Courts i'e', by the Bombay High Court in the case of HEXAWARE TECHNOLOGIES LTD v. ASSISTANT COMMISSIONER OF INCOME TAX OTHERS

Order

(per Hon'ble Sri Justice Suddala Chalapathi Rao) Heard Sri Ravi Sankara Reddy, learned counsel representing Sri Dundu Sashank Manmohan, leamed counsel for the petitioner and Sri T.P.S.Harsha' leamed Junior Standing Counsel

representing Ms.J.Sunitha, learned Senior Standing Counsel for Income 'fax, lor the respondents. Perused the record'

2. This is a writ petition where the proceedings are either challenged to the notices which were issued under Section 148A and 148 of the lncome 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 l48A of the Act and the subsequent initiation ofproceedings under Section 148 of the Act by the jurisdictional Assessing Officer, whereas in terms of the amendment that was brought to the Income Tax Act by way t 2 of Finance Act, 2021 w.e.f., 01 .04.2021 onwarc s. proceedings under Section 148.4 of the Act as also under Ser:rion l4g of the Act ought ro have also been issued and procced,_' I in a f-aceless lnallner

1. The contention of the petitioner is tlrrLt the issue of proceedings being in violation of the Finance Ac . 2021 i.e.. the irnpugned notices under Section l48A and Scction l4g of the Act no1 being issued in a faceless manner, have alread..,becn dealt with and decrded by this Court in rhe case of K.{NKANALA RAVINDR.{ REDDY vs. INCOME-TAX OFI.]CER] decided on 14.09.2023 whereby a batch of writ petitions \\( rc allowed and the proceedings initiated under Section l48A as al:;o und.. Section 148 of the Act were held to be bad with consequenti rl reliefs on the ground of it being in violation of the provisions of Secr.ion I 5lA of the Act rcad with Notification 1812022 dated 29.03 .t()12. Thc said judgment passed by this Court has also been subscqr entl1. followcd in a large number of writ petitions which were allo,ved on similar ' l(2023) I i6 laxmann.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 TECHNOLOGIES LTD., vs. ASSISTANT COMMISSIONER OF INCOME TAX & OTHERS2, Gauhati High Court in the case of RAM NARAYAN SAH vs. UNION OF INDIAs, Punjab and Haryana High Court in the case of JATINDER SINGH BANGU vs. UNION OF INDIA4, and Telangana IJigh 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 circte, High Courl of Himachal Pradesh in the case of GOVIND SINGH vs- INCOME TAX OFFICERT' Gujarat High Court in the case of MANSUKHBHAI ' lzoz+1464 lrR 430 (Bom) 'IQO24) 156 taxmann.com 478 (Gauhati)l ^ l(2024) 165 taxnann.corn I l5 (Punjab & Haryana)l ' 12024) 167 taxmann.com 4 I I ('[elangana)] " 12024) 166 taxmann.com 679 (Bombay)l ' iZOZ+) 165 taxmann.com I I 3 (Himachal Pradcsh)l I 4 J: DAHYABHAI RADADIYA vs. INCOME T,,\X OFFICER, WARD 3(3Xr8, Jharkand High. Court in the cr se of SHYAM SUNDAR SAW vs. UNION OF INDIAe, RajasthrLn High Courl in the case ol SHARDA DEVI CHHAJER vs. INCOME TAX OFFICER & ANOTHER and batch of vvrit 1r:ritionsro which stood decided on 19.03.2024. Similar views have also been taken by the Division Bench of Calcutta High Cour iLr the case of GIRDHAR GOPAL DALMIA vs. UNION OF {NDIA & ORS (M.A.l' 169O of 2023), decided on25.09.2024

6. Even though the same issue having been dr:r.ided by a large number ol ltigh Courts, we are still confronted wit I large filing of identical matters on daily basis ranging betwcer 5 to l0 rvrit petitions. 1-hat upon the instructions being s,rrght lrom the Department, they have becn taking a solitary E round that the decision of the Bombay High Court in the cas.( of Hexan,are Technologies Ltd., (2 supra) as also the one u hich has becn decided by this Courl in the case of Kanakilt Ravindra Reddy *2024 SCC C)nl-ine Guj 4012 '2025 SCC ()nline Jhar 287 t" 12023'. RJ J D :4984-DBl 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 Court and the Hon'ble Supreme Courl is seized of the matter. In addition, there are about I200 SL,Ps also filed 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 therc 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 Fligh Court itsetf.

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 lncome 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 Off,icer, rather the authorities concemed in the teeth of series of decisions 7 6 by all the major High Courts in India are cc ntinuously still initiating proceedings under Section 1484 of th: Act and also initiating proceedings under 'Section 148 o thc' Act in contravention to the amendments brought into the nconte Tax Act pursuant to the Finance Act,2020 as also the Finan, c Act 2021 (). U;ror, a query being put as to why can't thi:; q'rit petition be disposed ol'in the teeth of the decision rendered lx, this Court in the case of Kanakala Ravindra Reddy (l supra). l,'arned Standing Counsel fbr the lncorne Tax Department contends t lrat those rvould unnecessarily burden the Income Tax Departn-,t'nt ri hcre they rvould be required to file eqrral number of S LI's befbre the I lon'ble Supremc Court and it would be furthcr bulclening the cxchequer of the lJnion of India. It was also the r: rntcntion of .the learned Standing Counsel that no prejudice would Irc caused to the interest of tlrc petitioners in case if this writ petition is kept pending titl the finalization of the SLPs pending beforc rhe Hon'ble Supreme Court and the fact that the petitioner is ;rlready enjoying the benefit of interim protection. Nonetheless, on 1 tc earlier query of this Court as to why the Income Tax Departmenr have not come out with a rnechanism to issue appropriate instrur: ions or to take appropriate steps in ensuring that proceedings under Section 148,,4. 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 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 Courls.

10. As a result of which, what we are facing is steep increase of litigation day in and day out even though various ordcrs have been passed by this High Court allowing writ petitions on thc very same issue. The Income Tax authorities concemed are still even now in 2025 also initiating proceedings in contravention to the provisions of Section 1514 of the Act and as a result by now, rnore than 600 to 700 petitions have been already got piled up before this Iligh Court on an issue which otherwise stands squarely covercd 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 Kanakala Ravindta Reddy (l supra), the Division Bench while reserving the right of the Revenue, has also protected the interest ol the petitioners l 8 -:l! .ll insofar as the liberty which was granted to tl- c Revenue for initiating frr:sh proceedings strictly in accordance rvith the amended provisions o1- the Act, as amended by the Finance Act, 2020 and the Finance Act, 2021. The petitioner assessee woLrlrl be entitled to challenge o, raise the other legal objections if the licvcnue initiates lresh proceedings. 1'he Department has made n.r endeavour in availing the said liberty that was reserved for the It:venue. On the contrary. thcy have been still sticking on to the srtencl, which this Iligh Court as well as rnanv other High Courts alr'-'ady held to be ll. It appears that because of the aforesaid liberlv that this High Court had granted permitting the Revenue fbr initiating fresh proceedings as a one-time measure in a facel: is manner, the Incorne '['ar. Department wants to take advantage ol- thc same by protractir-rg these proceedings which would enable t rem to rneet the limitation that would otherwise come in the way. -ikervise, if the writ petition is kept pending for a considerable lonlr period of time and finally i1t a later stage if the Hon'ble Supremr, ('ourt confirms the decisior taken by this High Courl as also by the other High Courts in rvhich the SLPs are. still pending, tt e Income Tax . i..;L- 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 equalty disadvantageous and detrimental so far as interest of the assesses are concemed. As a consequence, the Income Tax Departrnent 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 (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 ,uvith over 600-700 petitions piling up on the same issue' This deliberate approach not only undermines the principle of judicial 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 limitation periods, rather than adhering to the established legal I 10 position. Such conduct raises serious questions about the administrative efficiency and the respect for judicial pronouncen)ents, particularly when this Court has already provided a balanced approach by preserviag both the Reverrue's rights and assesses intcrests I3. furothcr aspect which needs to be considererl is that in fact it should have been realized by the Income Tax Departrnent itselfand should hav,: found out via media in ensuring t[ at proceedings under Secti,.lr'rs 148-,{ and 148 should not have b:en issued in a faceless manner, at lcast til[ the Hon'ble Supreme ( ourt decide the twclve hunored (1200) odd SLPs which it is already seized ofor, at lcast the lncome '['ax Departmqnt should have t]rund out some rcmedial steps to ensure that wherever the auth,lrities intend to initiate proceedings under Sections 148-A and 148, other than in a l'aceless mauner, the proceedings should have been deferred without prer:ipitating the matter turther intimating tlte assessee that they shall initiate appropriate proceedings only after the SLP's are decided by the Hon'ble Supreme Court on the 'ut,ry same issue. 'fhis again, the Income Tax Department, has not been able to give a convincing ieply, except for the fact that such a <l:cision if at att

11. has to be taken, has to be taken for the whole of India, and which otherwise has to be by way ofa policy decision and that too at the level of Central Board of Direct Taxes. Though the leamed Standing Counsel for the lncome Tax Department contended that the Delhi 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 dools of this High Courl resulting in filing of hundreds of new writ petitions which in the long run not only alfects the disposai 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 matter before the Hon'ble Suprcme 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 Incomc 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 lurther worse, the Income Tax Department IS showing audacity by issuing notices continuously under Sections 148-A and I 72 148 througtr the jurisdictional Assessing Officer rr hcreas it ought to have been only in the faceless manner.

14. In thc case ol- BANK OF INDIA vs. ASSISTANT COMMISSIONER, INCOME TAXjr, on an issuc rvhether it was justifiable on the part ol the Income Tax Dep rttment in not following an order passcd by the adjudicating auth,rrity only on the ground that the appeals are pending, the Divisic,r r Bench of the l{igh Court ot'Bombay hcld at paragraph No.25 as t Irder, viz., : "25. Mr. Paridwalla has rightly drawn out att€ r tion to the decision of this Court in Commissioner of lncome Iax vs. Smt. Godavaridevi Saraf'2 as also the recent decisiotr of the co- ordinate Bench of this Court in Samp Furniture (P) L td. v. lTOl3 of whicl' one of us (Justice G.S. Kulkarni) was a meml)er, wherein the Court categorically observed that the Revenur: having not "accepbd" the judgment of the High Court would not rrean that till the same is set aside rn a manner known to law, it w:rld loose its binding force. Refernng to the decision of the Supre rre Court in Union of lndia vs. Kamlakshi Finance Corporatiorr Ltd..4, the Court otrserved that the approach of the officials ot Revenue of treating decisions being "not acceptable" was crrti: zed by the Supreme Court. ln such decision, following are the relevant observations made by the Supreme Court. " 11zozs) I70 taxmann.com 422 (Bornbay)l '2 1tezs1 113 Il'R 589 (llombay) '3 120241 165 taxrnann.com 581/300 Taxman 452 (Bonr ray) " 1t9921 [axnann.corr I6155 IILT 433 (SC) 13 "6. Sri Reddy is perhaps nght 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 Asslstant 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 lhe 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 Judrcial 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 I i I I i I I I I I I I ; j i I i 74 rule is not followed, the result will only b€ undue harassment to assesses and chaos in adminirtratron of tax laws.

12. We have dealt with this aspect at som€ rength, because it has been suggested by the l:arned Additional Solicitor General that the obser rations nrade by the High Court, have been harsh rn the o,ficers. lt is clear that the observations of tr -. High Court, seemingly vehement, and apcarently unpalatable to the Revenue, are only intended o curb a tendency in revenue matters which, if allo\ved to br:come widespread, could result in cons < erable harassment to the assesses-public without any' renefit tc the Revenue. We would like to say tl- at the department should take these observations n the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be pard by the adjudicating authorities .nd the appellate authorities to the requirements of udicial discipline and the need for giving effect to th€r orders ol the higher appellate authorities which are t rinding o 1 them."

15. What is wonying this Bench more is tl c lact that an endeavour is being made wholc heartedly to ensure not to generate further litigation on issues which have been laid tr rest by a large number of lJigh Courts all of whom have taken a ronsistent stand that the action of the Income Tax Department bein;: r'iolative 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 Ravindru Reddy (l supra) shall however be subject to the outcome ol the SLPs which were filed by the Income Tax Department and which is pending consideration before the Hon'ble Supreme Cour1.

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 furlher be burdened which otherwise can be decided and disposed ofas 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, aE has been observed in paragraphs I t , I I I I i I I I I I I I 1 , I L6 ;.r 36,37 and:i8 of the order which, for ready referen::. is reproduced hereunder:

36. For all lhe aforesaid reasons, lhe impugned notices issued and the proceedings drawn by the res pondent- Department is neither tenable. hor su:;tainable. The notices so issued and the procedure adop ed being pi:r se illegal, deserves to. be and are accor'( ingly set aside/quashed. As a consequence, all the inpugned orders getting quashed, the consequential ordets passed bv the respondent-Department pursuant to th ) notices issued under Section 147 and 148 would ;rlso get quashed and it is ordered accordingly. The r€ason we are quashing the consequential order is on the )rinciples that when the initiation of the proceedings iself was procedurally wrong, the subsequent orders irlso gets nul fied automatically. 37 The preliminary objection raised by the petitioner is sustained and all these writ petitions stands al owed on this very jurisdictional issue. Since the impugneJ notices and orders are getting quashed on the point of jurisdiction, we are not inclined to proceed fu ther and decade the other issues raised by the petitior er which stands reserved to be raised and contencl( d in an appropriate proceedings.

38. Since the Hon'ble Supreme Court had, ir the case of Ashish Agarwal, supra, as a one{ime measure exercising the powers under Article 142 of the C,cnstitution of lndia, permitted the Revenue tc proceed under the substituted provisions, and this Cour'1 allowing the petitions only on the procedural flaw, he right i1 17 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 Kanaksla Ravindra Reddy (l supra) is subjected to challenge 1 before the Hon'ble Supreme Court in SLP No.3574 of 2024, preferred by the Income Tax Deparlment, 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 High Court in the case of Kanakala Ravindra Reddy (l supra). ( This, in other words, would mean that either of the paties, 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 148 stands set aside/quashed. 18 *l:,:' The consequential orders, if any, also stand set riide/quashed in similar: terms as have been passed by this High Courl in the case of Kankunala Ravindra Reddy (1 supra). There shal be no order as to costs Consequently, miscellaneous petitions pendir g, if any, shall stand closerl //TRUE COPYi/ ,bI AS\ \ I AVANI SWAMY T REGISTRAR .{ SECTION OFFICER \ \ To, 1 2 J 4 5 6 TJ GJP The lncome Tax OfficerAy'y'ard 11(1 ), Hyderabad, Sign:ture Towers, Opp. Botanical G,:rdens, Serlingampaliy,'n. n. OistriCt, Hy'c,,raOaO ielr;'g;;5 500084 The Chief Commissioner of lncome Tax, Hyderabad, 1Oth Floor, C_ Block, l. T. Towers, 10- 2- 3. A. C. Guards, nyUeraO'aO- SOOOO+ The Assessrnent Unit, Income Tax Department, Nalioral Faceless fl119-ss1en! Kamp, Jawaharlal Nehru Stadium, Delhi_ 1 One CC to liri Dundu Sashank lvlanmohan, Advocat,: tOpUCl One CC to I\4s. J. Sunitha (JUNIOR SC for lncome Tax) [OpUC] Two CD Copries Centre, Dethi, Ministryof'Finance,'Room rto. 4Oi,2nd Ftoor, E- ,l0003. & J HIGH COURT DATED:0410812025 .';,i\" (.; '' ..\ /,. r ' ..,:. B r, [[T 20m ORDER WP.No.22730 of 2025 i i i I i . ALLOWING THE WRIT PETITION WITHOUT COSTS o