The High Court · 2025

ORDER: (per Hon'ble Sri Justice p.Sam Koshy) Heard Mr. M. Naga Deepak, leamed counsel for the petitioners and Ms. J.Sunitha, leamed Junior Standing Counsel for the Income Tax Department for respondent No.2. perused the record.

2. This is a writ petition where the proceedings are either challenged to the notices which were issued under Section l4gA and 148 of the Income Tax Act, 1961 (for short .the Act') or the assessment orders those have been passed under Section 147 of the Act which have been assailed.

3. This writ petition is being taken up today only on one of the grounds, that the notices issued under Section l4gA of the Act and the subsequent initiation ofproceedings under Section l4g of the Act by the jurisdictional Assessing Officer, whereas in terms of the amendment that was brought to the Income Tax Act by way of Finance Act, 2021 w.e.f., 01.04.2021 onwards, proceedings \L .t .-.. -:"&i; ...,*. -**:.r *i&&i 3tll .: xii$.' .' 2 under Section 148.4 ofthe Act as also under Section t18 ofthe Act ought to have also been issued and proceeded in zL faceless manner.

4. The contention of the petitioner is that the issue of proceedings being in violation of the Financ" 6s1, )[t"t'l i'e', the impugned notices under Section 148A and Section 148 ofthe Act not being issued in a faceless manner, have already beer dealt with and decided by this Court in the case of KANKANALA RAVINDRA REDDY vs. TNCOME-TAX OFFICE'II! decided on14.09.2021 whereby a batch of writ petitions were allowed and the proceeclings initiated under Section 1484 as also un'ler Section 148 of the Act were held to be bad with consequential reliefs on the ground of it being in violation of the provisions of Secti':n 151A of the Act read with Notification 1812022 dated2g'03'202:ll The said judgment passed by this Court has also been subsequently followed in a large number of writ petitions which were allowec on similar 'l(2023) 1 56 taxmann.com 178 (Telangana)l ) J

5. Down the line, we find that the same issue has also been decided against the Revenue by various High Courts i.e., by the Bombay High Court in the case of HEXAWARE TECTINOLOGIES LTD., vs. ASSISTANT COMMISSIONER OF INCOME TAX & OTHERS2, Gauhari High Court in the case of RAM NARAYAN SAH vs. UNION OF INDIA3, punjab and Haryana High Courl in the case of JATINDER SINGH BANGU vs. UNION OF INDIA4, and Telangana High Court in the case of SRI VENKATARAMANA REDDY PATLOOLA vs. DEPUTY COMMISSIONER. OF INCOME TAX5 where the issue was in respect of international taxation, Bombay High Court in the case of ABI{IN ANILKUMAR SHAH vs. TNCoME TAx OFFICER, INTERNATIONAL TAXATION6 which is again on intemational taxation and central circle, High court of Himachal pradesh in the case of GOVIND SINGH vs. INCOME TAX OFFICERT, Gujarat High Court in the case of MANSUKIIBIIAI '7zoz+1464 ITR 430 (Bom) '[Q024) 156 taxmann.com 478 (Gauhati)] ' 1Q024) 165 taxmann.com 1 1 5 (punjab & Haryana)l ' 12024) 167 taxmanir.com 41 I (Tetangana)l " 12024) 166 taxmam.com 679 (Bombay)l ? [2024) 165 taxmann.com l 13 (Himachal pradesh)] 4 DAITYABIIAI RADADIYA vs. INCOME TAX OFFICER' WARD 3(3X5)8, Jharkand High Court in the case of SIIYAM SUNDAR SAW vs. UNION OF INDIAe, Rajasthan High Court in the case ol- SHARDA DEVI CHHAJER vs' TNCOME TAX OFFICER & ANOTHER and batch of writ petitic'nsl0 which stooddecidedor lg.03.2O24.Similarviewshavealsobeentaken by the Division Bench of Calcutta High Court in lhe case ol GIRDHAR GOPAL DALMIA vs' UNION OF INDIA & ORS (M.A.T 1690 ot2023), decided ot25.09'2024'

6. Even though the same issue having been decided by a large numberofHighCourts,wearestillconfrontedwithlar;gefilingof identical nlatters on daily basis ranging between 5 to i 0 writ petitions. That upon the instructions being sought from the Department, they have been taking a solitary grour'd that the decision of the Bombay High Court in the case o1l Hexaware Technologies Ltd., (2 supra) as also the one which has been decided by this Court in the case of Kanakala Ravindra Reddy tzo2+ scc online Guj 4012 '2025 SCC Online Jhar287 'o 1zoz3 : RI-JD : 49 84-DBl n 5 (1 supra) has been subjected to challenge in a Special Leave Petition i.e., SLP No.3574 of 2024 before the Hon,ble Supreme Courl and the Hon'ble Supreme Court is seized of the matter. In addition, there are about 1200 SLps also filedarising out ofthe same issue being decided by various High Courts. 7 . To a query being put to the leamed counsel for the Revenue, they have categorically accepted the fact that there is no interim order granted by the Hon'ble Supreme Court in any of these matters pending before it. Meanwhile, fresh writ petitions of identical nature are being piled up before this Bench on daily basis and the pendency is getting increased on matter which otherwise has already been dealt and decided by this very High Court itself.

8. On the one hand, even though the order of this Court that was passed as early as on 14.09.2023 and more 16 months have lapsed, till date, we do not find any remedial steps having been taken by the Income Tax Department to take appropriate steps to either hold back issuance of notice under Section l48A and under Section 148 of the Act by the jurisdictional Assessing Officer, rather the authorities concemed in the teeth of series of decisions * ;&.*4a...&&;i&, 6 by alt the major High Courts in India are continuously still initiating ploceedings under Section 148,{ of the Acl and also initiating proceedings under Section 148 of the Act in contravention to the amendments brought into the Incotrte Tax Act pursuant to the Finance Lct,2020 as also the Finance L:t 2021' g. 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 Courl in the case of Kanukala Ravintlra Reddy (l supra)' learned Standing Counsel for the Income Tax Department contends that tl-rose would unnecessarily burden the Income Tax Department rvhere 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 lt was also the contr:ntion of the leamed Standing Counsel that no prejudice would be cirused to the interest ofthe 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 instructiorLs or to take l .1 7 appropriate steps in ensuring that proceedings under Section 14gA of the Act as also the assessment orders under Section l4g of the Act are kept in a hold in the light ofthe decisions dedcided by the various High Courts, it was submitted by the leamed Standing Counsel that the said steps can only be taken at the level of CBDT as any such steps would have to be taken pan India and cannot be limited to any of these jurisdictional High Courts.

10. As a result of which, what we are facing is steep increase of litigation day in and day out even though various orders have been passed by this High Court allowing writ petitions on the very same issue. The Income Tax authorities concemed are still even now in 2025 also initiating proceedings in contravention to the provisions of Section 151,4, of the Act and as a result by now, more than 600 to 700 petitions have been already got piled up before this High Court on an issue which otherwise stands squarely covered by the judgment of this Court in the case of Kanakala Ravindra Reddy (1 supra). What is also surprising is the fact that though while allowing the writ petitions in the case of Kanakala Ravindra Reddy (1 supra), the Division Bench while reserving the right of the Revenue, has also protected the. interest of the petitioners .1..,. ::, ;&&t X 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,2O2l. The petitioner assessee would be entitled to challenge or raise the other lega1 objections if the Revenue initiates fresh proceedings. The Department has made no en'Jeavour in avaiting the saicl liberty that was reserved for the Revetrue' On the contrary, they have been still sticking on to the stand' which this High Courl as well as many other High Courts already held to be bad. I1. It appears that because ofthe aforesaid liberty that this High Court had granted permitting the Revenue for init'iating fresh proceedings as a one-time measure in a faceless nranner' 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' Likr;wise' if the writ petition is kept pending for a considerable long period of time and hnally at a later stage if the Hon'ble supreme Corrrt conflrms the decision taken by this High Court as also by the other High Courts in which the SLPs are still pending, the I ncome Tax *; !I). i !*::!ltrr 9 Department would get the advantage of the liberty that is otherwise protected in favour of the Revenue for initiation of fresh proceedings from the disposal of these matters at a much later stage which wouid be advantageous and beneficial to the Revenue and would be equally disadvantageous and detrimental so far as interest of the assesses are concemed. As a consequence, the Income Tax Department gets an extended period of time for initiation of fiesh proceedings.

12. The alarming trend of docket explosion in this Court, despite the clear precedent set in Kanakala Ravindra Reddy (l supra), is a matter of grave concem. The Income Tax Department,s persistent initiation of fresh proceedings, disregarding the established judicial pronouncements, has led to an unprecedented surge in litigation with over 600-700 petitions piling up on the same issue. This deliberate approach not only undermines the principle ofjudicial precedent but also strains the judicial resources unnecessarily. The Department's strategy of awaiting the Supreme Court,s decision on pending SLPs while continuing to initiate fresh proceedings appears to be a calculated move to buy time and circumvent timitation periods, rather than adhering to the established legal i ,:, A 't 10 'position. Such conduct raises serious qdestions ibout the administrativeefficiencyandtherespectforjudicial pronouncements, particularly when this Courl has already provided a balanced approach by preserving both the Revenue's rights and assesses interests.

13.Anotheraspectwhichneedstobeconsideredisthatinfactit should have been realized by the Income Tax DepartmerLt itself and should have tbund out via media in ensuring that p'roceedings 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 of or' at least the lncome Tax Department should have found out some remedialStepstoensurethatwherevertheauthoritiesintendto initiate proceedings under Sections 148-4 and 148, other tban in a faceless manner, the proceedings should have bet:n deferred withoutprecipitatingthematterfurtherintimatingtheassesseethat they shall 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 alle to give a convincing reply, except for the fact that such a decision if at all /'1 l't has to be taken, has to be taken for the whole of India, and which otherwise has to be by way of a policy decision and that too at the level of Central Board of Direct Taxes. Though the leamed Standing Counsel for the Income Tax Department contended that the Delhi High Court dismissed a writ petition of similar nature, on the one hand when the High Cour.t is struggling .to reduce its pendency, such notices which are under challenge in this writ petition .are furcing the assessee to knock the doors of this High Court resulting in filing of htrndreds of new writ petitions which in the long run not only affects the disposal of the writ petitions but also consumes substantial time of the Bench in hearing these matters again and again on daily basis. Admittedly, in spite of the rnatter before the Hon'ble Supreme Court having been taken on rnany occasions, the Hon'ble Supreme Court which is seized of the matter has been reluctant in granting any interim protection to the Income Tax Department. Yet, the authorities concemed at the State level are not ready to accept the verdict passed by a majority of High Courts of different States on the same issue; and to make things further worse, the Income Tax Department is showing audacity by issuing notices continuously under Sections 148-4, and .i l48throughthejuiisdictionalAssessingofficerwherelrsitought to have been only in the faceless manner'

14. In the case of BANK OF INDIA vs' ASSISTANT COMMISSIONER, TNCOME TAXIr, on an issue whe:ther it was justihable on the part of the Income Tax Departm':nt in not following an order passed by the adjudicating authority rlnly on the ground that the appeals are pending, the Division Bench of the High Court of Bombay held at paragraph No'25 as undet', viz , : "25. Mr. Paridwalla has rightly drawn out attentiorL to the decision of this Court in Commissioner of lncome Tax v!;' Smt' Godavaridevi Sarafl2 as also the recent decision of the co- ordinate Bench of this Court in Samp Furniture (P) Ltd' l" lTO13 of which one of us (Justice G.S. Kulkarni) was a member, wherein the Court categorically observed that the Revenue havng 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 krose its binding force. Referring to the decision of the Supreme (lourt in Union of lndia vs. Kamlakshi Finance Gorporation Ltcl'l4, the Court observed that the approach of the officials of Re'rrlnue of treating decisions being "not acceptable" was criticized by the Supreme Court. ln such decision, following are the lelevant observations made by the Supreme Court. " 71z)zs1 170 taxrnann.com 422 (Bombay)l '' 119281 113 ITR 589 (Bombay) t' 12Oz+1165 taxrnann.com 581/300 Taxman 452 (Bombay) 'o 719921!almann.com 16155ELT 433 (SC) T t3 "6.Sri .Reddy is perhaps right in saying tfiat the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not lenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual malafides but with the fact that the officers, in reaching in their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, righfly criticized this conduct of the Assistant Collectors and the harassment to the assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. lt cannot be too vehemen y emphasized that it is of utmost importance that, in disposing of the quasijudicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellte Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunat is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline reqtire that the orders of the hlgher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not ,,acceplable', the department - in itself an objectionable phrase _ and is the subiect matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. lf this healthy 74 rule is not followed, the result will only be unduer harassment to assesses and chaos in adminiskation of tax laws.

12. we have dealt with this aspect at some length' because it has been suggested by thb learne(i Additional Solicitor General that the observations made by the High Court, have been harsh on th': officers. lt is clear that the observations of the Hig r 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 benelit to the Revenue. We lvould 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 lf e appellate authorities to the requirements of judir;ial discipline and the need for giving effect to the orde's of the higher appellate authorities which are bind'rrg on them."

15. What is worrying this Bench more is the llct 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 o1- High Courts all of whom have taken a consistent stand that the action of the Income Tax Department being violative oithe I i i i * ! I I I I I 15 Finance Act,2020 and Finance Act,202l. Now, in order to protect the interest of the Revenue as also that of the assessee, it would be trite at this juncture, if we dispose of the writ petition with an observation/direction that the disposal of the instant writ petition in terms of the judgment rendered by this High Court in the case of Kankanala Ravindru Reddy (l supra) shall however be subject to the outcome of the SLPs which were flrled by the Income Tax Department and which is pending consideration before the Hon,ble Supreme Court.

16. In the given facts and circumstances, this Bench is of the considered opinion that unless and until we do not timely dispose of matters which are squarely covered by the decision of this Court and which stands fortified by the decisions of the various other High Courts on the very same issue, the pendency of this High Court would further be burdened which otherwise can be decided and disposed of as a covered matter.

17. So far as the interest of the Revenue is concerned, we are of the considered opinion that the interest of the Revenue has already been considered and protected, as has been observed in paragraphs 76 36, 37 arld 38 of the order which, for ready reference' is reproduced hereunder:

36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respond'-'nt- 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-Department pursuant to the notices issued under Section 147 and 148 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 nullif ied automaticallY.

37. The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowerl on this very jurisdictional issue. Since the impugned no.:ices 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 r"'hich stands reseryed to be raised and contended tn an appropriate proceedings.

38. Since the Hon'ble Supreme Court had, in the case of Ashish Agarwal, supra, as a one-time measure exercising the powers under Article 142 of the Constitution of lndia, permitted the Revenue to proceed under the substituted provisions, and this Court allcwing the petitions only on the procedural flaw, the right I I i I i i i i I I I I i I ! i i I I I ! I I I I I I I I I I t7 conferred on the Revenue would remain reserved to proceed further if they so want from the stage of the order of the Supreme Court in the case of Ashish Agarwal, supra.

18. We would only further like to make observations that since we are inclined to dispose of the instant writ petition, conscious of the fact that the earlier order of this High court in the case of Kanakala Ravindra Reddy (l supra) is subjected to challenge before the Hon'ble Supreme Court in SLp No.3574 of 2024, preferred by the Income Tax Department, we make it clear that ( ( allowing of the instant writ petition is subject to outcome of the aforesaid SLP preferred by the Revenue against the decision ofthis High Court in the case of Kanakala Ravindra Reddy (1 srryra). This, in other words, would mean that either of the parties, if they so want, may move an appropriate petition seeking revival 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 stands allowed in favour of the assessee so far as the issue of jurisdiction is concemed. As. a consequence, the impugned notice under challenge under Sections 148-4 and 14g stands set aside/quashed. I : \ To 18 The consequential orders, if any, also stand set aside/rluashed in similar terms as have been passed by this High Court in the case of Kankanala Ravindra Reddy (l supra). There shall be tro order as to costs Consequently, miscellaneous petitions pending, if any, shall stand closed. sD/i<. Aqst$r BHAVANI SWAMY ANT REGISTRAR //TRUE COPY// i

1. OFFICER "$ECTION

1. The National Faceless Assessment Centre, tncomlax De,partment, New Delhi, lndia. 2- The lncome Tax Officer, ITO Ward 1, Nirmal, Adilabad, T,:langana. 3. The Assessment Unit, tVlinistry of Finance, Government of lndia, New Delhi. 4. One CC to SRI IM.NAGA DEEPAK, Advocate IOPUC] 5. One CC to IVs. J.SUNITHA (JUNIOR SC FOR INCOME 1',\X) Advocate loPUCl

6. One CC to SRI GADI PRAVEEN KUIVAR, DEPUTY SOL OITOR GENERAL OF lNDlA, Advocate (OPUC)

7. Two CD Copies SA GJ o t HES 1 o c) a- 1t itjt z * tl liP/\TC t HIGH COURT DATED:2410412025 ORDER WP.No.10714 of 2025 DISPOSING OF THE W.P WITHOUT COSTS. ,r{