Kapil Consultancy Services pvt_ Ltd v. The National Faceless Assessment Center

THE HONOURABLE SRIJUSTICE P.SAM KOSHY AND THE HONOURABLE SRIJUSTICE NARSING RAO NANDIKONDA WRIT PETIT ION No. 19583 of2025 ORDER (per [bn'ble Sri.lustice Narsing Rao Nundikonr]a) Heard Mr. Kailash Nath p.S.S., leamed counsel for the petitioner and Ms. J. Sunitha, learned Senior Standing Counsel for the Income Tax Department appearing for the respondents. Perused the lecord

2. This is a writ petition where the proceedings are either challenged to the notices which were issued under Section I4gA and 148 of the Income l-ax Acr, l96l (for short ,the Act,) or the assessment orders those have been passed under. Section 147 of the Act r.r.,hich 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 14g of the Act by the jurisdictional Assessing Off-rcer, whereas in terms of the arnendment that was brought to the lncome Tax Act by way of F'inance Act, 2021 w.e.f., 0l .04-2OZl onwards, proceedings '! 2 under Section l48A 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 Scction l48A and Section 148 of the Act not being issued in a faceless manner, have already been dealt with and decided by this Court in the case of KANKANALA RAVINDRA RBDDY vs. INCOME-TAX OFFICERT decided on 14.09.2023 whereby a batch o1-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 ofthe pLovisions ofsection 151A of theActreadwithNotificationl8l2o22dated29.03.2022.Thesaid judgment passed by this Court has also been subsequently followed in a large number of writ petitions which were allowed on similar terms. 'tQO23) [56 taxmann.coni 178 (lelangana)l 1 3

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 Courr in rhe case of HEXAWARE TECHNOLOGIES LTD., vs. ASSISTANT COMMISSIONER OF INCOME TAX & OTHERS2, Gauhari High Courl in the case of RAM NARAYAN SAH vs. UNION OF INDIAT, punjab and Haryana High Court in the case oIJATINDER SINGH BANGU vs. UNION OF INDIA4, and Telangana l{igh Courl 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 ABHIN ANILKUMAR SHAH vs. INCOIVIE TAx OFFICER, INTERNATIONAL TAXATION('which is again on inremational taxation and central circle, High Court of Himachal pradesh in the case of GOVIND SINCII vs. INCOME TAX OFFICERT, Gujarat High Courr in the case of MANSUKHBHAI ' Tzoz+1464 ITR 430 (uom) ' [(2024) 156 taxmann.com 478 (Gauhari)] ^ [(2024) 165 taxmann.com t I5 (punjab & Ilaryana)] '[2024) 167 ta;irnan-tr. corn 4l I (Telangana)l " 12024) 166 taxmann.com 679 (Bombay)l 'L2024) 165 taxmann.com I l3 (Himachal pradesh)l 4 INCOME TAX OFFTCER' Court in the case of SHYAM NDlA". Rajasthan High Court in HHAJER vs' INCOME TAX 'o which DAHYABHAI RADADIYA VS. WARD 3(3X5)8, Jharkand High SUNDAR SAW vs' UNION OF I the case of SHARDA DEVI C OFFICER & ANOTHER and stood gecided on i9'03-2024 Similar views have also been taken by the Division Bench of Catcutta High Court in the case of GIRDHAR GOPAL DALMIA vs' UNION OF INDIA & ORS (M.A.T 1690 of 2023)' decided on 25'09'2024' batch of writ Petttrons been decided bY a large Even though the same issue having 6 number of High Courts' rve are still contionted with large filing of identical matters on daily basis ranging bet\&'een 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 tligh crourl in rhe case ol Hexaware Technologies Lld'' (2 supra) as also the one which has been decided by this Court in the case ol Knnuktrla Ravindrt Redtly tzoz4 scc online Guj 4ol2 ,2025 SCC Online .lhar 287 '012023, RJ-JD:4984-DBl 'l 5 (1 supra) has been subjected to challenge in a Special Leave Petition i.e., SLP No.3574 of 2024 belore the Hon'ble Supreme Couft and the Hon'bte Supreme Court is seized of the matter' In addition, there are about 1200 SLPs atso fited arising out of the same issue being decided by various High Courts'

7. To a query being put to the learned counsel for the Revenue' they have categorically accepted the fact that there is no interim order granted by the [Jon'ble Supreme Court in any of these matters pending before it' Meanwhile' fiesh writ petitions of identical nature are being piled up beforc 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, evcn though the order of this Court that was passed as early as on 14'09'2023 and more 16 months have tapsed, till date, we do not find any remedial steps having been taken by the Income 'I'ax Deparlment to take appropriate steps to either hold back issuance ol notice under Section 148,{ and under Sectionl48oftheActbythejurisdictionalAssessingofficer, rather the authorities conceme d in the teeth of series of decisions l .i 6 by all the major High Courts in lndia are continuously still initiating proceedings under Section l48A of the Act and also initiating proceedings under Section 148 of the Act in contravention to the amendments brought into the lncome Tax Act pursuant to the Finance Act,2020 as also the F inance Act 202 I ' 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 Court in the case of Kanukala Ravindra Reddy (l supra), leamed Standing Counsel for the Income lax Department contends that those would unnecessarily burden the Income Tax Depafimcnt where they woutd be required to file equal number ol SI.Ps betbre the Hon'bte Supreme Court and it would be further burdening the exchequer of the Union of lndia. [t was also the conrentiorl of the learned Standing Counsel that no prejudice would be caused to the interest ofthe petitioners in case if this writ pctition is kcpt pending tilt the finalization of the SLPs pending before the Hon'ble Supreme Courl and the fact that the petitioner is already enjoying the benefit of interim protection. Nonetheless, on the earlier c1uery of this Court as to why the Income Tax Depa(ment have not come out with a mechanism to issue appropriate instructions 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 of the 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 i{igh 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 lncome Tax authorities concerned are still even now in 2025 also initiating proceedings in contravention to the provisions of Section 1 5 I A of the Act and as a result by now, more than 600 to 700 petitions have been already got piled up belore this High Court on an issue which otherwise stands squarely covered by the judgment of this Court in the case of Kanakala Ravindru Reddy ( I supra). What is also surprising is the lact that though while allowing the writ petitions in the case of Kanakola Ravindra Reddy (l supra), the Division Bench while reseruing the right of the Revenue, has also protected the interest of the petitioners 8 insof'ar as the tiberty which was granted to the Revenue for .l initiating fiesh proceedings strictly in accordance with thc amended provisions of thc Act, as amended by the Finance Act, 2020 and the Finance .Act, 2021 . The petitioner assessee would be entitled to challenge or raise the other tegal objections ilthe Revenue initiates fresh proceedings. The Department has made no endeavour in availing the said tiberty that was reserved for the Revenue. On the contrary, they have been still sticking on to the stand, which this ttigh Ciourt as well as marty other High Courts already held to be bad. I l. [t appears that because of the aforesaid liberty that this High Courl had granted permitting the Revenue for initiating liesh proceedings as a one-time measure in a faceless manner' the lncome Tax Department wants to take advantage ol the sarne by protracting these proceedings which would enable them to meet thc limitation that would otherwise come in the way. l.ikewise, il 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-rrms the decision taken by this High Court as also by the other High Courts in rvhich the SLPs are still pending, the Incotne -l'ax { 9 Department would get the advantage of the tiberty that is otherwise protected in favour of the Revenue fbr 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 concerrred. As a consequence, the Income Tax Department gets an extended period of time for initiation of fresh proceedings.

12. The alarming trend of docket explosion in this Court, despite the clear precedent set in Kanakala Ravindra Reddy (t supra), is a matter of grave concern. The Income Tax Department,s persistent initiation of fresh proceedings, disregarding the established judicial pronouncements, has led to an unprecedenled surge in litigation with over 600-700 petitions piling up on rhe same issue. This deliberate approach not only undermines the principte of judicial precedent but also strains the judicial resources unnecessarily. 'l-he 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 tegal 10 I position. Such conduct raises serious questions about the administrativeefhciencyandtherespectlorjudicial pronouncements, particularly when this Couft has already provided a balanced approach by preserving both the Revenue's rights and assesses interests

13. Anothcr aspect which needs to be considered is that in fact it should have bcen lealized by the Income Tax Department itself and should havc fbund out via media in ensuring that proceedings. under Sections 148-4. and 148 should not have been issued in a laceless manner, at least till the Hon'ble Supreme Court decide the twelve hunclrcd ( 1200) odd SLPs which it is already seized of or' at least the lncome Tax Department should have found out some remedial sl.eps to ensure that wherever the authorities intend to initiate proccedings under Sections 148-A and 148' other than in a faceless rnanner, the proceedings should have been defened without precipitating the matter further intimating the assessce that they shall initiate appropriate proceedings only after the SLP's are decided by the Hon'ble Supreme Court on the very same issue' 'fhis again, the lncome Tax Department, has not been able to give a convincing rcply, cxcept tbr the f-act that such a decision if at all 11 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 Deparlment contended that thc Delhi High Court dismissed a writ petition of similar nature, on the one hand when the High Court is struggting to reduce its pendency, such notices which are under challenge in this writ petition are fbrcing the assessee to knock the doors of this High Court resulting in fiting 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. Admittedty, in spite of the matter 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 lncome Tax Department. Yet, the authorities concerned a1 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 lurther worse, the Income Tax I)epartment is showing audacity by issuing notices continuously under Sections 148-A and 12 148 through the jurisdictional Assessing Ofhcer whereas it ought ..1 to have been only in the faceless manner.

14. In the case of BANK OF INDIA vs. ASSISTANT COMMISSIONER. INCOME TAX|r, on an issue whether it was justifiable on the parl of the lncome Tax Department in not following an order passed by the adjudicating authority only on the ground tl.rat the appeals are pending, the Division Bench of the I{igh Court of Bombay hcld at paragraph No.25 as under, viz., : "25. Mr Paridwalla has rightly drawn out attention to the decision of this Cou( in Commissioner of lncome Tax vs. Smt. Godavaridevi Saraf'' 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 lhat 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 treatrng decisions being "not acceptable" was criticized by the Supreme Court. ln such decision, following are the relevant observations made by the Supreme Court. Jlzozs; 170 taxmann.corn 422 (Bornbay)l '' 1tszal Il3 trR 589 (Bornbay) '' IZOZ+1 [65 taxmann.com 5tll/300 'laxman 452 (BombayT '' 1 t 992 ; taxrnann.com l6l-55 t'-l- I 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 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 hrgher 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 .iurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate aulhorities. 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 t4 1 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 thrs aspect at some length, because tt has been suggested by the learned Additronal Solicitor General that the observations made by the High Court, have been harsh on the officers. lt rs 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 ad.ludicating authorities and the appellate authorltles to the requirements of iudicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them."

15. What is worrying this Bench more is the fact that an endeavour is being made whole heartedly to ensure not to generate further titigation on issues rvhich have been laid to rest by a large number of High Couds atl of whorn have taken a consistent stand that the action of the lncotne Tax Deparlment being violative of the 15 Finance Act. 2020 and Finance Act, 2021. Now, in order to protect the interest ol 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 Kankanalo Ravindra Reddy (l supra) shalt however be subject to the outcome of the SLps which were filed by the lncome Tax Depaftment and which is pending consideration before the Hon,ble Supreme Court.

16. In the given lacts 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 fbrtified by the decisions of the various other High Couns on the very same issue, the.pendency of this High Court would tunher be burdened which otherwise can be decided and disposetl ol'as a covered matter. 17 . So thr as the interest of the Revenue is concemed, we are of the considered opinion that the interest of the Revenue has arready been considered and protected, as has been observed in paragraphs 76 .l 36,37 and38 of the order which. lor ready ref-erence, 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 asideiquashed. 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 'l 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 nullified automatically.

37. The preliminary obiection raised by the petitioner is sustained and all these wrlt petitions stands allowed on this very Jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of lurisdiction, 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 proceedrngs.

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 thrs Court allowing the petitions only on the procedural flaw, the right 17 conferred on the Revenue would remain reserved to proceed further if they so wanl 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 Kanokala Rtvindra Reddy (l supra) is subjected to challenge before the Hon'ble Suprerne Courr in SLp No.3574 of 2024, preferred by the Income 'fax Department, we make it clear that allowing of the instant writ pctition is subject to outcome of the aforesaid SLP prelerred by the Revenue against the decision of this High Court in rhe case of Kanakala Ravindra Reddy (l supra). This, in other words, would mean that either of the parties, if they so want, may movc an appropriate petition seeking revival of this writ petition in the light of the decision of the Hon,ble Supreme Court in the pending S[_p on the very sarne 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 undcr Sections 148-A and l4g stands set aside/quashed. \ .:l 1 \ 18 \ The consequential orders' if any' atso stand set aside/quashed in similar terms as have been passed by this tligh court in the case of 'fhere shall be no order as Kankanala Ravindra Redd.v ( I supra)' to costs. Consequently, tniscellaneous petitions pending' if any' shall stand closed. SD/. K.BH AVANI SWAMY S TANT REGISTRAR ./ /ffRUE COPY// SECTION OFFICER To The National Facele$s Assessment Center" lncom tax Department, New The Assistant Commissioner of lncome Tax, Circle 1 , Karimnanagar, lncome Delhi, lndia Tax Office' AaYakar Bhavan, Near Natrai Theatre, Karimnagar The Assessment Unit lncome Tax DePartm ent, Mi nistry of Finance, Gov ernment of lndia The DePutY commissione r of lncome Tax, Central Circle-2(3), HYderabad One CC to S R! P.S.S.KAI LASH NATH, Ad One CC to Ms. J.SUNITHA SR SC FOR I NCOM TAX) Ad vocate [OPUC] Two CD Copies vocate IOPUC]

1. .) o 4 5 6 7 SA BM !, / HIGH COURT DATED:0910712025 1ll.-':'I4 l4: f, J ). 1r tlJB zffi 4., './< . S r,AT Ct {t-r' t ORDER WP.No.19583 of 2025 ALLOWING THE W.P WITHOUT COSTS. //z ,z /8