Santosh Kumar Agarwal v. 1. The lncome Tax Officer

Counsel for the petitioner : Ms. HIMANGINI SANGHI 3sil,.slri8Hf; iiiilt",ilFifl*"r,;iixT#a_LEARNEDJUNToRSTANDTNG The Court made the following ORDER THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOT]RABLE SRI JUSTICE NARSING RAO NANDIKONDA W.P.No.3382 I OF 2024 ORDER, (per Hon'ble Srt Justice P'Sam Koshy) Heard Ms. Himangini Sanghi, learned counsel for the petitioner and Ms. J.Sunitha, learned Junior Standing Counsel for the Income Tax Department for respondent No'l' Perused the record. Z. This is a writ pJtition where the proceedings are either challenged to the notices which were issued under Section 148A andl48oftheIncomeTaxAct,lg6l(forshort'theAct')orthe 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 of proceedings under Section 148 of the Act by the jurisdictional Assessing Offrcer' whereas in terms oftheamendmentthatwasbroughttothelncomeTaxActbyway 2 of Finance Act, 2021 w.e.f., 0l .04.2021 onwards, proceedings under Section l48A of the Act as also under Section l4g 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,,202l i.e., the impugned notices under Section l48A and Section 14g ofthe Act not being issued in a faceless manner, have already been dealt with and decided by this Court in the case of KANKANALA RAVINDRA REDDY vs. INCOME-TAX OFFICERT decided on 14.09.2023 whereby a batch of writ petitions were allowed and the proceedings initiated under Section l4gA as arso under Section 148 of the Act were held to be bad with consequential reriefs on the ground of it being in violation of the provisions of Section 151A of the Act read with Notification 18l2OZ2 dated,29.O3.2022. The said judgment passed by this Court has also been subsequently followed in a large number of writ petitions which were allowed on similar terms. '[(2023) 156 taxmann.com 178 (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 & OTHERS2, 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 INDIA4, and Telangana High Court in the case of SRI \'ENKATARAMANA REDDY PATLOOLA VS' DEPUTY COMMISSIONER OF'INCOME TAX5 where the issue was in respect of intemational taxation, Bombay High Court in the case of ABTIIN ANILKI'JMAR SHATI VS. TNCOME TAX OFFICER' INTERNATIONAL TAXATION6 which is again on intemational taxation and central circle, High Court of Himachal Pradesh in the case of GOVIND SINGH vs' INCOME TAX OFFICER?' Gujarat High Court in the case of MANSUKHBHAI ' lzoz+) 464 ITR 430 (Bom) ' iAnZ6 1 56 taxmann.com 478 (Gauhati)l ^iizozqj 165 taxmann.com 115 (Punjab & Haryana)l '7ZOZ+1167 taxmann.com 41 1 (Telangana)l "izozql 166 taxmann'com 679 (Bombay)l^ r -Lr, ' 12024\ 165 taxmann'com I l3 (Himachal Pradesh)l 4 DAIfYABHAI RADADTYA vs. TNCOME TAx OFFICER, WARD 3(3X5)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 petitionsro which stood decided on 19.03.2024. Similar views have also been taken by the Division Bench of Calcutta High Court in the case of GIRDHAR GOPAL DALMTA vs. UNION oF INDIA & oRS (M.A.T 1690 of 2023), OecidJa 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 l0 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 lfexaware Technologies Ltd., (2 supra) as also the one which has been decided by this Court in the case of Kanakala Ravindra Reddy 82024 SCC Online Gr\ 4012 '2025 SCC Online Jhar 287 'o y2023 : RJ-JD: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 Court is seized of the matter' In addition, there are about 1200 SLPs also frled arising out of the same issue being decided by various High Courts' To a query being put to the leamed counsel for the Revenue' 7 . 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 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, till date, we do not find any remedial steps having been taken by the Income Tax Department to take appropriate steps to either hold back issuance of notice under Section 1484. and under Section 148 of the Act by the jurisdictional Assessing Off,rcer' rather the authorities concemed in the teeth of series of decisions 6 1n by all the major High Courts India are continuously still tnrtlating proceedings under Section I4gA 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 Act202l. 9' 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 of Kanakala Ravindra Reddy (l supra), leamed Standing Counsel for the Income To^x 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. It was also the contention of the leamed Standing counser that no prejudice wourd be caused to the interest of the petitioners in case if this writ petition is kept pending till the finalization of the SLps pending before the Hon,ble Supreme Court and the fact that the petitioner is already enjolng 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 tssue appropriate instructions or to take 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 ofCBDT 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 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 l'ax authorities concemed are still even now in 2025 also initiating proceedings in contravention to the provisions ofSection15lAoftheActandasaresultbynow,morethan600 to 700 petitions have been already got piled up before this High Court on an issue which otherwise stands squarely covered by the judgment of this Court in the case of Kanakala Ravindra Reddy (1 supr4).- What is also surprising is the fact that though while allowing the writ petitions in the case of Kanakala Ravindra Redd.y (l supra), the Division Bench while reserving the right of the Revenue, has also protected the interest of the petitioners 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 Financ e Act, 2020 and, the Finance Act, 2021. The petitioner assessee would be entitled to challenge or raise the other legal objections if the Revenue initiates fiesh proceedings. The Department has made no endeavour in availing the said liberty that was reserved for the Revenue. On the contrary, they have been still sticking on to the stand, which this High Court as well as mart! other High Courts already held to be I L It appears that because ofthe aforesaid liberty that this High Court had granted permitting the Revenue for initiating fresh proceedings as a one_time measure in a faceless manner, the Income Tax Department wants to take advantage of the same by protracting these 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 time and finally at a later stage if the Hon,ble Supreme Court confirms the decision taken by this High Court as also by the other High aorn:j_rll* the SLps are still pending, rhe Income 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 ofthese 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 lncome 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 in Kanakala Ravindra Reddy (l supra)' is a matter of grave concern' The Income Tax Department's persistent initiation of fresh proceedings, disregarding the established judicial pronouncements, has led to an unprecedented surge in litigation with 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 Deparfmbnt's strategy of awaiting the Supreme Court's decision on pending SLPs while continuing to initiate fresh proceedings appears tobeacalculatedmovetobuytimeandcircumvent , rather than adhering to the established legal limitation 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 tnterests

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 148-4 unl" rO, should not have been issued in a faceless manner, at reast till the Hon'bre Supreme court decide the twelve hundred (1200) odd SLps which it is already seized ofor, at Ieast the Income Tax Department should have found out some remedial steps to ensure that wherever the authorities intend to initiate proceedings under sections r4g-A and r4g, other than in a faceless manner, the proceedings should have been deferred without precipitating the matter further intimating the assessee that they shall initiate appropriate proceedings only after the SLp,s are decided by the Hon'ble Supreme Court on the very same issue. This again, the Income Tax Department, has not been able to give a convincing reply, except for the fact that such a decision if at all -lr4v 7L 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 learned Standing Counsel for the Income Tax Department contended that the Delhi High Court dismissed a writ petition of similar nature' on theonehandwhentheHighCourtisstrugglingtoreduceits 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 matterbeforetheHon'blesupremeCourthavingbeentakenon many occasions, the Hon'ble Supreme Court which is seized of the matter has boen 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 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 148-4 and t2 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 TAXrr, on an issue whether it was justifiable on the part of the Income Tax Department in not following an order passed by tte 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. Paridyvalla has rightly drawn out attention to the decision of this Cou( 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) Ltd. v. lTO13 of which one of us (Justice G.S. Kulkarni) was a member, wherein the Court categorically observed that the Revenue having not "accepted" the iudgment 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. Refening to the decision of the Supreme Court in Union of lndia vs. Kamlakshi Finance Corporation Ltd.14, 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, following are the relevant observations made by the Supreme Court. " 11ZoZs1 170 taxmann.com 422 (Bombay)l '2 1t9281 I l3 ITR 589 (Bombay) '3 lzoz+1165 taxmann.com 581/300 Taxman 452 (Bombay) 'o Ttggzltaxmann.com 16155ELT 433 (SC) 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 overlooks is that we are not concerned here with the correctness or otherwise of their conclusion dI 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 cond1ct of the Assistant Collectors and the harassmenl 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 the Assislant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal' The principles of iudicial 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 mafter of an appeal can fuinish no ground for not followingrit unless its operation has been suspended by a competent court' lf this healthy 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 observations made by the High Court, have been harsh on 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 allowed to become widespread, could result in considerabie harassment to the assesses-public without any benefit to the Revenue. We would like to say that the department should'take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effecl to the orders of the higher appellate authorities which are binding on them."

15. What is worq.ing 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 of whom have taken a consistent stand that the action of the Income Tax Department being violative of the -\ *1 15 Finance Act,2020 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 Deparlment 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 concemed, we are of the considered opinion that the interest of the Revenue has already been considered and protected, 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, ihe consequential orders passed by the respondent-Department pursuant to the notices issued under Section 147 and 148 would also get quashed and it is ordered accordingly. The reason we are quashing the cOhsequential order is on the principles that when the initiation of the proceedings itself was procedurally r,rirong, 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 jurisdictional issue. Since the impugned notices 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 petitioner which stands reserved to be raised and contended in an appropriate proceedings. 38. Since the Hon'ble Supreme Court had, in the case supra, as a one{ime measure of Ashish Aqarwal 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 conferred on the Revenue would remain reserved to 17 proceed further if they so want from the stage of the order of the Supreme Court in the case of Ashish Aqarwal, supra' 1g. 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 ol 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 preferred by the Revenue against the decision ofthis High Court in the case of Kanakala Ravindra Reddy (l supra)' This, in other words, would mean that either of the parties, if they so want, may move an appropriate petition seeking revival of this writpetitioninthelightofthedecisionoftheHon,bleSupreme Court in the pending SLP on the very same issue' I t t I the instant writ petition stands allowed in lg. AccordinglY' favour of the assessee so far as the issue of jurisdiction concemed. As a consequence, the impugned notice under challeoge under Sections 148-A and 148 stands set aside/quashed. 1S 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. //TRUE COPY// SD/-K.BHAVANI SWAMY ANT REGISTRAR AS U SECTION OFFICER To

1. The lncome Tax Officer, ward 1, lncome Tax Department, Adilabad. 2. The Assessment Unit, lrfcome Tax Department, National e_Assessment Center New Delhi, Room No 40i, 2nd Floor, E-Ramp Jawaharlal Nehru Stadium, New Delhi 110 003.

3. One CC to Ms. H|MANGINI SANGH|, Advocate tOpUCl 4. one cc to Ms. J.suNtrHA, LEARNED JUNTOR srANorNc courusel ron THE INCOME TAX DEPARTIMENT, Advocate tOpUCl 5. Two CD Copies SA GJP Pt+ L',1. ?.o .// k ,.) ) ( I:i 11 AlJ6 zffi De .SDaTCli i-'J 3 L HIGH COURT DATED:24104t2025 ORDER WP.No.33821 of 2024 ALLOWING THE W.P WITHOUT COSTS. 1)- ).1 ,