent set in Kanakala Ravindra Redfi (l supra), is a matter of grave concem. The lncome Tax Departni,rrrt's persistent initiation of lresh proceedings, disregarding the establ shed judicial pronouncements, has led to an unprecedented surp.e in litigation with over 600-700 petitions piling up on the sart(: issue. This deliberate approach not only undermines the princip e of judicial precedent but also strains the judicial resources unnt:cr:ssarily. The Depafiment's strategy of awaiting the Supreme Courl'r; decision on pending SLPs while continuing to initiate fresh proceedings appears to be a calculated move to buy time arrci ctrcumvent limitation periods, rather than adhering to the estal;lished lega1 10 position. Such conduct raises serious questions about the administrative efficiency and the respect for judicial pronouncements, particularly when this Court has already provided a balanced approach by preserving both the Revenue's rights and assesses interests

13. Another aspect which needs to be considered is that in fact it should have been realized by the Income Tax Department itself and should have found out via media in ensuring that proceedings under Sections 148-4 and 148 should not have been issued in a ; faceless manner, at least till the Hon'ble Supreme Court decide the twelve hundred (1200) odd SLPs which it is already seized ofor, at least the Income Tax Department should have found out some remedial steps to ensure that wherever the authorities intend to initiate proceedings under Sections 148-A and 148, other than in a faceless manner, the proceedings should have been delerred without precipitating the matter further intimating the assessee that they shatl initiate appropriate proceedings only after the SLP's are decided by the Hon'ble Supreme Court on the very same issue. This again, the Income Tax Department, has not been able to give a convincing reply, except for the fact that such a decision if at all 11 has to be: taken, has to be taken for the whole of [rr:ia, and which othenvis,: has to be by way of a policy decision anC that too at the level of Central Board of Direct Taxes. Thor eh the leamed Standing Counsel for the Income Tax Departmenl oontended that the Delhi High Court dismissed a u,rit petition of sirr .lar nature, on the one hand when the High Court is strugglin g to reduce its pendencr,, such notices which are under challenqr- in this writ petition are l'orcing the asscssee to knock the doc n; of this High Court resulting in filing of hundreds of new writ pet.itions which in the long run not only affects the disposal of the wril petitions but also consume s substantial time of the Bench ir Jrearing these matters again and again on daily basis. Admittedt)., in spite of the matter bt:fore the Hon'ble Supreme Court having treen taken on many occasions, the Hon'ble Supreme Courl which ir; seized of the matter has been reluctant in granting any interim plotection to the Income llax Deparlment. Yet, the authorities cc nr:emed at the State levd are not ready to accept the verdict passel ty a majority of High (lourts of different States on the same issue and to make things further worse, the Income Tax Departmr nl IS showing audacity by issuing notices continuously under SectLons 148-A and 12 i'.. 148 through the jurisdictional Assessing Officer whereas it ought to have been only in the faceless manner.

14. In the case of BANK OF INDIA vs. ASSISTANT COMMISSIONER, INCOME TAX'1, on an issue whether it was justifiable on the part of the Income Tax Departrnent in not following an order passed by the adjudicating authority only on the ground that the appeals are pending, the Division Bench of the High Court of Bombay held at paragraph No.25 as under, viz., "25. Mr. Paridwalla has rightly drawn out attention to the decision of this Court in Commissioner of lncome Tax vs. Smt. Godavaridevi Sarafl2 as also the recent decision of the co- ordinate Bench of this Court in Samp Furniture (P) Ltd. v. lTO13 of which one of us (Justice G.S. Kulkarni) was a member, wherein the Court categorically observed that the Revenue having not "accepted" the judgment of the High Court would not mean that till the same is set aside in a manner known to law, it would loose its binding force. Referring to the decision of the Supreme Court in Union of lndia vs. Kamlakshi Finance Corporation Ltd.14, the Court observed that the approach of the officials of Revenue of keating decisions being "not acceptable" was criticized by the Supreme Court. ln such decision, following are the relevant observations made by the Supreme Court. 1' 11zOzS1 170 taxmann.com 422 (Bombay)l '' 1t9281 113 ITR 589 (Bombay) t3 720241165 taxmann.com 581/300 Taxman 452 (Bombay) 'o i19921 taxmann.com 16/55ELT 433 (SC) .- \., 13 "6. Sri Reddy is perhaps right in saying thal the officers were not actuated by any mala firler; in passing the impugned orders. They p,rr-raps genuinely felt that the claim of the assessee wilr; not tenable and that, if it was accepted, the R€ v': nue would suffer. But what Sri Reddy overlooks is trzrtwe are not concerned here with the correctnos, or otheMise of their conclusion or of any 'airtual malafides but with the fact that the officers, in retc:ring in their conclusion, by-passed two appellate orrlers in regard to the same issue which were placed before them, one of the Collector (Appeals) and the o:h:rr of the Tribunal. The High Court has, in our view. -i:rhtly criticized this conduct of the Assistant Collecto-s and the harassment to the assessee caused by the 1a lure of these officers to give effect to the ord,:r, of authorities higher to them in the appellate hierar:l^.2. lt cannot be too vehemently emphasized that i r; of utmost importance that, in disposing o' the quasi.iudicial issues before them, revenue office rs are bound by the decisions of the appellate auth,:,r'ies. The order of the Appellte Collector is binding r;r the Assistant Collectors working within his jurisdictir,n and the order of the Tribunal is binding upon the As;i{;tant Collectors and the Appellate Collectors who funr;tion under the jurisdiction of the Tribunal. The princil)los of judicial discipline require that the orders of the ri:rher appellate authorities should be followed unreservr)dly by the subordinate authorities. The mere fact ti a. the order of the appellate authority is not "acceptabk:" to the department - in itself an objectionable phrar;e - and is the subject matter of an appeal can furn sf no ground for not following it unless its operatiol has been suspended by a competent court. lf this healthy 4 : t: l ' l l i i L4 (f rule is not followed, the result will only be undue harassment to assesses and chaos in administration of tax laws.

12. We have dealt with this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observations made by the High Court, have been harsh on lhe officers. lt is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assesses-public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them."

15. What is wonying this Bench more is the fact that an endeavour is being made whole heartedly to ensure not to generate further litigation on issues which have been laid to rest by a large number of High Courts all of whom have taken a consistent stand that the action of the Income Tax Department being violative of the 15 Finance,\ct, 2020 and Finance Act,2021. Now, in clder to protect the interest o1'the Revenue as also that of the asses ie,), it would be trite at tl.ris j uncture, if we dispose of the writ p r:r ition with an observation/direction that the disposal of the instant r, rit petition in terms of the judgment rendered by this High Court in the case of Kankanala Ruvindra Reddy (1 supra) shall hower,:r be subject to the outcome of the SLPs which were hled by the Income Tax Depa(mcnt and which is pending consideration bell'rrr: the Hon'ble Supreme Court

16. In the given facts and circurnstances, this tlench is of the considered opinion that unless and until we do not t mely dispose of matters which are squarely covered by the decisior of this Courl and which stands fortified by the decisions of thc 'r31j6u5 61hq1 High Courts rtn the very same issue, the pendencl,, of this High Court would further be burdened which otherwise .:zrn be decided and disposed ofas a covered matter 11 . So far as the interest of the Revenue is conce.n,,'d, we are of the considered opinion that the interest of the ReverLur: has already been considered and protected, as has been observerl n paragraphs 1 I I t: L' I i, r 16 f- 36,37 and 38 ofthe order which, for ready reference, is reproduced hereunder:

36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respondent- Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent-Depa(ment pursuant lo the notices issued under Section 147 and 1 48 would also get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullifi ed automatically.

37. The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petitioner which stands reserved to be raised and contended in an appropriate proceedings.

38. Since the Hon'ble Supreme Court had, in the case of Ashish Agarwal, supra, as a one{ime measure exercising the powers under Article 142 of the Constitution of lndia, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right 17 conferred on the Revenue would remain reser /ed to proceed further if they so want from the stal e of the order of the Supreme Court in the case :rf Ashish Agarwal, supra.

18. Wt: would only further like to make obsen'atirtns that since we are inclined to dispose of the instant writ petitic n, conscious of the fact that the earlier order of this High Court iu the case of Kanakalo Ravindra Reddy (l supra) is subjecterl to challenge before the Hon'ble Supreme Court in SLP No..]:74 of 2024, prefened by the Income Tax Department, we ma<.r it clear that allowing of the instant writ petition is subject to lrtcome of the aforesaid SLP preferred by the Revenue against the rl::cision of this { High Corrrt in the case of Kanakala Ruvindra R't,rdy (l supra). This, in other words, would mean that either of the 1,arties, if they so want, may move an appropriate petition seekinl r';vival of this writ petition in the light of the decision of the Hon ble Supreme Court in the pending SLP on the very same issue.

19. Accordingly, the instant writ petition stard:; allowed ln favour of the assessee so far as the issue of jrrrisdiction 1S concernerl. As a consequence, the impugned rotice under challenge under Sections 148-A and 148 stands set eside/quashed. 1E The consequential orders, if any, also stand set aside/quashed in similar terms as have been passed by this High Court in the case of Kankanala Ravindra Reddy (l supra). There shall be no order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed //TRUE COPY// SD/. B. REKHA RANI S TANT REGISTRAR SECTION OFFICER ft/asa b Tank, x-|, lncome Tax Towers, N,4asab KUIVIAR RAO, Advocate [OPUC] (Jr. SC FOR INCOIVIE To,

1. lncome Tax Officer, Ward 14(1), lncome Tax Towe Hyderabad, Telangana - 500004 The Principal Commissioner of lncome Ta Tank, Hyderabad, Telangana - 500004 One CC to SRl. POLKAMPALLY PAVAN One CC to fils. BOKARO SAPNA P.EDDY TAX)[OPUC] Two CD Copies Btu GJP 2 3 4 0 HIGH COURT DATED:2410412025 ii 15Pr 2925 .\ 'i .i' '- -:,, ORDER WP.No.7647 o12025 ;,,! ,.t. ] '/ ALLOWING THE WRIT PETITION WITI{If,UT COSTS