The Hon’ble Telangana High Court in a Batch of writ petitions in the case Titled as Kankanala Ravindra Reddy vs. ITO, Telangana has vide Order dated 14/09/2023 quashed all orders passed u/s 148(d) and all consequential notices issued u/s 148 of the Income Tax Act, 1961passed / issued after 28.3.2022 / 29.3.2022.
Facts of the case(s):
(1) Local Jurisdictional AOs (JAO) issued reassessment notices for AY 2013-14 and subsequent assessment years u/s 148 between 1.4.2021 to 30.6.2021.
(2) Hon’ble Supreme Court, vide Order passed in the case of Ashish Agarwal on 4.5.2022 (2022) 444 ITR 1 (SC) validated all such notices but directed that further proceedings shall be carried out in accordance with the amended provisions of law and more particularly law amended by the Finance Act, 2021 w.e.f. 1.4.2021. It may be noted that, SC has never ordered that the further proceedings be carried out in accordance with the provisions as they stood before 1.4.2022.
(3) After validation of notices u/s 148 by deeming the same SCN u/s 148(b) the Jurisdictional Assessing Officers issued :-
* letters providing opportunity u/s 148(b),
* passed orders u/s 148(d),
* issued notices u/s 148.
(4) The above notices and orders were assailed before Telangana High Court.
Grounds of grievance:
That the proceedings of above notices and orders as validated by the hon’ble Supreme Court of India in the matter of Ashish Agarwal (supra) should have been carried out in faceless manner in accordance with the following provisions:
(1) Faceless Jurisdiction of Income Tax Authorities Scheme, 2022 notified u/s 130(1) and 130(2) of the Act on 28.3.2022.
(2) e-assessment of Income Escaping Assessment Scheme, 2022 notified u/s 151A of the Act on 29.3.2022.
(3) section 144B of the Act.
Held in Order: Findings
(1) Para 25, 26 and 27 of the Order:
“25. A plain reading of the aforesaid two notifications issued by the Central Board of Direct Taxes dated 28.03.2022 and 29.03.2022, it would clearly indicate that the Central Board of Direct Taxes was very clear in its mind when it framed the aforesaid two schemes with respect to the proceedings to be drawn under Section 148A, that is to have it in a faceless manner. There were two mandatory conditions which were required to be adhered to by the Department, firstly, the allocation being made through the automated allocation system in accordance with the risk management strategy formulated by the Board under Section 148 of the Act. Secondly, the re-assessment has to be done in a faceless manner to the extent provided under Section 144B of the Act.”
“26. After the introduction of the above two schemes, it becomes mandatory for the Revenue to conduct/initiate proceedings pertaining to reassessment under Section 147, 148 & 148A of the Act in a faceless manner….”
“27. In the present case, both the proceedings i.e., the impugned proceedings under Section 148A of the Act, as well as the consequential notices under Section 148 of the Act were issued by the local jurisdictional officer and not in the prescribed faceless manner. The order under Section 148A(d) of the Act and the notices under Section 148 of the Act are issued on 29.04.2022, i.e., after the “Faceless Jurisdiction of the Income Tax Authorities Scheme, 2022” and the “e-Assessment of Income Escaping Assessment Scheme, 2022” were introduced.”
(2) Para 34 of the Order:
“What is also relevant to take note of the fact that the Hon’ble Supreme Court while exercising its power under Article 142 of the Constitution of India has also not relaxed the applicability of the Finance Act 2021. Rather, the Hon’ble Supreme Court in very clear and unambiguous terms had held that the notices issued under the un-amended provisions, which were struck down by the High Court, shall be treated as a notice under new amended provisions and the Union of India was directed to proceed further from that stage in terms of the amended provisions of law.”
Held in Order: Reasoning
(3) Para 31 of the Order:
“It is well settled principle of law that where the power is given to do certain things in certain way, the thing has to be done in that way alone and no any other manner which is otherwise not provided under the law.”
Similarly under, Para 32 of the Order:
*If statute provides a thing to be done in a particular manner following a particular procedure, it shall have to be done in the same manner in accordance with the provisions of law without deviating from the prescribed procedure.
Further, the Hon’ble Telangana high Court has relied upon the following Supreme Court Case Laws in this regard:
* Municipal Corporation Greater Mumbai vs. Abhilash Lal & Others, 2020 13 SCC 234.
* Chandra Kishore Jha vs. Mahaveer Prasad & Others, 1999 8 SCC 266.
* Opto Circuit India Ltd. vs. Axis@ Bank Ltd. , 2021 6 SC 707.
* Union of India vs. Mahesh Singh, CAP. 4807 of 2022.
* Tata Chemicals Ltd. vs. Commissioner of Customs (Preventive), Jam Nagar, 2015 11 SCC 628.
* Cherrukurimani vs. Chief Secretary of Government of Andhra Pradesh, 2015 13 SCC 722.
(4) Para 35 of the order
“In view of the aforesaid discussions, it is by now very clear that the procedure to be followed by the respondent-Department upon treating the notices issued for reassessment being under Section 148A, the subsequent proceedings was mandatorily required to be undertaken under the substituted provisions as laid down under the Finance Act, 2021.”
“In the absence of which, we are constrained to hold that the procedure adopted by the respondent-Department is in contravention to the statute i.e. the Finance Act, 2021, at the first instance.”
“Secondly, it is also in direct contravention to the directives issued by the Hon’ble Supreme Court in the case of Ashish Agarwal, supra.”
Held in Order: Conclusion
(5) Para 36 of the Order:
“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 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 consequential order is on the principles that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically.”
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