Govind Singh Vs ITO (Himachal Pradesh High Court)
Himachal Pradesh High Court has issued an interim stay on a reassessment notice issued under Section 148 of the Income Tax Act, 1961, to petitioner Govind Singh. The court, in its order, prima facie found the notice to be “wholly without jurisdiction” due to non-compliance with the provisions of Section 151A, introduced with effect from November 1, 2020, and subsequent notifications.
The impugned notice was issued by the jurisdictional Income Tax Officer (ITO). However, Section 151A, alongside a notification dated March 28, 2022, mandates an automated allocation system based on a risk management strategy formulated by the Central Board of Direct Taxes (CBDT). The court observed that the revenue had not contended that the first respondent (the ITO) was randomly allocated the case under this automated system.
Judicial Precedents Cited
The Himachal Pradesh High Court relied on similar pronouncements from other High Courts:
1. Telangana High Court in Kankanala Ravindra Reddy Vs. Income Tax Office and two others (CWP No. 25903 of 2023, judgment dated September 14, 2023): The Telangana High Court emphasized that two CBDT notifications (March 28 and March 29, 2022) made it mandatory for reassessment proceedings under Sections 147, 148, and 148A of the Act to be conducted in a faceless manner. This includes allocation through an automated system and reassessment under Section 144B. The court had ruled that since the proceedings in Kankanala Ravindra Reddy were initiated by a local jurisdictional officer and not in the prescribed faceless manner after the “Faceless Jurisdiction of the Income Tax Authorities Scheme, 2022” and “e-Assessment of Income Escaping Assessment Scheme, 2022” were introduced, they were invalid. The core principle cited was that “where the power is given to do certain things in certain way, the thing has to be done in that way alone.”
2. Bombay High Court in Hexaware Technologies Ltd. Vs. Assistant Commissioner of Income Tax & others (Writ Petition No. 1778 of 2023, judgment dated May 3, 2024): The Bombay High Court echoed the Telangana High Court’s view, stating that the Scheme dated March 29, 2022, mandatorily requires notice issuance “through automated allocation.” This automated allocation implies a randomized distribution of cases, and it was not the revenue’s contention that the Assistant Commissioner of Income Tax in that case was a randomly allocated officer. The Bombay High Court also dismissed reliance on a Calcutta High Court judgment (Triton Overseas Private Limited) for not considering the mandatory nature of the March 29, 2022 Scheme.
The Himachal Pradesh High Court concurred with the views expressed by the Telangana and Bombay High Courts. Consequently, the court granted an interim stay on all further proceedings pursuant to the Section 148 notice issued to Govind Singh. The case is scheduled for further hearing on September 17, 2024.
FULL TEXT OF THE JUDGMENT/ORDER OF HIMACHAL PRADESH HIGH COURT
Notice to the respondents. Mr. Ishaan Kashyap, Advocate, accepts notice for respondents no. 1 to 3 and Mr. Balram Sharma, Deputy Solicitor General of India, accepts the same for respondent no. 4.
2. Prima-facie, we are of the view that the impugned notice, Annexure P-2 issued under Section 148 of the Income Tax Act, 1961 by the 1st respondent, who is the Jurisdictional Officer, is wholly without jurisdiction having regard to Section 151-A, introduced in the Income Tax Act, 1961 w.e.f. 01.11.2020 and the notification issued on 28.03.2022 thereunder, which specifically contemplates that there would be automated allocation system in accordance with risk management strategy formulated by the CBDT and it is not the case of the revenue that the 1st respondent is an officer who has been so randomly allocated as per the Scheme.
3. Similar view has been taken by the Telangana High Court in a judgment dt. 14.09.2023, rendered in CWP No. 25903 of 2023 and other connected matters, titled as Kankanala Ravindra Reddy Vs. Income Tax Office and two others in paras 25 to 27 & 31, which read as under:
“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 reassessing 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. Proceedings under Section 147 and Section 148 of the Act would now have to be taken as per the procedure legislated by the Parliament in respect of reopening/re-assessment i.e., proceedings under Section 148A of the Act.
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.
28 ………
29……..
30…….
31. 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.”
4. The Bombay High Court in a judgment dt. 03.05.2024, rendered in Writ Petition No. 1778 of 2023, titled as Hexaware Technologies Ltd. Vs. Assistant Commissioner of Income Tax & others, has also taken a similar view in paras 35 & 39, which read as under:
“35………The Scheme dated 29th March 2022 in paragarph 3 clearly provides that the issuance of notice “shall be through automated allocation” which means that the same is mandatory and is required to be followed by the Department and does not give any discretion to the Department to choose whether to follow it or not. That automated allocation is defined in paragraph 2(b) of the Scheme to mean an algorithm for randomised allocation of cases by using suitable technological tools including artificial intelligence and machine learning with a view to optimise the use of resources. Therefore, it means that the case can be allocated randomly to any officer who would then have jurisdiction to issue the notice under Section 148 of the Act. It is not the case of respondent no. 1 that respondent no. 1 was the random officer who had been allocated jurisdiction.
36 to 38…………
39. With reference to the decision of the Hon’ble Calcutta High Court in Triton Overseas Private Limited (Supra), the Hon’ble Calcutta High Court has passed the order without considering the Scheme dated 29th March 2022 as the said Scheme is not referred to in the order. Therefore, the said judgment cannot be treated as a precedent or relied upon to decide the jurisdiction of the Assessing Officer to issue notice under Section 148 of the Act. The Hon’ble Calcutta High Court has referred to an Office Memorandum dated 20th February 23023 being F No. 370153/7/2023 TPL which has been dealt with above. Therefore, no reliance can be placed on the said Office Memorandum to justify that the JAO has jurisdiction to issue notice under Section 148 of the Act. Further the Hon’ble Telangana High Court in the case of Kanchanalak Ravindra Reddy vs. Income Tax Officer has held that in view of the provisions of Section 151A of the Act read with the Scheme dated 29th March, 2022 the notices issued by the JAOs are invalid and bad in law. We are also of the same view.”
5. Therefore, there shall be interim stay of all further proceedings pursuant to Annexure P-2, notice issued to the petitioner, till the next date of hearing.
6. List on 17.09.2024. Reply, if any, be filed in the meanwhile.
