The High Court · 2025

Order

28.11.2O25 Between: M/s. Hyderabad Race Club, A Company reqistered under Section 25 of the Companies Act, 1956, Having its Regrstered Office at Race Course, Irl a la kpet, Hyderabad. Represented by its Secretary Mr. B.Sridhar, S/o. Sri B.Gowda, Aged 50 yea rs. AND The Deputy Commissioner of Income Tax, Circle 2 (2), 5''' Floor, Aaya kar Bhawan, Basheerbagh, Hyderabad. Petitioner ...Respondent

ORDER: (Der the t'ton'ble Sri )ustice P.saot Koshy) Heard Mr. S.Ravi, learned Senior Counsel for l1e petitioner; and Ms. LSunita, learned Senior Standing Counsel i r Income Tax Department appearing on behalf of the respondent.

2. The instant writ petition has been filed by the petitioner under Article 226 of the Constitutron of India challenging the second notice dated 03.10.2008, passed by the respondent under Section 148 of the Income Tax Act, 1961 (for short the 'Act') as illegal, arbitrary and contrary to the provisions of Section 147, 148 and 153(2) of the Act.

3. The facts of the case, are that, the petitioner filed its income tax return for the Assessment Year 2002-2003 on 25.10.2002 declaring an income of Rs.2,50,73,780/- which was processed under Section 143(1) of the Act without variations. On 28.03.2007, the respondent issued a notice under Section 148 of the Act to reopen the assessment citing concerns about cash payments exceeding Rs.20,000/- made to successful punters and their treatment under Section 40A(3) oF the Act. The petitioner responded by requesting reasons for reopening and clarified that the original return should be treated as compliance with the notice while reserving the right to file detailed objections. On 28.05.2007, the Assessing Officer issued hearing notices under Section 143(2) of the Act fixing the date of hearing on 14.06.2007 and similarly on

28.09.2OO7 further notice was issued fixing a date of hearing on '1 \

22.1O.2OO1 , during which the petitioner's represent'i ives appeared but no progress was made in the proceedings. Un:3r the second proviso of Section 153(2) of the Act, (which was rmended with effect from 01.04.2005) reassessments pursuant 1( notice under Section 148 of the Act issued after 01.04.2005, mur;1 be completed wrthin 9 months from the end of the financial ye,r in which the notice was issued. Since the notace was issued c n 28 03 2007 (within the financial year ending 31.03 2007), ti I assessment should have been completed by 31.12.2007. Wherr the Assessing Officer issued arlother hearing notice on 22.08.200t;, the petitioner pointed out the statutory time-bar in a letter da'r d 29.08'2008 whereupon the Assessing Officer realizing the limil. tion, issued a fresh notLce under Section 147 of the Act on 03.10 2O08 followed by a notice under Section 142(1) of the Act :r 04.11 2008 requiring the petitioner to file a return and product' Cocuments by

14.11.2008.

4. Therefore, the petitioner challenges this se: >nd notice as illegal and without jurisdiction contending that onc€ the statutory time limit for completing the reassessment ha( expired the assessment becomes final and the Assessing ( )FFicer cannot circumvent the mandatory time limit by issuing a fresh notice for the same assessment yeat as such repetitive notice defeats the legislative intent behind imposing strict time limits and deprives the assessee of the statutory protection and finality contemplated by Section 153 (2) of the Act, leaving assesses' perpetually vulnerable to reassessment proceedings contrary to the principles of certain and finality in tax matters.

5. Learned Senior Counsel for the petitioner contended that the first notice under Section 148 of the Act was issued on 28.O3.2007 within the financial year ending on 31.03.2007 which triggered the mandatory time limit prescribed under the second proviso of Section 153(2) of the Act as amended with effect from 01.04.2005. This provision categorically mandates that reassessments pursuant to notice issued under Seclion 148 of the Act after 01.04.2005 must be completed within 9 months from the end of the financial year in which the notice was issued. According ly. the assessment should have been completed by 31.12.2007; howeveq the Assessing Officer failed to complete the assessment within this statutory period despite issuing hearing notice on 28.05.2007 and

20.Og.2OO7 and started conducting hearing on 14.06'2007 and

22.10.2007 . When the petitioner pointed out this st rtutory bar in his letter dated 29.08.2008, the respondent havir ( realized the limitation, attempted to circumvent the mandatorl provisions by issuing a fresh notice on 03.10.2008 for the same a1; essment year 2OO2-2OO3. Therefore, the learned Senior Counsel fcr the petitioner submits that once the statutory time limit expired, tl e assessment proceedings stood concluded and became fina without any recourse to the responde nt.

6. Further; the learned Senior Counsel for lre petitloner contended that the issuance of repetitive notices unrr r Section 148 for the same assessntent year is destructive of the ';'atutory rights conferred upon the assessee under the Act and dol lats the very leqislative intent behind Section 153(2). The Par trment, in its wisdom, consciously reduced the time limit from or r year to nine months through the Finance Act to ensure expediti ) ls completion of reassessment proceedings and to provide certairr y and finality to assessees'. The purpose of these strict limits is -hat assesses should not be left in a state of perpetual uncrl tainty, never knowing when the tax authorities might come kn(,( king on their door. He submitted that it is well established princi: e of law that when a statute contemplates a particular act to be done in a partrcular manner within a specified time, the act must be done in that manner and within that time limit or not at all. The respondent cannot be permitted to deFeat these statutory mandates by circumventing the provisions through the issuance of fresh notice after the expiry of the limit. Such a practice would leave assessees perpetually vulnerable to reassessment proceedings contrary to the principles of certainty, finality, and statutory protection contemplated by the leg islatu re,

7. Furthermore, the learned Senior Counsel for the petitioner contended that Section 147 is not merely procedural but impinges upon the petitioner's substantive statutory rights, and therefore, a Writ of Prohibition lies for interdicting the respondent from acting beyond their authority. Moreove4 petitioner's accounts are audited in a transparent manner, and a part of certain additions made by the Assessing Officer for Assessment Years 2004-2005 and 2005- 2006 which the Income Tax Appellate Tribunal didn't uphold. thus, there are no real issues with their tax return. However, irrespective of merit, the respondent completely and totally lacks jurisdiction to ) initiate fresh proceedings by way of the impugn€ ( notice dated

03.10.2008. B. Lastly, the learned Senior Counsel for he petitioner contended that with the proceedings based on an r valid notrce is an abuse of tire legal system and causes irreparab, rnjury to the petitioner by wasting precious time and energy in contesting proceedings that are fundamentally without jurisdic, )n. fheretore, the needless process of suffering through the assessr rent and filing appeals thereafter is not an adequate alternative rr: nedy in these circumstances, particularly when the very jurisdicti r r to issue the second notice is challenged. Thus, the petitioner pr ryed that this Hon'ble Court may be pleased to issue an direr ion or order declaring the :;econd notice dated 03.1O.2008 as il:gal, arbitrary and contrary to the provisions of Sections 147,148 :nd 153(2) of the Act.

9. Per contra, the learned Senior Standing Cr rnsel for the income Tax Department contended that the first no ice issued on

28.03.2007 became infructuous upon the expiry o'the statutory time limit on 31,12.2OO7 without culminating ir a complete assessment order. lust because the assessment wa:;l 't finished on I time it doesn't mean the assessee automatically wins. It simply means that particular notice period expired and can't be used a ny more .

10. Further, the learned Standing Counsel argues that the provisions of Section 147 and 148 are independent charging provisions that confer jurisdiction upon the Assessing Officer to reopen assessments where income has escaped assessment and this jurisdiction is not extinguished merely because an earlier attempt to reassess under Section 148 could not be completed within the statutory time limit. Moreover, the power to issue a fresh notice under Section 148, provided all other conditions precedent are satisfied, including the existence of reasons to believe that income has escaped assessment and compliance with the limitation period prescribed under Section 149 of the Act remains available to the Assessing Officer. It was also submitted that Section 153(2) merely prescribes the time limit for completing reassessment proceedings once initiated, but does not prohibit the issuance of a fresh notice if the earlier proceedings have lapsed due to non- completion within the stipulated time. 1

11. Learned Senior Standing Counsel further cont rnded that the petitioner's interpretation od Section 152(2) is error( ous and would lead to absu.d consequences effectively grantin. immunily to assessees in case where income has genuinely esca::d assessment merely because the Assessing Officer failed to complete the proceedings within the prescribed time limit due to administrative reasons or otrer procedural delay. Such an interr etation would defeat the very purpose of Sections 147 and r, 8, which are designed to ersure that all taxable income is brouqlr to tax and no income escapes assessment. Moreover, the lec r;lature, while imposing strir:t time limits for completion of reassessment proceedings to ensure expeditious disposal and pr,r ect assessees from indefiniter proceedings, never intended to cr€ i te a situation where established cases of escaped income could rr t be assessed at all simply because of procedural lapses in earli.- attempts. It was further submitted that the second notice datec 33.10.2008 is issued after due application of mind, based on the sl ne reasons to believe that income has escaped assessment i e, the cash payments exceeding Rs.20,000/- made to succe ssful punters without proper deduction of tax at source and thei disallowance -i under Section 40A(3) of the Act. The issuance of this fresh notice is well within the limitation period prescribed under Section 149 of the Act for the Assessment Year 2002-2003, and all conditions precedent for exercising jurisdiction under Section 148 are duly satisfied. t2. Lastly, the learned Senior Standing Counsel submitted that the petitioner's remedies lies in following the statutory appellate mechanism provided under the Income Tax Act rather than invoking the extraordinary jurisdiction. Moreover, the writ jurisdiction should not be exercised to short-circuit the statutory appellate hierarchy. particularly when questions of fact regarding whether income has escaped assessment need to be examined through the reassessment proceedings. She denies that the impugned notice is illegal and arbitrary and submits that it is issued in accordance with law to protect the interests of revenue and ensure that all taxable income rs properly assessed. Therefore, she prays that the writ petition be dismissed and the petitioner be directed to co-operate in the reassessment proceedings initiated pursuant to the notice dated 03.10.2008 and avail the statutory remedies provided under the Act

13. Having r:arefully considered the materials on r:cord and also the contentions advanced by both parties, the quer; ions that arise for consideration in this writ petition are:-

1. Whether the second notice dated 03.10.200 1 issued under Section 148 of the Act for Assessment Year .t )03-04 is legal and valid, or whether it is barred by the provr. ons of Section 153(2) c,f the Act?

2. Whether the Assessing Officer having failed l< complete the reassessment proceedings within the statutor,, ttme limit oF 9 months prescribed under the second prov i .o to Section 153(2) of the Act in respect of the firs notice dated

28.03.2CtO7, can issue a fresh notice under Se - ion 148 of the Act for the same assessment year?

3. Whether the assessment became final upor expiry of the statutory time limit or did the assessment '( r Assessment Year 2003-04 attain finality and become conclr sive when the Assessing Officer failed to complete the rel;sessment by

37.72.2007, thereby precluding any further reassessment proceedirrgs for the same assessment year?

14. For better understanding of the dispute, it would be necessary at this juncture to take note oF the relevant provisions of the Act. Firstly, Section 747 of the Act dealing with income escaping assessment for ready reference is reproduced hereunder, viz., " 747. Income escaping assessmerrf. If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessinq Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 relevant assessment referred to as yea r). Explanation. - For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any rssue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 1484 have not been complied with.l"

15. Next comes Section 148 of the Act which deals with issue of notice where the income has escaped assessment. For ready reference, the said Section is also reproduced hereunder, viz., " 748. Issue of notice where income has ,scaped assessment Before makinq the assessment, reassessr lent or recomputation under section 147, and subje - to the provisions of section 148A, the Assessing Ofii 'er shall serve on the assessee a nofice, along with a c('l y of the order passed, if required, under clause (d) o section 1484, requiring him to furnish within such perio i as may be specified in such notice, a return of his incotr e or the income of any other person tn respect of wt I h he is assessable under this Act during the previ. ts year corresponding to the relevant assessment ye.t in the prescribed form and verified in the prescribed ma ner and setting forth such other particulars as may be pt scribed; and the provisions of this Act shall, so far as nay be, apply ar:cordingly as if such return were a returr -equrred to be furnished under section 139:Provided that r J notice under this section shall be issued unless \ere is information with the Assessing Officer which suqlt sts that the income chargeable to tax has escaped asse:;: men t in the case of the assessee for the relevant assessr, )nt year and the Assessing Officer has obtained prior apS.oval of the specified authority to issue such notice [Provided further that no such approval shatt be .equired where the Assessing Officer, with the prior appro t tl of the specified authority, has passed an order under cl, use (d) of section 148A to the effect that it is a fit case tc issue a notice under this section.l t Paqe 14 of 19 Explanation 1, -For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means, - (i) any information J*'**1 in the case of the assessee for the relevant assessment year in accordance with the rtsk management strategy formulated by the Board from time to time; [(ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii) any information received under an agreement referred to in section 9O or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v) any informatton which requires action in consequence of the order of a Tnbunal or a Court.l Explanation 2. -For the purposes of this section, where,- (i)a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 1324, on or after the lst day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub-section (2A) 1***1 of that section, on or after the lst day of April, 2021, in the case of the assessee; or (iii) th<t Assessing Officer is satisfied, with t te prior approval of the Principal Commissioner or Contn issioner, that any, money, bullion, jewellery or other valuaL: e article or thing, seized or requisitioned under sectio , 132 or section 1324 in case of any other person on or rfter the 1st day of April, 2021, belongs to the assessee; r', (iv) the Assessing Officer is satisfied, with t te prior approval of Principal Commissioner or Commissio ter, that any books of account or documents, s: zecj or requisi1oned under section 132 or section 1324 t case of any other person on or after the lst day of Ap, t, 2021, pertains or pertain to, or any information , tntained therein, relate to, the assessee, the Assessing Officer shall be deemed to have in'r which suggests that the income chargeable lc. escaped assessrnent in the case of the assesse(' the search is initiated or books of accotrrt documents or any assets are requisitioned or ; conducted in the case of the assessee or monet, jewellery or other valuable article or thinq or I account or documents are seized or requisitione) of any other person. rmation tax has Iwhere] trvey is bullion, coks of in case Explanation 3.- For the purposes of this section, : oecified authority means the specified authority referr:1 to in section I51.l"

16. Section 153(2) of the Act which is also relevant to the dispute in the instant case, is also reproduced hereunder, vtz. \ \ t{ "(2) No order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was sented Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted. "

17. Taking into consideration the aforesaid statutory provisions of the Act, this Bench is of the considered opinion that when the first notice was issued on 28.O3.2007, the clock stated ticking on a 9 months deadline that expired on 31.12.2007, as clearly prescribed by the second proviso to Section 153(2) of the Act. The Assessing Officer had ample opportunity during this period to complete the reassessment, hearings were held, notices were issued, yet the deadline came and went without a completed assessment order. HoweveL this wasn't a case of the petitioner being evasive or uncooperative rather it was simply a failure on the part of Revenue to manage its own statutory obligations. The existing law doesn't provide for extensions or do-overs in such situations.

18. The Parliament also deliberately reduced the ti ne frame from one year to nine months sending a signal that tax a rtho rities m ust act with dispatch and that taxpayers deserve finalil' and ce rta in ty in their affairs aren't merely procedural technical -ies, but they represent fundamental protections for citizens aci in st indefinite exposure to reassessment proceedings. If we werr: to accept the learned Senior Standing Counsel's argument that a 'l :sh notice can simply be issued whenever an earlier attempt F ril, rve would essentially be rewriting the statute to say that the ;e time limits mean nothing at all. The Assessing Officer could tak: at the apple, issuing notice after notice whenevr multiple bites r convenient; transforming what should be a time-bound procrl :ding in to an endless cycle. This would leave taxpayers like the retitioner in a perpetual state of anxiety, never knowing when the natter is tru ly closed. Such a result would be antithetical to the vr ry purpose of Section 153(2) and would render its protections entir-r ly hollow.

19. Further, when a statutory authority lacks jurisrl :tion to act in the First place and the affected party need not exher st a lternative remedies before seeking constitutional relief. Tl require the petitioner to go through the entire reassessment f,r ccess, gather f and submit documents, attend hearings, and then pursue appeals through multiple levels of the Income Tax hierarchy would be forcing them to participate in proceedings that are void from the inception. This would not only waste months or even years of the petitioner's time and resources but would also legitimize an action that the law simply does not authorize. The principles of natural justice demand that when an authority acts beyond its jurisdiction, immediate judicial intervention is not just appropriate but necessary. The writ jurisdiction exists precisely for situations like this, where fundamental statutory rights are at stake and where requiring a litigant to proceed through prolonged proceedings would itself constitute an injustice.

20. In light of all these considerations, this Bench concludes that the second notlce dated 03.10.2008, is wholly without jurisdiction, illegal, and contrary to the clear provisions of Sections 1,47, 148, and 153(2) of the Act. The second notice dated 03.10.2008 is accordingly set aside / quashed holding that the assessment for the year 2003-04 is hereby declared to have attained finality upon the expiry of the statutory deadline on 31.12.2OO7 .

21. Accordingly, the instant writ petition stands allowed. .,F Page 19 ot 19

22. As a seqLel, miscellaneous petitions pending if r ny, shall stand closed. Howe\/er, there shall be no order as to costs. That Rule Nisi has been made absolute as above' Witness THE HON'BLE THE CHIEF JUSTICE AP-ARESH KIJ VIAR SINGH' on this FRIDAY, THE TwENw ercuin-dni or r'rbvervreen rwo rHc t sAND AND TWENTY SRINIVASA REDDY ANT REGISTRAR FIVE SD/-,o, ASS I //TRUE COPY// S TION OFFICER To I The Deoutv Commissioner of lncome Tax' Circle 2 (4' *h Floor' Aayakar Bh;;;: Bisheerbagh, HYderabad' 6;;'ci i-o sir SnAvi, Advocate [oPUC] 6nE ;; i" iri'. rsuurtnn, Two CD Cooies "sn sc]oR iNCoM rAX I )PUCI 2 J 4 PSK. LS %/ HIGH COURT DATED:2811112025 ORDER WP.No.24576 of 2008 rEs t4 ( ( J lil m2[ o() u * I ;/ ALLOWING THE WRIT PETITION WITHOUT COSTS &^^,