Naresh Reddy Manchireddy v. 1. The Union of lndia

THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA WRIT PETITION No.3 t7t9 0B 2024 ORDER: (per Hon'ble Sri Justice P'Sam Koshy) Heard Mr. T.Pradyoth, learned counsel for the petitioner' Mr. B. Mukherjee, learned counsel representing the Union of tndia for respondent No.t and Mr. K.Sudhakar Reddy' learned Senior Standing Counsel for the Income Tax Department for respondent Nos.2 & 3. Perused the record.

2. This is a writ petition where the proceedings are either challenged to the notices which were issued under Section t48A andl48ofthelncomeTaxAct,lg6l(forshort'theAct')orthe assessment orden 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 Oflicer' wlereas in terms of the amendment that was brought to the Income Tax Act by way 2 of Finance Act, 2021 w.e.f., 01.04.2021 onward,s, proceedings under Section l48A of the Act as also under Section l4g ofthe Act ought to l'rave also been issued and proceede<l in a faceless manner.

4. The contention of the petitioner is that the issue of proceedings being in violation of the Finance Act, 2O2l i.e., the impugned notices under Section l4gA and Section 14g of the Act not being issued in a faceless manner, have already been dealt with and decided by rhis Court in the case of k.ANKANALA RAVINDRA REDDY vs. INCOME_TAX OFFICIIRT decided on 14.09.202i whereby a batch of writ petitions were allowed and the proceedings rnitiated under Section r4gA as arso uder Section 148 olthe Acr u,ere held to be bad with consequential reliefs on the ground olit being in violation of the provisions of St:ction I5lA of the Act read with Notification lg/2022 dated29.03.2022. The said judgment passed by this court has also been subsequentry folrowed in a large number or writ petitions which were ailorved on similar 't(2021) 156 raxurann.com tTg (Telangana)] 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 Court in the case of HEXAWARE TECHNOLOGIES LTD., VS. ASSISTANT COMMISSIONER OF INCOME TAX & OTIIERS2, Gauhati High Court in the case of RAM NARAYAN SAH vs. UNION OF INDIA3, Punjab and Haryana High Court in the case of JATINDER SINGH BANGU vs. UNION OF INDI#, and Telangana High Court in the case of SRI VENKATARAMANA REDDY PATLOOLA VS. DEPUTY COMMISSIOI\ER OF INCOME TAX5 where the issue was in respect of international taxation, Bombay High Court in the case of ABI{IN ANILKUMAR SIIAH vs. INCOME TAX OFFICER' INTERNATIONAL TAXATION6 which is again on intemational taxation and central circle, High Court of Himachat Pradesh in the case of GOVIND SINGH vs. INCOME TAX OFFICERT, Gujarat High Court in the case of MANSUKHBHAI ' lzoz+1464 trR 430 (Bom) 'l(2024) [56 taxmann.com 478 (Gauhati)] ^tQ024) 165 taxmann.com 115 @unjab &Haryana)) '12024\ 167 taxmann.com 4l I (Telangana)l " 12024) 166 taxmann.com 679 (Bombay)l '[2024) 165 taxmann.com 113 (Himachal Pradesh)] 4 DAHYABHAT RADADIYA vs. INCoME TAx OFF,ICE& *ARD 3(3x5)ti, Jharkand High court in the case of sIfyAM SUNDAR SAW vs. UNION OF INDIAe, Rajasthar High Court in the case of SHARDA DEVI CHHAJER vs. II\COME TAX OFFICER & ANOTHER and batch of writ peritionsro v/hich stood decided on 19.03.2024. Simitar views have aiso been taken by the Division Bench of Calcutta High Court in the case of GIRDHAR GOPAL DALMIA vs. UNION OF.n,tDIA & ORS (M.A.T 1690 of 2023), decided on25.09.2024.

6. Even though rhe same issue having been deci,led by a large number of High Courts, we are still confronted with large filing of identical matters on daily basis ranging between 5 to l0 w.it petitions. That upon the instructions being sought ftom the Department, rhey have been taking a solitary gr<lund 1121 the decision ol the Bornbay High Court in the case of Hoawar" Technologies Lt(t-, (2 supra) as also the one which has been decided by this Courr in rhe case of Kanakala Ravindra Reddl 8202+ scc online cuj 4012 '2025 SCC Online Jl.tar 2gl 'o 12023, RJ -JD :4984-DB l 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 Court is seized of the matter. In addition, there are about 1200 SLPs also filed arising out ofthe 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 Hon'ble Supreme Court in any of these matters pending before it. Meanwhile, fresh 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 High Court itselt

8. On the one hand, even though the order of this Court that was passed as early as on 14.09.2023 arrd 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 hotd back issuance of notice under Section 148A and under Section 148 of the Act by the jurisdictional Assessing Officer, rather the authorities concemed in the teeth of series of decisions 6 by alt the major High Courrs ln India 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 [rcome Tax Act pursuant to the Finance Act,2020 as also the Financr: ActZ02l.

9. Upon a query being put as to why can't this tvrit petition be disposed of in the teeth of the decision rendered blz this Court in the case of Kanakala Ravindro Reddy (l supra), Ieamed Standing Counsel for the Income Tax Department contends that those would unnecessarily burden the Income Tax Department where they would be required to file equal number of SLps before the Hon'ble Supreme Court and it would be further burdening the exchequer of the Union of India. [t was also the contention of the leamed Standing Counsel thar no prejudice would b,: caused to the interest of the petitioners in case if this writ petition is kept pending till the finalization ol the SLps pending befonr the Hon,ble Supreme Court and the lact that the petitioner is al-eady enjoying the benefit of interim protection. Nonetheless, on the earlier query of this Court as to why the Income Tax Department have not come out with a mechanism to issue appropriate instruct ons 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 High Courts.

10. As a result o[ 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 Income Tax authorities concemed are still even now in 2025 atso initiating proceedings in contravention to the provisions of Section l5tA 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 which otherwise stands squarely covered by the judgment ol 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 Ravindra Reddy (l supra), the Division Bench while 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 strictly in accordance with the amended provisions of the Act, as amended by the Finance A.ct, 2020 and the Finance Act, 2021. The petitioner assessee woulri be entitled to challenge or raise the other legal objections if the Revenue initiates fresh proceedings. The Department has made no endeavour in availing the said liberty that was reserved for the Rerenue. On the contrary, they have been still sticking on to the stand, which this High Court as well as many other High Courts alrerdy held to be bad. I l. It appears that because ol the aforesaid liberty rhat this High Court had granted permitting the Revenue lor initiating fiesh proceedings as a one-time measure in a faceles:i rnanner, the Income Tax Department wants to take advantage c I the same by protracting these proceedings which would enable them to meet the limitation that would otherwise come in the way. L ikewise, if the writ petition is kept pending for a considerable long period of time and f,rnally at a later stage if the Hon'ble Supreme (lourt confirms the decision taken by this High Court as also by rhe other High Courts in which the SLPs are still pending, thr: lncome Tax 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 benef,rcial 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 setin Kanakala Ravindra Reddy (l supra), is a matter of grave concern. The Income Tax Department's persistent initiation of fresh proceed i ngs, 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 questiorrs about the administrative efficiency and the respect fbr judicial pronouncements, particularly when this Court has already provided a balanced approach by preserving both the Revenue's rights and assesses lnterests.

13. Another aspect which needs to be considered is that in fact it should have been realized by the Income Tax Departinent itself and should have found out via media in ensuring that proceedings under Sections 148-4 and 148 should not have been issued in a faceless rnaluer, at least till the Hon'ble Suprerne C turt decide the twelve hundred (1200) odd SLPs which it is already seized of or, at least the Income Tax Department should have lbund out some remedial steps to ensure that wherever the author itics 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 matter further intimating tl e assessee that they shall initiate appropriate proceedings only afie.rhe SLP's are decided by the Hon'ble Supreme Coud on the vcrv same issue. This again, the Income Tax Department, has nor beer able to give a convincing reply, except for the lact that such a dr:cision 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 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 daity basis. Admittedly, in spite of the matter before the Hon'bte 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 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 further worse, the Income Tax Department is showing audacity by issuing notices continuously under Sections 148-A 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 TAX", on an issue wherher it was justifiable on the part of the Income Tax Departntent 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 righfly drawn out attenlion to the decision of this Court in Commissioner of lncome Tax vs. Smt. Godavaridevi Sarafr2 as also the recent decision cf the co- ordinate Bench of this Court in Samp Furniture (p) Ltd. v. tTO'3 of which one of us (Justice G.S. Kulkarni) was a memb-.r, wherein the Court categorically observed that the Revenue ,raving not "accepted'' the judgment of the High Court would not mean that tilt the same is set aside in a manner known to law, it woLid loose its binding force. Referring to the decision of the Suprerre Court in Union of lndia vs. Kamlakshi Finance Corporation Ltd.'., the Court observed that the approach of the of{icials of Revenue of treating decisions being "not acceptable" was critici;.ed by the Supreme Court. ln such decision, following are ttre relevant observations made by the Supreme Cou(. (2025) 170 taxmann.com 422 (Bombay)l 19781 I l3 ITR 589 (Bombay) 20241 165 taxmann.com 581/300 Taxman 452 (Bornba1.) 19921 taxrnann.com 16/55 ELT 433 (SC) "I,, ,, ,, I I I 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 ovedooks is that we are not conc€rned here with the correctness or othenrvise 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 mnduct 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 h(7her to them in the appellate hierarchy. lt cannot be too vehernently 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 iurisdiction 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 judicial discipline require that the orders of the higher appellate aulhorities 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 obiectionable 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 competenl court. lf this healthy 14 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 this aspect at some length, because it has been suggested by the learned Additional Solicitor General that the observa tions made by the High Court, have been harsh orr the officers. lt is clear that the observations of the High Court, seemingly vehement, and apparenfly unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allow;d to become widespread, could result in considerable harassment to the assesses-public without any br:nefit to the Revenue. We would like to say thal the department should take these observations in the proper spirit. The observations of the High ,lourt should be kept in mind in future and the utmost rogard should be paid by the adjudicating authorities anC the appellate authorities to the requirements of judicial discipline and the need for giving effect to the crders of the higher appellate authorities which are bilding on them."

15. What is worrying this Bench more is thr. Iact that an endeavour is being made whole heartedly to ensure nor to generate further litigation on issues which have been laid to rest b1, a large number of High Courts all of whom have taken a consistent stand that the action of the Income Tax Department being violati'e of the 15 Finance Act,2020 and Finance Act,202l . Now, in order to protect the interest ofthe Revenue as also that ofthe assessee, it would be trite at this juncture, if we dispose of the writ petition with an observation/direction that the disposal ofthe 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 [ncome 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 fortif,red 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 ofas a covered matter.

17. So far as the interest of the Revenue is concerned, we are of the considered opinion that the interest o[ the Revenue has already been considered and protected, as has been observed in paragraphs t6 36,,37 and 38 of the order which, for ready reference, is reproduced hereunder:

36. For ail the aforesaici reasons, the impugne( notices issued and the proceedings drawn by the respondent- Department is neither tenable, nor sus.ainable. The notices so issued and the procedure adopk)d being per se illegal, deserves to be and are accordingly set aside/quashed. As a consequence, all the inrpugned orders getting quashed, the consequential orders passed by the respondent-Department pursuant to the notices issued under Section 147 and 1zB would also get quashed and it is ordered accordingly. The reitson we are quashing the consequential order is on the principles that when the initiation of the proceedings itr;elf was procedurally wrong, the subsequent orders also gets nullified automatically.

37. The preliminary obiection raised by the pet tioner is sustained and all these writ petitions stands alk)wed on this very jurisdictional issue. Since the impugnec notices and orders are getting quashed on the l)oint of jurisdiction, we are not inclined to proceed furlher and decide the other issues raised by the petitionr:r which stands reserved to be raised and contenderj in an appropriate proceedings.

38. Since the Hon'ble Supreme Court had, in he case of Ashish Agarwal, supra, as a one-time rneasure exercising the powers under Article 142 of the Constrtution of lndia, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, tre right L7 conferred on the Revenue would remain resbrved 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 ol the fact that the earlier order of this High Couft in the case ol Konakala Rtvindra Reddy (l supra) is subjected to challenge before the Hon'ble Supreme Court in SLP No.3574 of 2024, prelerred by the Income Tax Department, we make it clear that allowing o[ the instant writ petition is subject to outcome of the albresaid SLP preferred by the Revenue against the decision o[ this High Coun in the case of Kanakala Ravindra Reddy (l supra) -l'his. in othcr rvords, would mean that either of the parties, if thel so \\'iurt. rna) rnove an appropriate petition seeking revival of this rvrit pctition in the light of the decision of the Hon'ble Suprctne Clourt in the pcnding SLP on the very same issue.

19. Accordingly, the instant writ petition stands a[lowed in t'avour of thc assessee so far as the issue of jurisdiction IS corrccmed. As a consequence, the impugned notice undcr challcngc urrrlcr Scctions 148-A and 148 stands set aside/quashecl 18 The consequential orders, if any, also stand set asirle/quashed in similar terms as have been passed by this High Court in the case of Kankanala Ravindrq Rcddy (l supra). There shall lte no order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed //TRUE COPY// SD/. A. JAYASREE ASSISTANT REGISTRAR SEC N OFFICER To New Delhi. Hyderabad - 500004 Department, New Delhi.

1. The S-ecretary, union of rndia, Department of Revenue, Ministry of Finance, 2. The lncome Tax Officer, Ward t 5(.1 ). lT Towers, AC Guards, Masab Tank, 3. The Assessment Untt. Nationai Faceless Assessment C)entre, lncome Tax 4. One CC to SRt T.PRADYOTH. Advocate tOpUCl 5. one cc to SRr cADr PRAVEEN KUruAR, DEpury sCrlrcrroR GENERAL OF INDIA Advocare [OpUC] 6. one cc to SRr K SUDHAKAR REDDY, LEARNED sErJIoR STANDTNG COUNSEL FOR THE TNCOME TAX DEpARTMe trtl, Atvocaie iOi,UCI 7. Two CD Copies SA GJP (k/ t, '.\\. .t' 10 StP \..' HIGH COURT DATED:0210s12025 ORDER WP.No.31719 of 2024 ALLOWING THE W.P WITHOUT COSTS. "\'d &F'