2024 (6) TMI 1147 - HC - Income Tax

Validity of reopening of assessment - notices issued for reassessment required compliance with the substituted provisions of the Finance Act, 2021 - as argued 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. HELD THAT - 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 decided by common order 2023 (9) TMI 951 - TELANGANA HIGH COURT as held 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 2022 (5) TMI 240 - SUPREME COURT 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. 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.

Summary

Issues involved:
Reassessment process under Finance Act, 2021; Validity of notices issued under Section 148 of the Income Tax Act, 1961; Compliance with statutory provisions and directives; Jurisdictional issue; Consequential orders based on flawed notices; Liberty reserved for parties to proceed further.

Reassessment Process under Finance Act, 2021:
The petitioner contended that the reassessment process was modified under the Finance Act, 2021, but the respondents failed to adhere to these modifications. It was argued that the notices issued under Section 148 of the Income Tax Act, 1961, were legally unsustainable due to this non-compliance, rendering the consequential orders also invalid.

Validity of Notices under Section 148:
The court acknowledged the similarity of the issues raised and decided to hear the matters together. It was noted that the notices issued for reassessment under Section 148A required compliance with the substituted provisions of the Finance Act, 2021. The court held that the failure to follow these procedures rendered the notices and subsequent proceedings illegal and unsustainable, as per the directives of the Hon'ble Supreme Court in a previous case.

Compliance with Statutory Provisions and Directives:
Referring to a previous order, the court emphasized that the respondent department's actions contravened the Finance Act, 2021, and directives from the Hon'ble Supreme Court. The court declared the impugned notices and consequential orders as illegal and quashed them, nullifying subsequent orders automatically due to the procedural flaws in the initiation of proceedings.

Jurisdictional Issue:
The court sustained the petitioner's preliminary objection, allowing the writ petitions solely on the jurisdictional issue. By quashing the notices and orders on this basis, the court refrained from addressing other raised issues, leaving them to be contested in appropriate proceedings. The court clarified that the Revenue's right to proceed further remained reserved based on a previous Supreme Court order.

Consequential Orders based on Flawed Notices:
Given the consensus between the parties, the court set aside the impugned Show Cause notices and consequential orders in the batch of writ petitions. Both parties were granted liberty to proceed in accordance with the law, as outlined in a previous order, which specified the Revenue's reserved right to proceed further if desired.

Liberty Reserved for Parties to Proceed Further:
The court allowed the writ petitions, with no costs imposed. Any pending interlocutory applications were closed, and both parties were granted the liberty to take their respective stands and proceed according to the law, as per the directions provided in the previous order from a related case.

This comprehensive analysis of the judgment covers the issues involved, the arguments presented, and the court's decision on each aspect, ensuring clarity and understanding of the legal complexities addressed in the case.