Nandimalla Rakesh Reddy v. The National Faceless Assessrnent Centre

Counsel for the Respondents: G SAMPADA (SC FOR CENTRAL GOVT) The Court made the following: ORDER ; I * I I THE HONOTJRABLE SRI JUSTICE P.SAM KOSHY AND THE TIONOURABLE SRT JUSTICE NA'RSING RAO NANDIKONDA WRIT PETITIO N No.309 85 0F 2024 9BDEB, (per Hon'ble Sri Justice Narsing Rao Nandilconla) Heard Mr. M.Naga Deepak, Iearned counsel for the petitioner and Ms. B.Sapna Reddy, leamed Junior Standing Counsel for the Income Tax Department for respondent Nos'l to 3 Perused 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 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 148A of the Act and the subsequent initiation of proceedings under Section 148 of the Act by the jurisdictional Assessing Officer' whereas in terms of the amesdruent that was brought to the Income Tax Act by way 2 of Finance Act, 2021 w.e.f., 01.04.2021 onwards, proceedings under Section l4gA ofthe Act as also under Section I4g ofthe 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 Section l4gA and Section l4g of the Act not being issued in a laceless manner, have already been dealt with and decided by this Court in rhe case of KANKANALA RAVINDRA REDDY vs. INCOME_TAX OFFICERT decided on 14-09.2023 whereby a batch of writ petitions were alrowed and the proceedings initiated under Section l4gA as also under section 148 of the Act were hekl to be bad with consequential reliefs on the ground of it being in violation of the provisions olsection l5lA of the Act read with Norification lgl2l22 dated 29.03.2022. The said judgment passed by this Court has also been subsequently followed in a large number of rvrit petitions which were allowed on similar terrns ' LQ023) 1 56 raxmann.com I 78 (Telangana)l 3

5. Down the line, we frnd 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 IIEXAWARE TECHNOLOGIES LTD', vs' ASSISTANT COMMISSIONER oFINCOMETAx&OTHERS2,GauhatiHighCourtinthecase of RAM NARAYAN SAH vs' UNION OF INDB- r' Punjab and Haryana High Court in the case of JATINDER SINGH BANGU vs. UNION OF lNDlA4, and Telangana High Court in the case of SRI VENKATARAMANA REDDY PATLOOLAVS. DEPUTY COMMISSIONER OI' INCOME TAX5 where the issue was in respect of intemational taxation, Bombay High Court in the case of ABHIN ANILKUMAR SHAH VS. TNCOME TAX OFEICER, INTERNATIONAL TAXATION6 which is again on international taxation and central circle, High Court of Himachal Pradesh in the case of GOVIND SINGI{ vs' INCOME TAX OFFICEfl' Gujarat High Court in the case of MANSUKHBIIAI 2 oozq1464 lrR 430 (Bom) '[(2024) 156 taxmann.conr 478 (Gauhatrrt " iizoaoi 165 taxmann.com I t 5 (Punjab & Harvana)l 'iioz+.t roz hxmann.com 4l t (Telangana)l " 12024\ 166 taxmann.com 679 (Bombay)l . - 'i;;;;; i;; i^*'"u*,..o* I ll (HirnachalPradesh)l 4 DAI{YABIIAI RADADIYA vs. TNCOME TAX OFFTCE& WARD 3(3XO8, Jharkand High Court in the case of SIIyAM SUNDAR SAW vs. UNION OF INDIAe, Rajasthan High Court in the case of SIIARDA DEVI CHHAJER vs. INCOME TAX OFFICER & AIrIOTHER and batch of writ petitionsr0 which stood decided on 19.03.2024. Similar views have also fesn 1ak., by the Division Bench of Calcutta High Court in the case of GIRDIIAR GOPAL DALMIA vs. UNION OF INDIA & ORS (M.A.T 1690 of 2023),decided on25.09.2024.

6. Even though the same issue having been decided by a large number of High Courts, we are still confronted with large filing of identical matters on daily basis ranging between 5 to I 0 writ petitions. That upon the instructions being sought from the Department, they have been taking a solitary ground that the decision of the Bombay High Court in the case of Hexaware Technologies Ltd., (2 supra) as also the one which has been deci(ed by this Courr in the case of Kanakala Ravindru Reddy t 82024 SCC Online Guj 4012 '2025 SCC Online Jhar 287 72023 : RI_JD:4984-DBl I o 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 frled arising out ofthe same issue being decided by various High Courts. '1 . 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 Hon'ble Supreme Court in any of these matters pending before it. Meanwhile, frestr writ petitions of identical nature are being piled up before this Bench on daily basis and the pendency is getting increased on matter whict otherwise has already been dealt and decided by this very High Court itself'

8. On the one hand, even though the order of this Court that was passed as early as on 14.09.2023 and more 16 months have lapsed, tilt date, we do not find any remedial steps having been taken by the lncome Tax Department to take appropriate steps to either hotd back issuance of notice under Section l48A and under Section 148 ol the Act by the jurisdictional Assessing Officer, rather the authorities concerned in the teeth of series of decisions 6 by all the major High Courts in India are continuously still initiating proceedings under Section l4gA of the Act and also initiating proceedings under Section l4g of the Act in contravention to the amendments brought into the Income Tax Act pursuant to the Finance Act, 2020 as also the Finance Act 2021.

9. Upon a query being put as to why can't this writ petirion be disposed of in the teeth of the decision rendered by this Court in the case ol- Kanakula Ravindra Reddy (1 supra), leamed Standing Counsel for the Income Tax Deparfinent contends that those would unnecessarily burden the Income Tax Department where they would be required to file equal numkr of SLps befbre the Hon'ble Supreme Court and it would be further burdening the cxchcquer of the Union of India. It was also the contention of the leamed Standing Counsel that no prejudice would be caused to the interest oIthe petitioners in case ifthis writ petition is kepr pending till the finalization of the SLps pending before rhe Hon,ble Supreme Court and the fact that the petitioner is already enjoying the benefit of interim protection. Nonetheless, on the esrliq qusry of this Court as to why the Income Tax Departrnent have not come out with a mechanism ro issue appropriate instrlj]Fns or to rake 7 appropriate steps in ensuring that proceedings under Section 148A of the Act as also the assessment orders under Section 148 of the Act are kept in a hold in the light ofthe decisions dedcided by the various High Courts, it was submitted by the 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 tndia and cannot be limited to any of these jurisdictional High Courts' l0.Asaresultofwhich,whatwearefacingissteepincreaseof litigation day in and day out even though various orders have been passed by this High Court altowing writ petitions on the very same issue. The Income'I'ax authorities concemed are still even now in 2025 also initiating proceedings in contravention to the provisions of Section 15lA of the Act and as a result by now' more than 600 to 700 petitions have been already got piled up before this High court on an issue whir:n otherwise stands squarely covered by the judgment of this Court in the case of Kanakala Ravindra Reddy (1 supra). What is also surprising is the lact that though while allowing the writ petitions in the case of Kanakula Ravindra Reddy (1 supra), the Division Bench white reserving the right of the Revenue, has also protected the interest of the petitioners 8 insofar as the liberty which was granted to the Revenue for initiating fresh proceedings strictry in accordance with the amended provisions of the 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 legal objections ifthe Revenue initiates fresh proceedings. The Department has made no endeavour in availing the said liberty that was reserved for the Revenue. On the contrary, rhey have been still sticking on to the stand, which this High Courr as well as many other High Courts already held to be I l. It appears rhar because of the aforesaid Iiberty that this Iligh Court had granted permitting the Revenue for initiating fiesh proceedings as a one-time measure in a faceless manner, tlre Income Tax Department wants to take advantage of the same by protracti,g thcse proceedings which would enable them to meet the limitation that would otherwise come in the way. Likewise, if the writ petition is kept pending for a considerable long period of tirne and finally at a later stage if the Hon'ble Supreme Court confinns the decision taken by this High Court as also by the other High Courts in which the S[_ps are still pending, the Income Ta:r 9 Department would get the advantage of the liberty that is otherwise protected in favour of the Revenue for initiation of fresh proceedings from the disposal of these matters at a much later stage which would be advantageous and beneficial to the Revenue and would be equally disadvantageous and detrimental so far as interest of the assesses are concemed. As a consequence, the Income Tax 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 it Kanakala Ravindra Reddy (1 supra), is a matter of grave concem. The Income Tax Depaftment's persistent initiation of fresh proceedings, disregarding the established judicial pronouncements, has led to an unprecedented surge in litigation with over 600-700 petitions piting 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 10 position. Such conduct raises serious questions about the administrative efficiency and the respect for judicial pronouncements, particularly when this Court has already provided a balanced approach by preserving both the Revenue,s rights and assesses rnterests

13. Another aspect which needs to be considered is that in fact it should have been realized by the Income Tax Department itself and should have found out via media in ensuring that proceedings under Sections 148-A and 148 should not have been issued in a faceless manner, at least till the Hon'ble Supreme Court decide the fwelve hundred ( 1200) odd SLPs which it is already seized of or, at least the Income Tax Department should have found out some remedial steps to ensure that wherever the authorities intend to initiate proceedings under Sections 148-A and 148, other than in a faceless manner, the proceedings should have been deferred without precipitating the rnatter further intimating the assessee that they shalt initiate appropriate proceedings only after the SLP,s are decided by the tlon'ble Supreme Court on the very same issue. This again, the Income Tax Department, has not been able to give a convincing replv, except for the fact that such a decision if at all -4 has to be taken, has to be taken for the whole of India, and which otherwise has to be by way of a policy decision and that too at the level of Central Board of Direct Taxes. Though the leamed Standing Counsel for the Income Tax Department contended that the 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 doors of this High Court resulting in filing of hundreds of new writ petitions which in the long run not only affects the disposal of the writ petitions but also consumes substantial time of the Bench in hearing these matters again and again on daily basis. Admittedly, in spite of the mattcr belore the Hon'ble Supreme Court having been taken on many occasions, the Hon'ble Supreme Court which is seized of the matter has been reluctant in granting any interim protection to the Income Tax Department. Yet, the authorities concerned at the State level are not ready to accept the verdict passed by a majority of tligh Courts of different States on the same issue; and to make things further worse, the lncome Tax Department is showing audacity by issuing notices continuously under Sections 148-,{ and = 72 148 through the jurisdictional Assessing Officer whereas it ought to have been only in the faceless manner.

14. In the case of BANK OF INDIA vs. ASSISTANT COMMISSIONER, INCOME TAXIr, on an issue whether it was justiflable on the part of the Income Tax Dqraftment in not following an order passed by the adjudicating authority only on the ground that the appeals are pending, the Division Bench of the High Court of Bombay held at paragraph No.25 as under, viz., : "25. Mr. Paridwalla has rightly drawn out attention to the decision of this Court in Commissioner of lncome Tax vs. Smt. Godavaridevi Sarafl2 as also the recent decision of the co- ordinate Bench of this Court in Samp Furniture (P) ttd. v. lTO13 of which one of us (Justice G.S. Kulkarni) was a member, wherein the Court categorically observed that lhe Revenue having not "accepted" the judgment of the High court would not mean 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 Gourt in Union of lndia vs. Kamlakshi Finance Corporation Ltd.'4, the Court observed that the approach of the officials of Revenue of treating decisions being "not acceptable" was criticized by the Supreme Court. ln such decision, foliowing are the relevant observations made by the Supreme Court. 170 taxmann.com 412 ( Bornbay) j t,'-l{zOzsl " U9781 I I3 ITR 589 lBombay) " 7202+1165 taxmann.com 5tt t/300 Taxman 452 (Bombayl 'o lSeZltaxmaffr.com t6/55 EI-T 433 (SC) L3 l' "6. Sd ReddY officers were is perhaps right in saying that the not actuated bY anY mala fides in impugned orders. TheY PerhaPs passing the 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 higher to them in the appellate hierarchy lt cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasijudicial issues before them' revenue officers are bound by the decisions of the appellate authorities The order of the Appellte Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon ihe 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 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 sugpended by a competent court lf this healthy \'\ 74 rule is not followed, the result will only be undue harassment to assesses and chaos in administration of tax laws aspect al some rength, by the rearned

12. We have deall with because it has been athis Additionar Soricitor o"n"'nn"ttuo made by the High ""r*,''i'rr:";"1"r::T::til: officers. lt is clear that th, oot"*"t'ons of the High court, seemingry ,un." and apparently unparatabre ,o ,n" *"r"nra'unt' a tendency in revenue ;;l[ "Jll[,iiTil::,: become widespread, could result in considerable harassment to the assesses ro rhe Revenue *",,"J;t:;"-',':"::;T::Ttj department should take th proper spirit. *," oo.u*"r"ilir"::T:Tl.':"j; should be kept in mind in futr shourd be paid by the ".,,#,irt"lil,[J::iil: appellate authorities to the disciptine and the need ;;,r# l?::,',t: ;: :T:: of the higher appellate autho trities 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 litigation on issues which have been laid to rest by a large number of High Courts all ofwhom have take n a consistent stand that the action of the Income Tax Department being violative of the 15 Finance /III,ZOZO and Finance Act,202l' Now' in order to protect the interest of the Revenue as also that of the assessee' it would be trite at this juncture, if we dispose of the writ petition with an observation/direction that the disposal of the instant writ petition in terms of the judgment rendered by this High Court in the case of Kankanala Ravindra Reddy (l supra) shall however be subject to the outcome of the SLPs which were filed by the Income Tax Department and which is pending consideration before the Hon'ble Supreme Court.

16. In the given facts and circumstances' this Bench is of the considered opinion that unless and until we do not timely dispose of matters which are 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 further be burdened which otherwise can be decided and disposed of as 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 protectcd, as has been observed in paragraphs '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_ 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 aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by lhe respondent-Department pursuant to the notices issued under Section 147 and 14g 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 atso gets nullified automatically.

37. The preliminary objection raised by the petitioner rs sustained and all these writ petitions stands a owed on this very jurisdictional issue. Since the impugned notices and orders are gefting quashed on the point of jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petitroner which stands reserved to be raised and contended in an appropriate proceedings. 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, permifted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right I I 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 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 Kanakala Ravindra Reddy (l supra) is subjected to challenge before the Hon'ble Supreme Court in SLP No'3574 of 2024' preferred by the Income Tax Department, we make it clear that allowing of the instant writ petition is subject to outcome of the aforesaid SLP prefened by the Revenue against the decision of this High Court in the case of Ksnakalu Ravindra Reddy (l stpra)' This, in other words, would mean that either of the parties' if they so want, may move an appropriate petition seeking revival of this writ petition in the light of the decision of the Hon'ble Supreme Court in the pending SLP on the very same issue'

19. Accordingly, the instant writ petition stands allowed in favouroftheassesseesofarastheissueofjurisdictionis concemed. As a consequenc€, the impugned notice under challenge under Sections 148-A and 148 stands set aside/quashed' 18 The consequential orders, if any, also stand set aside/quashed in similar terms as have been passed by this High Court in the case of Kankanala Ravindra Reddy (l supra). There shall be no order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed \ To, //TRUE COPY// t''- o''?arooilTT..J,t+ff[,/ SEC N OFFTCER 2 3 4 5 o aceless Assessment Centre lncome-tax Department, New

1. The National F Delhi, tndia lncome Tax Officer, tTO Ward Mahabubn agar The Assess ,tn Governmen ,N One CC to One CC to Ms. Bo karo Two CD Copies ?+ ment Unit come Tax Department Ministry of Finance, t of lndia ew Delhi Sri M. Naga-Deepak, Advoca te [OPUC Sapna Reddy (Jr. SC for lncome Tax) [OPUC] TJ PVL HIGH COURT DATED:2810412025 ORDER WP.No.30985 of 2024 ALLOWING THE WRIT PETITION WITHOUT COSTS A- n' 7 ) \