Case Law Details
Innani Ritesh Kumar Vs ITO (Telangana High Court)
The Telangana High Court heard a batch of writ petitions together as the parties agreed that they involved a similar question of law. The petitioners contended that, following the Finance Act, 2021, the reassessment procedure under the Income-tax Act, 1961 had been modified, but the respondents had not followed the substituted procedure. It was argued that the notices issued under Section 148 were therefore unsustainable in law and that all consequential orders were also liable to be set aside.
Read SC Judgment in this case: SC Remands Section 148 Reassessment Matters to HC for Fresh Consideration
During the hearing, counsel for both parties agreed that the issue had already been decided by the High Court in a batch of writ petitions led by W.P. No.25903 of 2022, disposed of by a common order dated 14.09.2023, and requested that the present matters be disposed of in terms of that decision.
The High Court referred to its earlier common order, wherein it had held that, after treating the reassessment notices as notices under Section 148A pursuant to the Finance Act, 2021, the Income Tax Department was mandatorily required to follow the substituted reassessment procedure. The earlier order recorded that failure to do so was contrary to the Finance Act, 2021 and also contrary to the directions issued by the Supreme Court in Ashish Agarwal. It further held that the impugned notices and the proceedings initiated by the Department were neither tenable nor sustainable and that the notices, along with the procedure adopted, were illegal. Consequently, the earlier order quashed the notices and all consequential orders passed pursuant to the notices issued under Sections 147 and 148, observing that where the initiation of proceedings was procedurally defective, the subsequent orders also stood nullified. The Court had allowed the writ petitions on the jurisdictional issue without examining the other issues raised by the petitioners, leaving those issues open for appropriate proceedings. It had also observed that, since the Supreme Court in Ashish Agarwal had, as a one-time measure under Article 142 of the Constitution, permitted the Revenue to proceed under the substituted provisions, the Revenue’s right to proceed further from the stage indicated in the Supreme Court’s order remained reserved.
Following the consensus of the parties and applying the earlier common order dated 14.09.2023, the High Court set aside the impugned show cause notices and the consequential orders in the present batch of writ petitions. Liberty was reserved to both the petitioners and the Revenue to take their respective stands and proceed in accordance with law in terms of paragraph 38 of the earlier common order. The writ petitions were allowed, with no order as to costs, and all pending interlocutory applications were directed to stand closed.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Sri K. Parikshith, learned counsel, appears for the petitioner(s) and Ms.B.Sapna Reddy, learned Junior Standing Counsel for Income Tax Department, appears for the respondents.
2. Regard being had to the similarity of the question involved, on the joint request of the parties, the matters are analogously heard and decided by this common order.
3. It is common ground taken by the learned counsel for the petitioner(s) that in furtherance of Finance Act, 2021, reassessment process stood modified but the respondents have not taken care of it and therefore notices issued under Section 148 of the Income Tax Act, 1961 cannot sustain judicial scrutiny. Since notices are bad in law, the consequential orders are also bad in law.
4. During the course of hearing, learned counsel for the parties agreed that curtains on this issue are finally drawn by this Court in a batch of writ petitions, W.P.No.25903 of 2022 and other connected matters, decided by common order dated 14.09.2023. The parties agreed that this matter may be disposed of in terms of the Common Order dated 14.09.2023.
5. This Court in the said order dated 14.09.2023 in W.P.No.25903 of 2022, held as under:
“35. 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.
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, 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.
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 of Ashish Agarwal, supra, as a one-time measure exercising the powers under Article 142 of the Constitution of India, permitted 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 proceed further if they so want from the stage of the order of the Supreme Court in the case of Ashish Agarwal, supra.
39. No order as to costs.”
6. In view of the consensus arrived, the impugned Show Cause notices and consequential orders passed in this batch of writ petitions are set aside. Liberty is reserved to both the parties to take respective stand and to proceed in accordance with law as per paragraph No.38 of the order dated 14.09.2023 in W.P.No.25903 of 2022.
7. The Writ Petitions are allowed. No costs. Interlocutory applications, if any pending, shall also stand closed.
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