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

THE HONOURABLE SRI JT,ISTICE P.SAM KOSHY AND THE HONOURABLE SRIJUSTICE NARSING RAO NANDIKONDA WRIT PETITION No.32124 of2O24 GDEB, (per Hon'ble Sri Justica P.Sam Koshy) Heard Mr. T.Chaitanya Ku6ar, learned counsel for the petitioner and Ms.J.Sunitha, learned Junior Standing Counsel for the lncome Tax Department for the respondents. Perused the record.

2. This is a writ petition wherp the proceedings are either challenged to the notices which were issued under Section 148A and 148 of the Income 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 taktin up today only on one of the grounds, that the notices issued under Section 148,{ of the Act and the subsequent initiation ofprodeedings under Section 148 of the Act by the jurisdictional Assessing Ofticer, whereas in terms of the amendment that was brought to the Income Tax Act by way of Finance Act, 2021 r,,.e.t.. 0t.0{.202 I onwards, proceedings l i ; I t I 3i I II I 2 under Section 148,{ 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 Section 148A and Sect.ion 148 of the Act not being issued in a faceress manner, have arready 6"sn dg2[t rvith and decided by this Court in the case of KANKANALA RAVINDRA REDDY vs' INCOME-TAX OFFICERT decided on 14.09.2023whereby a batch of writ petitions were allowed and the proceedings initiated under Section 148,4 e's also undcr Section 148 of the Act were held to be bad with consecluential reliels on the ground of it being in violation of the provisior's ol'section I 5l A ol' the Act read with Notification l}lzlz2dated l9 0l'2011 'thc said judgment passed by this Court has also been subscque ntl'v tollou'ed in a large number of writ petitions which were allorved on sirlilar terms- ,[(202]) 156 taxmann com 178 (Telangana)l <--."" I I I I ! I ! i ! 1 i i 1 ! I It i I t t I t 3

5. Down the line, we find that the same issue has also been decided against the Revenue by vanous High Courts i.e., by the Bombay High Court in the case of HEXAWARE TECHNOLOGIES LTD., vs. ASS|STANT COMMISSIONER OF INCOME TAX & OTHERS2, Gauhati High Court in the case of RAM NARAYAN SAH vs. UNtrON OF INDIA3, Punjab and Haryana High Court in the case of JATINDER SINGH BANGU vs. UNION OF INDIA4, and Telangana High Court in the case of SRI YENKATARAMANA REDDY PATLOOLA VS. DEPUTY COMMISSIONER OF INCOME TAX5 where the issue was in respect of intemational taxation, eorilUay High Court in the case of ABHIN ANILKUMAR SHAH vs. INCOME TAX OFFICER' INTERNATIONAL TAXATION6 which is again on international taxation and central circle, High Court of Himachal Pradesh in the case of GOVIND SINGH ns. li.lcorrle TAx oFFICERT, Gujarat High Court in the casc of' MANSUKHBHAI '1zoz+1464 ITR 430 (Bom) ' [(2024) I 56 taxmann.com 478 (Gauhatti) | '[(2024) 165 taxmann.com I l5 (Punjab & I laryana)] 'L2024) 167 taxmann.com 4l I ( l'clangana)l " 12024) 166 taxmann.com 679 (Bonrba;v )l ' 12024) 165 taxmann.com I l3 (Hinrachul Pradesh)l 4 DAHYABHAI RADADIYA vs. INCOME 'ltAX OFFICER' WARD 3(3)(5)8, Jharkand High Court in the case of SHYAM SUNDAR SAW vs. UNION OF INDIAe, Rajasthan High Court in the case of SHARDA DEVI CHHAJER vs' INCOME TAX OFFICER & ANOTHER and batch of writ petitions'o which stood decided on 19.03.2024. Similar views ha'r'e also been taken by the Division Bench of Calcutta High Court in the case of GIRDHAR GOPAL DALMIA vs.IINION 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 nurnber of High Courts, we are still confronted with large filing ol identical matters on daily basis ranging betr:r'een 5 to l0 writ petitions. That upon the instructions being sought ttorn the Departrncnt, they have been taking a solitary ground that the decision of the Bombay High Court in the r:ase of Hantworc Technologies Ltd., (2 supra) as also the one which has been dccided by this Court in the case of Kanakalu Rsvindrfl Redd.r 8202+ scc onl-ine Guj 4012 " 1025 SCCI Online Jhar 287 oJ2o23, R.t-JD:4984-DBi ' i E 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 filed arising out of the same issue being decided by various High Courts. l. To a query being put to the learned counsel for the Revenue, they have categorically accepted thq fact that there is no interim order granted by the Hon'ble Suppeme Court in any of these matters pending before it. Meanvyhile, fresh writ petitions o f identical nature are being piled up before this Bench on daily basis and the pendency is getting increasgd on matter which otherwise has already been dealt and decided by this very High Court itself.

8. On the one hand, even though the order ol this Court that rvas passed as early as on 14.09.2023 and more 16 rnonths have Iapsed, till date, we do not find an| remedial steps having been taken by the Income Tax Departmerit to take appropriate sreps to either hold back issuance of notice qnder Section l48A and under Section 148 of the Act by the jurlsdictional Assessing Officcr, rather the authorities concemed in tllre teeth of series ol decisions 6 \ by all the major High Courts in 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 Income Tax Act pursuant to the F inance Acl, 2020 as also the Finrmce Act 2021 . 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 ol Kanakala Ravindrs Reddy (l supra'l, leamed Standing Counsel lor the Income Tax Department contencls that those would unnecessarily burden the Income Tax Department where they would be lcquired to file equal number of SLPs before the Hon'ble Supreme Court and it would be further burdening the exchequer ol'thc Union of India. It was also the contention of thc learned Stancling Counsel that no prejudice would be caused to the intercst of thc petitioners in case if this writ petition is kept pending till the llnalization ol the SLPs pending br:fore the Hon'ble Suprerne Court and the fact that the petitioner is already enjoying the benclit of- interim protection. Nonetheless, r>n the earlier query of this Courr as to why the Income Tax Department have not comc out with a mechattistn 1o issue appropriate ins'fructions or to takc 7 appropriate steps in ensuring that pfoceedings under Section l48A of the Act as also the ass€ssrnent 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 onlyl 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 of which, what w$ are facing is steep increase of litigation day in and day out even ttlough various orders have been passed by this High Court allowing tvlTit petitions on the very same issue. I'he Income Tax authorities qoncemed are still even now in 2025 also initiating proceedings in pontravention to the provisions of Section I 5 I A of the Act and as a result by now, more than 600 to 700 pctitions have been already got piled up before this High ('oLu1 on an issue which otherwise Ftands squarely covered by the jrrdgment of this Court in the case of Kanaksla Ravindra Redd_1, ( I supra). What is also surprising is the fact that though while allorving the writ petitions in the case of Kanakslt Ravindra Rctldy (l supra), the Division BenQh while reserving the right ol thc Revenue, has also protected the interest of the petitioners 8 \ insofar as the liberty wh ich was granted to the Revenue for initiating fresh proceedings strictly in accordance with the amended provisions of the Act, as amended by the Financ e Act, 2020 and the Finance Act,202l . The petitioner assessee wtuld 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 riberty that was reserved for the Revenue. on the contrary, they have been stil sticking on to the stand, which this High Court as well as nrany other High Courts already held to be l I1. It appears rhar because ofthe aforesaid libelty that this High Court had granted perrnitting the Revenue for initiating fresh proceedings as a one-trme lreasure in a faceklss manner, the Income Tax l)epartrnent wants to take advantage of the same by protracting thcse procecdings which would enable them to meet the limitation that rvould otherwise coure in the way. Likewise, if the writ petition is kept pending lbr a considerable long period of time and finally at a latcr stagc if rhe Hon,ble Supreme Court confirms the decision taken hy rhis High Court as also by the other High Courts in which the SL.ps are sti[ pending, the Income Tax t { 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 thgse matters at a much later stage which would be advantageous and beneficial to ttre Revenue and would be equally disadvantageous and dekimental so far as interest of the assesses are concemed. As a consequence, the Income Tax Department gets an extended perio{ of time for initiation of fresh proceedings.

12. The alarming trend of docket pxplosion in this Court, despite the clear precedent set in Kanakala Ravindra Reddy ( I supra), is a nlatter ol grave concem. The Incorne Tax Department's persistent i n i tiation o t' ticsh proceedings, disregarding the established j ud ic ial pronou ncernents, has led to an unprecedented surge in litigation rvith or,er 600-700 petitions piling up on the same issue. This tlcliberate approach not only under;nines the principle of judicial precedent but also strains the judicial resources unnecessarily. The Dcpartnre nt's strategy of awaiting the Supreme Court's decision on pcnding S[.[)s rvhile continuing [o initiate fresh proceedings appcars to be a calculated move to buy time and circumvent linritation periods, rathcr than adhpring to the established legal I I I I t. I I I I I i 10 position. Such conduct raises serious questions about the administrative efficiency and the respeot for judicial pronouncements, particularly when this Court has already provided a balanced approach by preserving both the Re'venue's rights and assesses interests.

13. Another aspect which needs to be considered is that in fact it should have been realized by the Income Tax Dellartment 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 teast till the I ton'ble Supreme Court decide the I twelve hundred (1200) odd SLPs which it is already seized of or, at least the Income Tax Dcpartment should havt: found out some remedial steps to ensurc that nherever the authorities intend to initiate proceedings under Sections 148-A and 148, other than in a faceless manner, thc procecdings should have been deferred without precipitating the matter turther intimatirrg the assessee that they shall initiate appropriate proceedings only rfter the SLP's are decided by the Hon'ble Supreme Court on tho very same issue. This again, the Income '['ax Depanrnent, has not been able to give a convincing reply, except fbr the lact that such a decision if at all ) .) 11 has to be taken, has to be taken fop the whole of India, and which otherwise has to be by way of a pqlicy decision and that too at the level of Central Board of Direc{ Taxes. Though the leamed Standing Counsel for the Income 'lfax Department contended that the Dethi High Court dismissed a writ petition of similar nature, on the one hand when the High Cqurt is struggling to reduce its pendency, such notices which arB under challenge in this writ petition are forcing the assessee tp knock the doors of this High Courl resulting in fiting of hundreds of new writ petitions which in the long run not only alfects the disposal of the writ petitions but also consurnes substantial time 0f the Bench in hearing these matters again and again on daily bpsis. Admittedly, in spite of the matter belore the Hon'ble Supre e Court having been taken on many occasions, the Hon'ble Suprqme Court which is seized of the matter has been rcluctant in grantipg any interim protection to the Income Tax L)epartrrcnt. Yet, the authorities concemed at the l l State level are not ready to accept ithe verdict passed by a majority ol High Coufts of dit-tbrent States on the same issue; and to make things iurther rvorse, the lncomp Tax Department is showing audacity' by issuing notices continqously under Sections 148-4 and 12 (4, 148 through the jurisdictional Assessing Officelwhereas it ought to have been only in the faceless manner.

14. In the case of BANK OF INDIA vs' ASSISTANT COMMISSIONER, INCOMB TAX1r, on an issue whether it was justifrable on the part of the Income Tax Department in not following an order passed by the adjudicating auttrority only on the ground that the appeals are pending, the Division Bench of the High Court of Bombay held at paragraph No.25 asr under, viz', : "25. Mr. Paridwalla has rightly drawn out at:ention to the decision of this Court in Commissioner of lncome Tax vs' Smt' Godavaridevi Sarafl2 as also the recent declsi()n of the co- ordinate Bench of this Court in Samp Furniture (P) Ltd' v' lTOl3 of which one of us (Justice G.S. Kulkarni) was a member, wherein the Court categorically observeo that the Revenre having not "accepted" the judgment of the High Court would n()t mean that till the same is set aside in a manner known to law, it'ryould loose its binding force. Referring to the decision of the Supreme Court in Union of lndia vs. Kamlakshi Finance Corporalion Ltd''1, the Court observed that the approach of the officials of Revenue of treating decisions being "not acceptable" was criticrzed by the Supreme Court. ln such declsion, followrng ar3 the relevant observations made by the Supreme Court 112025; 170 taxmann.com 422 (Bomba) )l 1t9781 113 ITR 589 (Bombay) " IZOZ+1165 taxmann.com 581/300 Taxnian 451 (tlombay) lgezltaxmann.com 16/55 ELT 113 (SC) r' t2 ( . l i I I i I i i 1 i ! i. i.: i) 1: 5I I I I * n ! ! { { ! a , d :t $ I * 4 t I I I i !, I I l 13 I "6. Sri Reddy is perhaps rlght in saying that tfle 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 Rqddy overlooks is that we are not concerned here with the correctness or otherwise of their conctusi[n or of afly 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 Coltector (Appeals) and the other of the Tribunat. The High Courtlhas, in our view, righfly criticized this conduct of the issistant Collectors and the harassment to the assessie caused by the failure of these offrcers to n,r" .ku", to the orders of authorities higher to them in thp appellate hierarchy. lt cannot be too vehemenfly errnphasized that it is of utmost importance that, ih disposing of the quasijudicial issues before thei.n, revenue officers are bound by the decisions of thL appellate authorities. The order of the Appe te Collpctor is bindino on the Assistant Coltectors *ork,ng *lthrn nis lurisOiJtion and the order of the Tribunal ,s Oinilng upon the Assistant Collectors and the Appeltate Collectors who function under the jurisdrction ot the Tri[unal. The principles of judicial disciptine requrre that the orders of the higher appellate authoritres should bq followed unreservedly by the subordjnate authorilies. The mere fact that the order of the appellate authorit}1 is not ,,acceptable" the department - rn rtself an gbjectionable phrase - and is the sub1ect matter of anl appeal can furnish no ground for not foltowing it unjess its operation has been suspended by a competent court lf this healthy :]. '3 14 E= \ rule is not followed, the result will only be undue harassment to assesses and chaos in admilistration 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 observations made by the High Court, have been harsh on the officers. lt is clear that the obseNatlons of the Hrgh Cou(, seemingly vehement, and apparently to curb unpalatable to the Revenue, are only intend€rd a tendency in revenue matters which, if allowed to become widespread, could result in cor siderable harassment to the assesses-public without a 1y benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the H gh Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorrties and the appellate authorities to the requirements )f judiciat discipline and the need for giving effect to the orders of the higher appellate authorities whrch 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 laitl to rest b)' a large number of High Courts all of whom havc taker a cotrsistetlt stand that the action of the Income Tax Department being '"iolative of the i i I I i I I i I I i i I I I I 1$ Finance Act, 2020 and Finance Agt, 2O2l . Now, in order to prot€ct 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 dispgsal of the instant writ petition in terms of the judgment rendered bf, this High Court in the case of Kankanala Ravindra Reddy (1 sulpra) shall however be subject to the outcome of the SLPs which ,were filed by the [ncome Tax Department and which is pending ionsideration before the Hon'ble Supreme Court.

16. In the given facts and circlrmstances, this Bench is of the considered opinion that unless and until we do not timely dispose of matters which are squarely coveped by the decision of this Court and which stands fortified bv the decisions of the various other High Courts on the very sanie is{ue. rhe pendency of this High Court would further be burdened Which otherwise can be decided and disposed ofas a covered mattc4

17. So far as the interest of the (erenue is concemed, we are of the considered opinion that thc intejrest ofthe Revenue has already been considered and protected, as (as been observed in paragraphs L6 F- \ \ 36,37 and 38 of the order which, for ready referen<:e' is reproduced hereunder:

36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the rospondent- Department is neither tenable' nor s rstalnable' The notices so issued aM 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 the respondenlDepartment pursuant to l:he notices issued under Section 147 and 148 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 objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very .iurisdictional issue Since the impugned notrces and orders are getting quashed on the point of jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petilioner which stands reserved to be raised and contended in an appropriate Proceedings.

38. Since the Hon'ble Supreme Court hac in the case of Ashish Agarwal, supra, as a one-tinle measure exercising the powers under Article 1'12 of the Constitution of lndia, permitted the Revenur: to proceed under the substituted provisions, and this Court allowlng the petitions only on the procedural flaw the rrght 1,| confened on ttle Revenue would remain reserved to proceed further if they so want from the stage of the order of the Supreme Cpurt in the case of Ashish Agarwal, supra. I

18. We would only further likq to make observations that since we are inclined to dispose of the ilnstant writ petition, conscious of the fact that the earlier order ofl this High Court in the case of Kanakala Ravindra Reddy (1 strpra) is subjected to challenge before the Hon'ble Supreme Court in SLP No.3574 of 2024, lI preferred by the Income Tax Department, we make it clear that I ( allowing of the instant writ petition is subject to outcome of the aforesaid SLP prefened by the Revenue againsr the decision of this High Court in the case of Kanalpala Rnindra Reddy (l stpra). This, in other words, would meanl that either of thc parties, if they so want, may move an appropriatf petition seeking revival of this writ petition in the light of the dPcrs ion ol the Hon'ble Supreme Court in the pending SLP on the v rv same I ssue. f I

19. Accordingly, the instant writ petition stands allowed in favour of the assessee so lar as the issue ol' jurisdiction ls concemed. As a consequencg, thc impugned notice under challenge under Sections 148-4 and I48 stands ser aside/quashed. 18 The consequential orders, if any, also stand set aside/quashed in similar terms as have been passed by this Higlr Courl in the case of Ksnkanala Ravindra Reddy (1 supra)' There shall be no order as to costs Consequently, miscellaneous petitions pending, if any, shall stand closed. To SDIK.BHAVANI SWAMY ASSIsTANT REGISTRAR //TRUE COPY// '\ \\ , i '' s="''oN oFFlcER \ \l

1. The lncome Tax Officer, Ward 1, Sangareddy lncorht: Tax Office, Veerabhadra Nagar, New Bus Stand. Veerabhadra Nagar, Sangareddy 502001 , Telangana.

2. The Principal Chief Commissioner of lncome Tax-Tel,angana and A.P, Hyderabad, lT Towers, AC Guards, Masab Tank, Hyclerabad -500028, Telangana-

3. The Chairman, Central Board of Direct Taxes, Deparlment of Revenue, Ministry of Finance, Govemment of lndia, Secretariat Buildings, New Delhi - 110001.

4. The National Faceless Assessment Center, lncome T'ax Department, New f'- Delhi.

5. The Secretary to the Govemment, Union of lndia, Department of Revenue, Ministry of Finance, New Delhi.

6. The Secretary to the Government, Union of lndia, Delrartment of Revenue, Ministry of Finance, New Delhi - 1 10 001 .

7. One CC to SRI THANNERU CHAITANYA KUMAR, Advocate [OPUC] 8. One CC to tv1s. J.SUNITHA (JUNIOR SC FOR INCOI/E TAX) Advocate loPUCl

9. One CC to SRI GADI PRAVEEN KUMAR, DEPUTY I]OLICITOR GENERAL OF lNDlA, Advocate (OPUC)

10.Two CD Copies SA GJP o I I i\o( 2 3 AUE 2025 I I 11, \. .\i . HIGH COURT DATED:01 10512025 ORDER WP.No.32124 ot 2024 ALLOWING THE W.P WITHOUT COSTS. I i l I I I I E]