Allowed

M/s.Polepally Solar Parks Private Limited v. The National Faceless Assessment Centre

Telangana HC11 Jul 2022WP/13675/2022

Case brief

AI extract

What is this about?

The Telangana High Court quashed an income tax assessment order passed by the National Faceless Assessment Centre under Section 143(3) read with Sections 143(3A) and 143(38) dated 15.04.2021. The court held that since these sections were rendered inapplicable by the 2020 amendment effective from 01.04.2021, the order was passed without jurisdiction. The court allowed the writ petition and ordered

What did the court decide?

Quashed the assessment order dated 15.04.2021 and all consequential notices; directed respondents not to take further steps based on the impugned order.

M/s.Polepally Solar Parks Private… — Constitutional and Fundamental Rights | Telangana HC (2022)

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HIGH COURT FOR THE STATE^{OF TELANGANA} AT HYDERABAD (Special Original Jurisdiction)

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MONDAY, THE ELEVENTH^{DAY OF JULY} TWO THOUSAND AND^TWENTYTWO

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PRESENT

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THE HONOURABLE^{THE CHIEFJUSTICEUJJALBHUYAN} AND

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THE HONOURABLE^{MRSJUSTICE SUREPALLI NANDA}

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WRIT PETITION NO:^{1367s OF 2022}

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Between:

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M/s.POLEPALLY SOLAR^{PARKS PRIVATE LIMITED, a company incorporatedin} inOii nruing registered^{office at H-NO. 7- 1-414-35/A, and A1 , 3rd Floor,Srinivasa} Cofony ei.i, S.h.^{Nagrr,Ameerpet, Hyderabad - 500038PANAAHCP5388GRep-} by itsSenior General^Manager.

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...PETITIONER

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AND

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1 . The National Faceless^{Assessment Centre, 2nd Floor,E-Ramp, Jawaharlal} Nehru Stadium, Delhi^-'110003.

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The Principal Chief^{Commissioner of lncomeTax,National Faceless}

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niiessmeht Centre, 2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - 't 10003.

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Deputy Commissioner^{of lncome-tax,. 2(1),National Faceless Assessment}

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G;G, ZnO rtoor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - 1 10003'

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' Deputy Commissioner^{of lncome{ax,Circle5(1),Hfderabad, RoomNo 344'} O -'ei,ici,^jrd Floor, I.T.Tower,^{AC Guards,MasabTank,Hyderabad-} s00004

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The Principal Commissioner^{of lncome Tax -5, Hyderabad, D - Block,3rd} Fioor, l.T.tower, AC Guards,^{MasabTank,Hyderabad- 500004'}

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The Union of lndia,^{Through the Secretary, Ministryof Finance, Government} of lndia, North Block,^{New Delhi- 1 10 00'1.}

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.,.RESPONDENTS

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Petition Under Article^{226 of lhe constitutionof lndia praying that in the} circumstances stated^{in the affidavit filed therewith,the High court may be} pleased to issue a writ of certiorari^{or a writ in the nature of certiorarior writ of} ii/andamus or a^{Writ in the natureof Mandamus or any other appropriate Writ,} order or direction,^{catlingfor the records of the Petitioner's case and after going} into the legality^{and propriety thereof, to quash and set aside the assessment}

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order passed under section^{143(3) read with section 143(34) and 143(38) of the} Act dated 15 April^{2021 (Exhibit P12.1) and the notice of demandin Form No.7} OateO t S April 2021^{(gxhinitP12.2) as well as the show-cause noticesunder} section 274 read with^{sections 271AAC(1)and 2704 of the Act dated 15 April} 202.1 (Exhibit P12.3^{and P12.4) and the order of the Respondent No. 4 directing} the Petitioner to^pay 20 %^{of the demand vide order dated 13 December} 2021(Exhibit 17).

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b)' This Hon,ble Court^{be pleasedto issue a Writ of Mandamusor a Writ in} the nature of Mandamus^{or any other appropriatewrit, order or direction,} directing the Respondents,^{its servants, subordinates, agents and successorsin} office i. to forthwith withdraw^{and/or cancel the assessmentorder passedunder} section .l 43(3) read with section 143(34) and 1 43(38) of the Act dated 1 5 April 2021 (Exhibit^{p12.1)and the notice of demand in FormNo.7dated 15 April 2021} (Exhibit P12.2) as well as the^{show-causenotices under section274 readwith} iections 271A,AC(1)^{and 2704 of the Act dated 15 Aptil 2021 (Exhibit P12.3 and} P12.4) and the order^{of the Respondent No. 4 directingthe Petitionerlo pay 20o/o} of the demand vide order^{dated13 December2021 (ExhibitP17)'}

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ii. to grant an unconditional^{stayof demandarising pursuantto the aslgsslnent} order-passed under^{section 143(3) read with section 143(34) and1 43(38) of the} Act dated 15 April 2021^{(Exhibit P12.1) and raised vide the notice of demandin} Form No. 7 dated 15^{April2021 (ExhibilP12.2l}

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(c) that this Hon'ble court be^{pleasedto issue a writ of prohibition or a writin the} nature ot prohibition or any^{other appropriate writ, order or directionunderArticle} 226 of the Constitution^{of lndia prohibiting Respondents from taking any stepsin} furtherance of the^{assessment order passed under section '143(3) read with} section 143(34) and^{143(38)of the Act dated 15 April 2021 (ExhibitP12.',1) and} the notice oi demand^{in Form No. 7 dated 15 April 2021(Exhibit P'l2.2) as well} as the show-cause notices under^{section 274read with sections 271AAC(1) and} 27OA of the Act dated 15^{of April 2021 (Exhibit P12.3andP12.4) andthe orderof} the Respondent No.^{4 directing the Petitioner to pay20o/oof the demandvide} order dated 13 December^{202'l (Exhibit17).}

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(d) that pending the hearing and^{final disposal of the present petition, this Honble} bourt may be^pleased to^{stay the operation of the assessmentorder passed} under seciion^{143(3) read with section 143(3A) and 143(38)of the Act dated 15} April 2021^(Exhibit P12.1)^{and the noticeof demand in Form No. 7 dated15 April} 2021 (Exhibit P12.2)^{and all further steps pursuantthere to.}

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(e)for ad-interim reliefs in terms of^{prayers above}

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(f)for costs of this Petition and

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(g)for such further and other reliefs as the nature^{and circumstances of the case} may require.

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l.A.NO:1 OF 2022

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Petition Under Section 151 cpc praying that in the circumstances stated in the affidavit filed in support of tne peiition, if,u iigl, Court may b; ;;;;;1" grant stay of all further proceedings pursuant to tf," irprgn"O' f r""f ".s assessment order of the 1st Respondent dated 1sro4r2o21 penoing aisp;ior the writ Petition as otheru,vise the petitioner witt te put to severe ross and hardship.

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Counsel for the Petitioner : SRI.J.D.MISTRI

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Counsel for the Respondent Nos.t to 5 : SRI.J.V.PRASAD (SC FOR TNCOME TAX)

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Counsel for the Respondent No.6 : M/s.B.MUKHARJEE

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The Court made the following ORDER

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THE HON'BLE THE CHIEF JUSTICE^{UJJALBHI,'-{AN} AND

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THE HON'BLE MR,S JUSTICE SUREPALLI^NANDA

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Writ Petition No.13675 of 2022

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93DEB:^{eer theHotbtethechiefJusti.c UjjatBhuaanl}

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Heard Mr. J.D.Mistri, learned Senior^{ct.iitrtscl lor thc} petitioner and Mr. J.V.Prasad, learned Scnior^Standing Counsel for Income Tax Department^{for respirncientsNo.1} to 5. Also heard Mr. B. Mukharjee,^{icar-nctj(:()Llnscl ibr} respondent No.6.

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By filing this petition under Anicic 22(.,^ofthc Constitution of India,^{petitioner sc,:k's (lLr:.tslringof} assessment order dated 15.04.2021^{passcri b-r' rc:;oondent} No. I under Section 143(3) read with^{Sect"orrs 143(3A) and} 143(38) of the Income Tax Act, 1961^{(bricfli'.'the Act'} hereinafter) for the assessment^{year20I B I 9.}

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Though not very relevant since thc^{asscssnrctltordel} has been impugned on the ground of l:.rt:i<^,ol .iiriisciclion.

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we may mention that by the aforesaid assessment order, several additions have been made by respondent No.l to the returned income of the petitioner including an addition of Rs.1,28,22 ,I2,496.OO under Section 68 <;f the Act.

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The challenge to the assessment order r,vas summed up by this Court when notice was issued and interim stay was granted in the proceedings held on 3L.O3.2022. It lv'as ordered as follows:

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"Petitioner is an assessee under the Income Ta-'r Act, 1961 (briefly referred to hercinaftcr as the ActJ, cngaged in the business of generating, accumulating, distributing, selling and supplying electricity power from non-conventional energr sources on commercial basis. For the assessment year 2}fa-Ig, petitioner filed return of income declaring total income as nil. Return of the petitroner was selectcd for scrutiny under.a Computer Aided Scrutiny System (CASS). Ultimately 1"t respondent passed the assessment order on I5.O4.2021 under Section 143(3) read with Sectiores 143(3A) ad 143{38) of the Act determining the total income of the petitioner at Rs. 1 35,08,37,2 10.00.

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Lcarncd Senior Counsel for the petitioner submits that bv way of the assessment order, le respondent had added the entire loan availed of by the petitioner from three financial institutions as its income.

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Aggrieved by the aforesaid order of assessment, petitioner has preferred an appeal before the appellate

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authority. During pendency of the appeal. pt--titioner filed a petition for stay of demand raised pursurrr)t 1o thc assessment order before the assessing attlllorit'. Assistant Commissioner of Income Ttr-r,, Cir cie^{r( I} J, Hyderabad, utde e-r:atl dated 13.12.2021 clirt'ctccl tht' petitioner to pay 2Oo/o of the demand and thelcaftcr to re-apply for stay of tlle balance demand.

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Aggrieved thereby, petitioner filed further applii:aticn for stay before the Commissioner of Incotnc Tax,^,jircl,:- 5, Hyderabad. It is stated that the said applica.ion rs stil1 pending and no decision has been t.rken lhereo]l. While lhe matter rested thus, 4ttt respbndcnt 'ssue,d notice to the petitioner on 26.02.2022 dirc'cting the petitioner to liquidate the demand, failing rlhic h ir r,"i"s stated that coercive measures would be tirk.n rrrrrit I tlre Act.

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Referring to the order of assessment, it is slr brnltted by Mr. Mistry that the same was passed uncicr Sor;t:ons 1a3(3A) and 143(38) of tJle Act, but Lrrrdi:r Scr:tion 143(38), it has been made clear that nothing r:ontainc<i in Sub-Section (3A) and Sub-Section (3B) shall appl1, to assessments made under Sub-Section (3) bf Scction 143 or under Section 144, as the case may br:, c-rrr c;r alter Ol.O4-2O2l- I{orvever, the assessment or<.icr u'it: p;rsscd on 15.O4.2O21. Thercfore, prtma facie it^a1.>pt.us '.hat the assessrng authority had applied prorrsions o[ lau' while making the assessment which werc inapplicable on the date of passing the assessment ordcr.

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In view of the above, it is hereby direL-tcd that until further orders. respondents shall not takc iurlhcr stcps on the basis of the assessment order date(l 15.U4.2021."

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Thercaftcr, learned Standing Counsel sought for time to file counter zrffidavit. In the proceedings held on 17.06.2022, this Court while granting further time to learned Standing Counsel to fiie counter affidavit also referred to a decision of the Delhi High Court in Gurgaon Realtech Ltd. v. National Faceless Assessment Centre Delhir and rnade a pima facie observation that the preser-rt case appears to be squarely covered by the said decision. Relevant portion of the order dated 17.O6.2022 reads as under:

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"As we have already noticed in our order dated 31.O3.2022, the challenge in the present writ petition is to the assessment order dated i5.04.2021 passed under Sect.ion 143(3) read with Sections 143(3A) and 143(38) of the Act.

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In the light of the provision contained in Scction 143(3D) of the Act, pima facie the assessment order datcd 15.04.2021 does not appear to be tenable in law. In fact. on this point there is already a Division Bench judgment of the Delhi High Court in Gurgaon Realtech Ltd. v. Natlonal Faceless Assessment Centre Delhl [436^ITR 2801. The matter appears to be squarely covered by the said decision.

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Nonctheless, as requested by Mr. prasad, we rcluctantly grant two (02) weeks, further time to file counter affidavit by respondents making it clear that if

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| (2O21) 436 I'l'ti 280 (Delhi)

)

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counter affrdavit is not filed by the next darc, C()urt may proceed with the matter on the basrs ol- a.i,ailable materia.ls."

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In the hearing today, Mr. J.V.prasad, learned Senior Standing Counsel for Income Tax Departmcnt in his usual fairness submits that counter affidavit has not ber:n filed but having regard to the challenge made to the impugned order of assessment Court may r:onsicjer passing appropriate order.

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7 . Section L43 of the Act deals u,ith framing of assessment. Subsections (3A), (38) and (3Ci u,ere inserte,l in Section 143 of the Act by the Finanr;r: Act, 2O1B u,ith effect from 01..04.2018. By the aforesaid provisions, the scheme of facelcss assessment was in trucl uced in the assessment proceedings so as to imparr. grcaler efficiency, transparency and accountability by eliminating interface between the assessing officer and the assesscr:.

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Subsection (3D) was inserted in Section 143 of the Act by the Taxation and Other Larvs (Rcltrxation and Amendment of Certain provisions) Acr, 202U. with effuct /

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from 01 .O4.2021^{. As per sub-section (3D),nothing} contained in^{sub-section (3A) and sub-section (3E}) shall} apply to thc^{assessmentmade under sub-section (3) or} under^Se ction^{144, as the case may be, on or after} ot.o4.20'2r

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g . From the^{above, it is evidentthat subsections(3A)} and (3B) ol^{Scction143 of the Act were not available to the} assessingofficertoframeassessmentundersubsection(3} of Section^{143 or under Section144 of the Act post} o1.o4.2021^.

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At this.juncture^{we may mention that the provision of} facelcss assessment^{continuedin the form of Section 1448} of the Act^{ra'hich was insertedby the Taxationand Other} Laws (Relaxation^{and Amendmentof Certain Provisions)} Act,2O2O, with^{effect from Ol'O4'2021'}

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i 1. Rcvcrtiug^{back to the impugnedorder of assessment'} wc find that thc^{same was issued under Section1a3(3)} read with Scctions^{143(3A)and 1a3(3B) of the Act on} 15.O4.2O21, admittedly,^{after O1'04'2021when respondent}

No. 1 had no jurisdiction to invoke subsections (3A) and (3B) of Section 143 of the Act.

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In the hearing today, Mr. J.D.Mistri, learned Senior counsel has submitted that to ensure that the remedv of appeal is not lost on account of limitation, petitioner had filed statutory appeal before the lirst appellate authority under Secti on 246A of the Act on 25.05.2021. An application for stay was also filed. Interestingly, petitioner vras directed to pay 2O%o of the demand first and then rr:apply for stay. His submission is that when the rmpugned order of assessment is ex facie without jurisdiction, question of payment of 2Oo/o of the demand does not arise. That apart, this Court under Article 226 of the Constitution of India may set aside the impugned order of assessment notwithstanding the fact that petitioner has filed appeal before the first appellate authoritv.

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In the decision rendered in Gurgaon Realtech Ltd. (supra), Delhi High Court was, also confronted with a simiiar fact situation. It has been held that if the challenge to the assessment order is made on the ground that it was

passed without jurisdiction, then notwithstanding the fact that an appeal was filed, albeit, only to ensure that the limitation is not crossed, there would not be arry impediment in proceeding ahead with the matter by the writ court. Finally, after adverting to Section 143 of the Act, more particularly to subsections (3A) and (38) thereof, Delhi High Court held that a-fter 01.O4.2O2t, the assessment order ought to have been passed in consonarce with the provisions of Section l44B of the Act.

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1 4. We are in respectful agreement with the views expressed by the Delhi High Court.

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That being the position and on due consideration, we are of the unhesitant view that the impugned assessment order dated 15.04.2021 is clearly without jurisdiction. The same is hereby set aside and quashed. All consequential notices issued pursuant thereto would also stand quashed. However, it would be open to respondent No.l to proceed with the assessment in accordance with and if permissible in law.