Srinivas Gunaganti v. Assessment Unit, National Faceless Assessment Ce

Counsel for the Res pondent No.3: SRI GADI PRAVEEN KUMAR Deputy Solicitor General of lndia The Court made the following: ORDER v THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOUTTABLE SRI JUSTICE NARSING RAO NANDIKONDA Wlll'l' PETITION No.18156 OF 2025 ORDER: (per I lon'blc Sri .lustice Narsing Rao Nandikondu) Heard Mr. Thanneru Chaitanya Kumar, learned counsel tbr the petitioner and Ms. B.Sapna Reddy, learned Senior Standing Counsel lor the Income Tax Departrnent for respondent Nos.l & 2. l'erused the record.

2. This is a writ petition where the proceedings are either challenged to the notices which were issued under Section l48A and 148 of lhe Incorne Tax Act, 19f I (for shgft.:the Act') or the assessnlent orders those l-rave been passed uuder Section 147 ol' the Act which have been assailed. i. 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 1 olthe arnendment that was brought to the Income Tax Act by way o1- Finance Act, 2021 w.e.L, 0 [ .04.2021 onwards, proceedings :t { I 2 under Section 148A of the Act as also under Section 148 of the Act ought to l-ave also been issued and proceeded irt a faceless manner.

4. The corrtention of the petitioner is thht the issue of proceedings bt:ing in violation of the Finance Act, 202 I i.e., the irnpugned noti,les under Section l48A and Section 148 of the Act not being issued in a faceless manner, have already bccn dealt with and decided bi, this Court in the case ol KA\KANALA RAVINDRA REDDY vs. INCOME-TAX OFFICI.]RT decided on 14.09.2023 whereby a batch ol writ petitions were allowed and the proceedings initiated under Section l48A 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 of Section 15lA of the Act read with Notification 1812022 dated29.03.2022. The said judgment passcd by this Court has also been subsequently followed in a large ntrmber of writ petitions which were allowed on similar terms. '[(.2023) I 56 laxrnann.com 178 (Telangana)] .1 I J

5. Dorvn the linc, we find tl.rat the same issue has also been decided against the Revenue by vanous High Courts i.e., by the Bombay High Courr in the case of HEXAWARE 'IIiCIINOLOGIES LTD.. r's. ASSISTANT COMMISSIONBR OF INCOME TAX & OTHERS2, Gauhati High Court in the case of RAM NARAYAN SAH vs. UNION OF INDIAT, Punjab and Ilaryana tligh 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 international taxation, Bonibay High Coufl in the case of ABHIN ANTLKUMAR SHAII vs. INCOME TAX OFFICER, INTBRNATIONAL TAXATION6 which is again on international taxation and central circte, High Court of Himachal Pradesh in the case ol GOVIND SINGH vs. INCOME TAX OFFICERT, Cujarat I{igh Court in the case of MANSUKIIBHAI 'zTzoz+1464 ITR 430 (Bom) 'l(2024) 156 taxmann.com 478 (Gauhati)l It(2024) 165 taxmann.corn I l5 (Punjab & Haryana)l '12024) 167 taxmann.corn 4l I (Telangana)l " [2024) 166 taxmann.corn 679 (Borrrbay)] '[2024) 165 taxmann.com 113 (I{imachal Pradesh)] 4 DAHYABHAI RADADIYA vs. INCOME TAX OFFICER, WARD 3(3)(i;)8, Jharkand High Court in the case of SHYAM SUNDAR SA'vV vs. UNION OF INDIAe, Rajasthan I tigh Court in the case ol SHARDA DEVI CHHAJER vs. INCOME TAX OFFICtrR & ANOTHER and batch of rvrit pelii onsr0 rvhich stood decicled on 19.03.2024. Sirnilar viervs have also been taken bi, the Dir.'isi:n Bench of Calcutta l{igh Court in thc case of (;IRDHAII COPAL DALMIA vs. UNION OF INDIA & ORS (M.A.T 1690 of 2023), decided on25.09.2024.

6. Even though the same issue having been decicled by a large number of I{i11h Courts, we are still confronted with Iarge filing ol identical matlers on daily basis ranging between -5 to l0 r,rit petitions. Thrrt upon the instructions being sought lrorn the Departmenl, ,hey have been taking a solitary ground that the clecision ol t rc Bombay l{igh Court in the casc ol llexav'tre Technologies Ltd., (2 supra) as also the one wlich has been decided by tlLis Court in the case of Kanokala Rovindra Reddy 8z0z+ scc onLine Guj 4012 '!2025 SCC C)nl-ine Jhar287 t'\ 12023 : RJ -.ID :4984-DBl 5 (l supra) has been subjected to challenge in a Special Leave Petition i.e., SLP No.3574 of 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 of the same issue being decided by various High Courls. l. To a query being put to the learned counsel for the Revenue, they have categorically accepted the t-act that there is no interim order granted by the Hon'ble Supreme Court in any of these matters pending bcfbre it. Meanwhile, Ii'esh writ petitions of identical nature are being pilcd 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 older of this Court that was passed as early as on 14.09.2023 and rnore 16 months have lapsed, tilt date, we do not flnd any remedial steps having been taken by the Income Tax Department to take appropriate steps to either hold back issuance of notice under Section 148,{ and under Section 148 of the Act by the jurisdictional Assessing Offrcer, rather the authorities concemed in the teeth of series of decisions L I 6 by all the rrajor High Courts in India are continuously still initiating pro<'eedings under Section l48A of the i\ct and also initiating prt,ceedings under Section 148 of ihe Act in contravention to the amendrnents brought into the lncome Tax Act pursuant to tht: Irinance Act,2020 as also the Finance .\ct 2021.

9. Upon a query being put as to why can't this writ petition be disposed of ir the teeth of the decision rendered b1, this Court in tlre case ol' Ktnakola Ravindra Reddy {l supra), Iearned Standing Counscl lirl the lncome Tax Departrnent contends that. tl-rose would unnecessalily burden the Income Tax Department where they ri ould be letluired to file equal number of SLI''s before the [{on'ble Supreme Court and it would be lurther burdening the cxchequer ol .l're Union of India. It was also the contention of the leamed Stand ng Counsel that no prejudice would be caused to the interest of the petitioners in case if this writ petition is kept pcnding titt the finalrzation of the SLPs pending before the Hon'ble Suprenre Courl and the fact that the petitioner is already enjoying the benefit of interim protection. Nonetheless, on the earlier query olthis Court rrs to why the Income Tax Department lrave not come .- out with a m<:chanism to issue appropriate instructi,tns or to take 7 appropriate steps in ensuring that proceedings under Section l48A olthe 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 Coufts, it was subrnitted by the learned Standing Counsel that the said steps can only be taken at the level ofCBDT as any such steps would have to be taken Pan India and cannot be limited to any of these jurisdictional High Courls

10. As a result ol 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 Courl allowing writ petitions on the very same issue. The Income Tax authorities concemed are still even now in 2025 also initiating proceedings in conlravention to the provisions of Section l51A of the Act and as a result by now, more than 600 to 700 petitions have been alrcady got piled up betbre this High Couft on an issue which otherwise stands squarely covered by the judgment of this Court in the case of Kanakala Ravindra Reddy ( I supra). What is also surprising is the fact that though while allowing the writ petitions in the case of Kanakala Ravindra Reddy (l supra), the Division Bench while resewing the right of the Revenue, has also protected the interest of the petitioners T I 8 insofar as thr: liberty which was granted to the Revenue for initiating fresh proceedings strictly in accordance u'ith the amended provisions of the Act, as amended by the Finance Act. 2020 and thc Finance Act.2021. The petitioner assessee would be entitled to challenge or ririse the other legal objections if the Rer',:nue initiatcs fresh procccd ngs. The Department has made no endeavour iu availing thc saici liberty that rvas reserved for the Rercnue. On thc corltrary, they have been still sticking on to the stand, rvhich this tligh Court as rvell as many other High Courts already held to be bad. I I . It appears that because of the aforesaid tibeny that this High Court had gr anted permitting the Revenue lor initiating lresh proceedings rts a one-time measure in a faceless tnanner, the Incorne 'l'rx I)cpaftment wants to take advantage oI the same by protractingt thr:sc proceedings which would enable thr:m to meet the linritation tl-rat r'vould otherwise come in the wav. Likew.ise. if the rvrit petitior.r is kept pending for a considerable long period of time and finalll at a later stage if the Hon'ble Supreme (lourt confirms the decision taken by this High Court as also by tne other High Courts in rvhich the SLPs are stitl pending, the Income Tax 9 Department would get the advantage of the libefty that is otherwise protected in favour of the Revenue for initiation of fresh proceedings from the disposal olthese matters at a much later stage rvhich would be advantageous and benel-rcial to the Revenue and would be equally disadvantageous and detrimental so far as interest ol the assesses are concemed. As a consequence, the Income Tax Depaftment gets an extended period of tirne fbr initiation of fresh proceedings,

12. The alarming trend of docket explosion in this Cour1, despite thc clear precedent sel in Kanokola Rtvindra Reddy (l supra), is a matter of grave concem. The Income Tax Department's persistent initiation of liesh proceedings, disregarding the established judicial pronouncements, has led to an unprecedented surge in litigation rvith over 600-700 petitions piting up on the same issue. This deliberatc approach not only undermines the principle of j udicial precedent but also strains thejudicial resources unnecessarily. The Dcpaftment's strategy of awaiting the Supreme Cour-t'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 :di dJ 10 position. Sucir conduct raises serious questions about thc administrative elficiency and the respect lor judicial pronouncenren ts. particularly when this Couft has already provicled a balanced approach by preserwing both the Revenue's rights and assesses lntere its. 1-i. Another aspect which needs to be considered is that in fact it should have bi en realizcd by the Income Tax Departnrent itself and should have lbr-rnd out via media in ensuring that proceedings under Section:; 148-A and 148 should not have beert issued irr a faceless mann()l', at least till the Hon'bte Supreme Cotrrt decide the trvelve hundred (1200) odd SLPs which it is already seized ofor, at least the [nconre Tax Department should have found out sorne remedial stepri to ensure that wherever the authorities intend to initiate proccedings under Sections 148-A and 148, other than in a faceless l1l:ilnr)cr, thc proceedir-rgs should have t,een deferrcd r'r'ithotrt prc'cip itating the matter further intimating t1x: assL-ssee tltrt they shall initiate appropriate proceedings only after the SLP's are decided b1, the Hon'ble Supreme Couft on the verl' same 1SS u C. This again. tht, lncome Tax Departrnent, has not been able to give a convincing reltly, except for the fact that such a decision 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 ola policy decision and that too at the level of Central Board of Direct Taxes. Though the leamcd Standing Cor.rnsel for the Income Tax Deparlment contended that the Delhi High Court dismissed a writ petition of similar nature, ol1 the one hand when the High Court is struggling to reduce its pcndcncy, sr-rch notices which are undcr challenge in this u,rit petition are tbrcing the assessee to knock Lhe doors of this High Courl resulting in filing of hundreds of new writ petitions which in tlre long run not only alfects the disposal ol 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 belore 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 Irrcome Tax Departrnent. Yet, the authorities concerned at thc Statc 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 audqcity by issuing notices continuously under Sections 148-A and 72 148 through the jurisdictional Assessing Officer whi:reas it ought to have been o'rly in the faceless manner.

14. In thc case ol' IIANK OF INDIA vs. {SSISTAN'I COMMISSTC'NER. INCOME TAXIT. on an issue vrhether it rvas justifiable on the part of the Income Tax Department in not follorving an order passed by the adjudicating authoril.'r' only on thc ground that tlre appeals are pending, the Division []ench of the High Court of Bornbay held at paragraph No.25 as uncier, viz., : "25. Mr. Paridwalla has rightly drawn out attenticn to the decision oi this Court in Commissioner of lncome Tax vs. Smt. Godavariclevi Saraf'2 as also the recent decision of the co- ordinate B,:nch of this Court in Samp Furniture (P) Ltd. v. lTO13 of which orre 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 me.rn 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 ndia vs. Kamlakshi Finance Corporation |.td.14, the Court obs,-'rved that the approach of the officials of Revenue of treating d()cisions being "not acceptable" was criticiz:d by the Supreme Court. ln such decision, following are the relevant observations made by the Supreme Court. KZOZS) 170 raxmann.corn 422 (Bornbay)l t' '' 1t9za1 113 I tR 589 (Bombal ) " 120241 165 taxmann.corn 581 300 Taxman 452 (Bombay) llggZltaxmirnn.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 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 hvo 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 cnticized 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 rssues 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 judacial discipline require that the orders of the higher appellate authorities should be followed 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 7 ^14 rule is not followed, the result will only be undue harassment to assesses and chaos in administration of tax laws. 12 \Ne have dealt with this aspect at some length, becaLrse it has been suggested by the learned 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 apparently unpalatable to the Revenue, are only intended to c,:rb a tendency in revenue matters which, if allowed to becorne widespread, could result in considerable harassment to the assesses-publjc without any benefit to the Revenue. We would like to say that the department should take these observations in the properr 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 appe late authorities to the requirements of judicial discipline and the need for giving effect to the orders of th': higher appeltate authorities which are binding on tllem."

15. What ir; worrying this Bench more is the fact that an endeavour is t.eing made whole hearteclly to ensure not to generatc further litigati,)n on issues which have been laid to rcst by a large number of lJigh Courts all of whom l-rave taken a consislent stand that the action of the Income Tax Department being violative of thc ,{ ' -2. 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 bc trite at this juncture, if we dispose of the writ petition with an observation/dircction that the disposal of the instant writ petition in ternls of the judgment rendered by this High Courl in the case of Kunkunala Ravindra Reddy (l supra) shall however be subject to the outcome o[ the SLPs which were filed b), the Income Tax Depaflrnent and which is pending consideration before the Hon'ble Supren-re Court.

16. In thc given facts and circumstances, this Bench is of thc considered opinion that unless and until we do not timely dispose of matters which are squarely covered by the decision of this Court and rvhich stands fortil-red by the decisions of the various other High Courrs on the very same issue, the pendency of this High Court would lurther be burdened which otherwise can be decided and disposed o['as 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 a 16 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- Depz rtment is neither tenable, nor sustai.rable. The rotices so issued and the procedure adoptecl being per:;e illegal, deserves to be and are accordingly set asid€/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 alsc get quashed and it is ordered accordingly. The reason we are c uashing the consequential order is on the prir"ciples that when the initiation of the proceedings itself was procr:durally wrong, lhe subsequent orders also gets nullif ed automatically.

37. The.preliminary objection raised by the petitioner is suslained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned rotices 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 appr )priate proceedings. ,, - .- --.--.of

38. Since the Hon'ble Supreme Court had, in the case .As;hish.. .Agarwal,.-.suprat --.as. a .one-time - rneasure exeroising 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 ..t t { ^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 fufther like to make obsewations that since we are inclined to dispose of the instant writ petition, conscious of the lact that the earliel order ol this High Court in the case of Kanukqla Ruvindru Rcddy (I supra) is sub.jected to challenge before the Hon'ble Suprerne Court in SLP No.3574 ol 2024, prelerred by the lncome Tax Dcpartment, 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 of this I'ligh Courl in the case of Konaksla Rovindru Rcddy (l supra). This, in other words, r.vould mean that either o[ the parties, if they so want, may move ar-r approprilte 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-A and 148 stands set aside/quashed. \ 18 The consequential orders, if any, also stand set asicle/quashed in similar terms ts have been passed by this High Court in the case ol Kankanala Ravindra Reddy (l supra). There shal l;e no order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed. ,TRUE COPY// ,-, sbI. L. VIJAYA LAXMI ,/ {spr3\arur REGTgIB.aR---I--"{ \\ CTION OFFICER

1. Assessment Unit, National Faceless Assessment Cer\tri Department, Ministry of Finance, Room No. 401, 2nd Fl6 Jawaharlal Nlehru Stadium, Delhi - 1 10 003. , lncome Tax or, E-Ramp,

2. The lncome Tax Officer, Ward 1, Nalgonda/ lncome Tax Office, Near Rail, Under Bridg,:, Nalgonda, Telangana 001

3. The Secretary Ministry of Finance North Block, Union of lndia, New Delhi-1 '10 4. One CC to :lri Thanneru Chaitanya Kumar, Advocate [OPUC] 5. One CC to tt4s. B. Sapna Reddy, Senior SC for lncomr: Tax DepartmentlOPUCl

6. One CC to i;ri Gadi Praveen Kumar, Deputy Soiicitor General of lndia To, TJ GJP loPUCl

7. Two CD Colries 2/ HIGH COURT DATED:2710612025 ORDER WP.No.1815t; of 2025 ,. 17 !['t 2025 ,4. .(i.) ALLOWING'I-HE WRIT PETITION WITHOUT CI)STS / // l0 .) \_ I