f\iladhuri Kottam v. Union of lndia

Counsel for the Respondent Nos.2 and 3: MS. B. SAPNA FlEDDy, SENIOR SC FOR INCOME TAX EIEPARTMENT The Court made the following: ORDER THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA WRIT PETITION No.I6130 of 2025 ORDER; (per llon'ble Sri Justice Narsing Roo Nandiko1da) Heard Mr. M.V.Anil Kumar, leamed counsel for the petitioner and Ms. B.Sapna Reddy, leamed Senior Standing Counsel for the lncome Tax Department for the respondents. Perused the record.

2. 'l'his is a writ petition where the proceedings are either challenged to the notices which were issued under Section 148A 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 1484. of the Act and the subsequent initiation of proceedings under Section 148 of the Act by the jurisdictional Assessing Officer, whereas in terms of the Jlnendment that was brought to the Income Tax Act by way of Finance Act, 2021 w.e.f., 01.04.2021 onwards, proceedings 2 under Soction 1484 of the Act as also under Section l4g o1-the Act ougrt to have also been issued and proceeded in a faceless manner.

4. Tte contention of the pctitioner is that the issue of proceedi.rgs be ing in violation ol the Finance Acr, 202 I i.e., the impugne,l notices under Section l48A and Sectior 1 4g of the Act not beinE issued in a faceless manner, have ah.eady been dealt with and dec ded by this Court in the case of K,\NKAN,ILA RAVINI)RA REDDY vs. INCOME-TAX OI.FtftERI decided on 14.09.2023 whereby a batch of writ petitions w,rrc allowed and the proceedings initiated under Section l4gA as alsr under Section 148 of thr: Act were held to be bad with consequential r.eliefs o. the ground of it being in violation of the provisions of S,cction l5lA of the Act rrad with Notificarion l8l2\22 dared 29.03.2022. l.he said judgment passcd by this Court has also been subscqLrently followed in a large number of writ petitions which were allorved on similar terms. '[(2023) I :i6 t2*,ru,,n."orn 178 (Tclangana)] f I' 3

5. Down the line, we find that the same issue has also been decided against the Revenue by vanous High Courts i.e., by the Bombay High Court in the case of HEXAWARE TECHNOLOGIES LTD., vs. ASSISTANT COMMISSIONER OF INCOME TAX & OTHERS2, Gauhati High Court in the case of RAM NARAYAN SAH vs. UNION OF INDIA3, Punjab and Haryana High Court 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 intemational taxation, Bombay High Court in the case of ABHIN ANILKUMAR SHAH vs. INCOME 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 Courl in the case of MANSUKIIBHAI ' Tzoz+1464 ITR 430 (Bom) 'l(2024) 156 taxmann.com 478 (Gauhati)l " [(2024) 165 taxmann.com 115 (Punjab & I-laryana)] ' 12024) 167 taxrna-nn.com 4 I I (Telangana)l " [2024) 166 faxqann.com 679 (Bombay)] ' [2024) 165 taxrnann.com 1 13 (Hirnachal Pradesh)] 4 DAIIYI.BHAI RADADIYA vs. INCOME T,\X OFFICF,R, WARD 3(3X5)8, Jharkand High Court in rhe ciLse of SHyAM SUNDAR SAW vs. UNION OF tNDIAe, Rajasthtn High Courr in the case of SHARDA DBVI CHHAJER vs. INCOME TAX OFFICIIR & AIIIOTHER and batch of u,rit petitionsr0 which stood de:ided on 19.03.2024. Similar views have also been takcn by the I)ivision Bench of Calcutta High Court in the case of GIRDH,\R GOPAL DALMIA vs. UNION OF TNDIA & ORS (M.A.T 1690 of 2023), decided on25.09.2024.

6. Even though the same issue having been der:ided by a large number r,f High Courts, we are still confronted with large filing of identical matters on daily basis ranging between 5 to 10 writ petitions. That upon the instructions being sought from the Departmr:nt, they have been taking a solitary p,round that the decision of the Bombay High Court in the casr: of Ilexaware Technolc,gies Ltd., (2 supra) as also the one r^,hich has been decided lry this Court in the case of Kanakala Ravinclra Retldy t2\2q SCC online Gu.i 4012 '2025 SC(l Onlinc Jhar 28'7 'o 72023, R J-JD :49 84-DBl 5 (l supra) has been subjected to challenge in a Special Leave Petition i.e., SLP No.3574 ol 2024 before the Hon'ble Supreme Court and the Hon'ble Supreme Court is seized of the matter. In addition, there are about 1200 SLPs also filed arising 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, lresh 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 Departrnent 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 concerned in the teeth of series of decisions 6 by all the major High courls in India are c.nti,uousrv stilr initiatin3 proceedings under Section 14gA ol tre Act anrl also initiatinr3 proceedings under Section l4g (,1. the Act in contravr'ntion to the a,rendrnents brought into thc Ircor,e'r-ax Act pursuanr to the Finance AcL.2020 as also the Irinarce Act 2021

9. Uton a query being put as to why can,t thi: rvrit petition be disposed o1- in the teetrr of the decision rendered rrr this court in thc case of Ksntkala Ravintlra Rcdd-y (l supra), icarned Standing Counsel lor the Income Tax Department contends hat those would umecessarily burden the Income Tax Departm,:nt u,here they *,ould be required to file equal number ol S.lrs belbre the Hon'ble Supreme Court and it would be hrrther burdening the exchequer of the union of India. It was also the c rntention of the leamed Standing Counsel that no prejudice would lre caused to the interest olthe petitioners in case if this writ petition is kept pending till the l-rnalization of the SLps pending befbrc the Ilon,ble Supreme Court and the fact that the petitioner is a ready enjoying the benefit of interim protection. Nonetheless, on tlte earlier query of this Court as to why the Income Tax Department have not come out with rt mechanism to issue approBrial, ..,ctio6s or to take 7 appropriate steps in ensuring that proceedings under Section l48A of the Act as also the assessment orders under Section 148 of the Act are kept in a hold in the light ofthe decisions dedcided by the various High Courts, it was submitted by the learned 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 lacing is steep increase of Iitigation day in and day out even though various orders have been passed by this High Court allowing writ petitions on the very same tssue The Income Tax authorities concemed are still even now in 2025 also initiating proceedings in contravention to the provisions of Section 151A 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 (l supra). What is also surprising is the fact that though while allowing the writ petitions in the case of Kanakula Ravindra Reddy (l supra), the Division Bench while reserving the right of the Revenue, has also protected the interest of the petitioners 8 insofar as tl.re liberty which was granted to rhe Revenue for initiatin,3 fi'esh proceedings strictly in accordance rvith the amended provisions ol the Act, as amended by the Finance Act, 2020 and the Fi,ance Act,2021. The petitioner assessee wo rl<J be entitled to challenge or raise the other legal objections if trre I{eventre initiares lresh prtceedings. The Department has made rLo endeavour in availing the said liberty that was reserved for the F-evenue. On the contrary. they have been still sticking on to the s:and, rvhich this High Court as well as rnany other.High Courts alr.eacl), held to be I l. lt rtppears that because of the aloresaid libeny that this High Court hz.d granted permitting the Revenue for initiating lresh proceedings as a one-time measure in a facele;s manner. the Income 1'ax Department wants to take advantage of the same by protractirg these proceedings which would enable tllem to meet the limitation that would otherwise come in the way. t_ikeu.ise, if the writ petition is kept pending for a considerable lonp, period of time and finally at a later stage if the Hon,ble Supreme Court confirms the decision taken by this High Couft as also by the other tligh Courts in u,hich the SLps are still pending, rh,: Income Tax 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 would 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 Depaftment gets an extended peiiod of time for initiation of fresh proceedings.

12. The alaming trend of docket explosion in this Cour1, despite the clear precedent set in Kanakala Rsvindra Redtly (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 of judicial precedent but aiso 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 limitation periods, rather than adhering to the established legal \ 10 position. Such conduct raises serious questions about the adminis trative efficiency and the respect for judicial pronouncements, particularly when this Court has already provided a balanc ed approach by preserving both the Rev,,nue,s rights and assesses rnterests.

13. Atother aspect r.r,hich needs to be consideretl is that in fact it should have been realized by the Income Tax Departmenl. itself and should have found out via media in ensuring that proceedings under Sr:ctions 148-.4 and 148 should not have t,een issued in a faceless nanner, at least till the Hon,ble Supreme (lour1 decide the twelve hrrndred (1200) odd SLps which it is alread., seized of or, at least the Income Tax Department should have lbund out some remedial steps to ensure that wherever the authr rities intend to initiate p'oceedings under Sections l4g-A and l4g other than in a faceless manner, the proceedings should have been deferred without precipitating the matter further intimating tre assessee that they shall initiate appropriate proceedings only after the SLp,s are decided try the Hon'ble Supreme Couft on the vr,ry same issue. This again, the Income Tax Department, has not been able to give a convincing reply, except for the fact that such a dt:cision if at all 1L 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 Dethi High Court dismissed a writ petition of similar nature, on the one hand when the High Court is struggling to reduce its pendency, such notices which are under challenge in this writ petition are forcing the assessee to knock the doors of this High Couft resulting in filing of hundreds 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 mattel before the Hon'ble Supreme Courl having been taken on many 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 er worse, the Income Tax Department IS showing audacity by issuing notices continuously under Sections 148-A and L2 148 through the jurisdictional Assessing Officer whereas it ought to have been only in the faceless manner.

14. [n the case of BANK OF INDIA vs. ASSISTANT COMMISSIONER, INCOME TAXrr, on an issue rvherher it was justifiab e on the part of the Income Tax Department in not following an order passed by the adjudicating auth trity only on the ground that the appeals are pending, the Divisicn Bench of the High Co rrt of Bombay held at paragraph No.25 as under, viz., : "25. tVlr. Paridwalla has righfly drawn out attention to the deci;ion of this Court in Commissioner of lncome r-ax vs. Smt. Godavaridevi Sarafl2 as also the recent decisiorr of the co_ ordinate Bench of this Court in Samp Furniture (p) :td. v. lTOr3 of which one of us (Justice G.S. Kulkarni) was a member, wherein the lourt categorically observed that the Revenue having not "acc,:pted" the judgment of the High Court would not nean that till the same is set aside in a manner known to law, it wc,uld loose its binding force. Referring to the decision of the Supre,me Court in Unicn of lndia vs. Kamlakshi Finance Corporation Ltd.11, the Court observed that the approach of the officials of Revenue of treat ng decisions being "not acceptable" was critic ized by the Supreme Court. ln such decision, following are :he relevant observations made by the Supreme Court. ]] ttZOzS; 170 taxmann.com 422 (Bombay)l t2 1tez81 i t3 trR 589 (Bombay) " 7202+1165 taxmann.com 581/300 Taxman 452 (Bombal) 'o leOZl taxmann.com 16/55 ELT 433 (SC) 13 "6. Sri Reddy is perhaps right in saying that 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 tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks rs 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, rightly 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 vehemently 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 Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be foltowed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject 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 I L4 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 earned Additional Solicitor General that the observations made by the High Court, have been harsh on the officers. lt is clear that the observations of the High Court, seemingly vehement, and apparen y unpalatable lo the Revenue, are only intended lo curb a tendency in revenue matters which, if allo,ryed to become widespread, could result in consiclerable harassment to the assesses-public without any benefit to the Revenue. We would like to say fl-at 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 . udicial discipline and the need for giving effect to the orders of the higher appellate authorities which are L,inding on them."

15. What is worrying this Bench more is the facl that an endeavour is being made whole heartedty to ensure not to generate fuither liligation 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 aotion of the lncome Tax Department being violattve of the 15 Finance Act,2020 and Finance Act,2021 . 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 Ravindra Reddy (l supra) shall however be subject to the outcome of the SLPs which were filed 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 squarcly 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 ofas a covered matter. 17 . So far as the interest of the Revenue is concemed, we are of the considered opinion that the interest of the Revenue has already been considered and protected, as has been observed in paragraphs 16 36,37 atd,38 ofthe order which, for ready reference, is reproduced hereundr:r:

36. For all the aforesaid reasons, the impugnr:d notices issued and the proceedings drawn by the relpondent- Department is neither tenable, nor sustainable. The notices so issued and the procedure adotted being per se illegal, deserves to be and are accorJlngly set aside/quashed. As a consequence, all the mpugned orders getting quashed, the consequential orde-s passed by the respondent-Department pursuant to the notices issued under Section 147 and 148 would rlso get quashed and it is ordered accordingly. The Toason we are quashing the consequential order is on the principles that when the initiation of the proceedings tself was procedurally wrong, the subsequent orders rlso gets nullified automatically.

37. The preliminary objection raised by the pe titioner is sustained and all these writ petitions stands a lowed 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 fu(her and decide the other issues raised by the petitior er which stands reserved to be raised and contendod in an appropriate proceedings.

38. Since the Hon'ble Supreme Court had, in the case of Ashish Agarwal, supra, as a onetime measure exercrsing the powers under Article 142 of the Constitution of lndia, permitted the Revenue tc proceed under the substituted provisions, and this Coud allowing the petitions only on the procedural flaw, the right L7 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 ofAshish 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 Courl in the case of Kanakala Ravindrt 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 ol Kanakuls Ravindra Reddy (l supra). 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 concerned. As a consequence, the impugned notice under challenge under Sections 148-4 and 148 stands set aside/quashed. ( { 18 The corrsequential orders, if any, also stand set aside/quashed in similar lenns as have been passed by this High Courl in the case of Kankanala Ravintlra Redtly (.1 supra). There shalt be no order as to costs. C :nsequently, miscellaneous petitions pending, if any, shall stand ckrsed. //TRUE COPY// SD/- AHIVIED ABDULLA KHAN NT REGISTRAR AS '\T: To, I SECTION OFFICER t. J.

4. Union of lndia, Itr'linistry of Finance, lncome Tax Depar.ment, New Delhi - 100 01'l The Office of Commissioner, lncome Tax Department, lr,4inistry of Finance, Governrrent of lndia, New Delhi - '100 011. Ihe Office of Principal Commissioner, lncome Tax Deltartment, Hyderabad - lqnge 1, Aayakar Bhavan, Basheerbagh, Hyderabad . 500 004. Office of the lncome Tax Officer, Ward I 2(1 i, Hyderabad lncome Tax Departmr:nt Office, 2nd floor, Aayakar Bhavan, Bashe,;rbagh, Hyderabad - 500 004. 5. The Natkrnal Faceless Assessment Center, Income T:Lx Depadment, t\/inistry 6. One CC 1o Sri IVl. V. Anil Kumar, Advocate [OPUC] 7. One CC 1o Sri Gadi Praveen Kumar, Deputy Solicitbr 3eneral of lndia 8. One CC 1o Ms. B. Sapna Reddy, Senior SC for lncome: Tax 9. Two CD (lopies TJ GJP of Finance, Government of lndia, New Delhi - 100 011 Departm<:nt[OPUC] toPUCl 1 / HIGH COI.'RT DATED:1 310612025 ORDER WP.No.16130 of 2025 t l€ qj: 'l ,... o( \ I i ,/ ALLOWING THE WRIT PETITION WITHOUTCOSTS fl+- 3o 6,2\