Allowed

Paras Collins Distilleries Private Limited, v. The Dc/Acit Circle - 5(1)

Telangana HC17 Jul 2025WP/20593/2025

Case brief

AI extract

What is this about?

Writ petition challenging reassessment notices under Sections 148A and 148 of the Income Tax Act issued non-facelessly contrary to Finance Act 2021 amendments and Section 151A. Relying on its earlier decision in Kanakala Ravindra Reddy and several other High Court rulings, the court allowed the petition, quashing the impugned notices and consequential orders, subject to the outcome of pending Supr

What did the court decide?

Impugned notice challenged under Sections 148A and 148 set aside/quashed along with consequential orders; no costs; miscellaneous petitions closed.

Paras Collins Distilleries Private Limited, Vs The Dc/Acit… — Income Tax | Telangana HC (2025)

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PRESENT

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THE HONOURABLE^{SRIJ_USTICEP'SAMKOSHY} RAo^NANDIK.NDA THE HoNouRABLE^sRl "t#'ooslNc

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NN O:205930F²⁰²⁵ WRIT^PE

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Between: .tri, Director^{- P} Paras^{Collins Drstilleries Pn} Hyderabad' iilifxu-ii"oov,^SurveYN N%bI'5* "''AHsglEl: Telangana-^501218'

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...PETITIONER

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AND

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1 If ?&gl?'J35!"?;'{i}Hi3',ft^{|il,s?:r'}lt"1'"i'n:#'ffi 5b',of '''"''}

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2 ll''l'll1:ltm'"-'i:::ir'if?#?Jl;i'4"';-1'rrrower'Ac

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...RESPONDENTS

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Petition^{under Article 226 of the Constitution of lndiaprayingthat in the} crrcumstances^{stated in tn"ltr'd"tir"d therewitn'} i"#';:r?tl"l"L:""t''t"'t""1 fifiuug;ffi$$i#np#$d#ffi'ffi^i',:11{ffi iff iHil"ffifi^{:L'ffiY[i ?Xo' ll, ft ;'] ir'" p,."'p..o r N atura I J u stice}

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IA NO:^{1oF 2025}

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petition under section 151^{cpc prayingthat in the circumstances statedin} the affidavitfited^{in suppoi'.iit. p.titio",ihJ.Hig.Corrt mav be pleasedto stay} alt further^{proceedingsp'oti"i to [nt ntti"" uls i+e dt' 28 06 2025 vide DIN No'} |rBA/AST/S/148-1t2L25-i6'iibliiiorrzs(1)^{issued by the JA0(1 respondent)} instead of^{FAO for n' V' ZOfS- 20' and may pass such other order(s) as the} Hon'ble^{Courtdeemsnt JnA pr.opt' in the lnterestsof substantialiustice' as} otherwise^{the Petitioner wJ;b" ilto irreparableloss and severe iniury'}

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' .{' / a ?', Counsel for the petitioner: SRt. DUNDU MANMOHAN

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Counsel for the Respondents: SRI K SUDHAKAR REDDY SC FOR lT The Court made the following: ORDER

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THE^{TTONOT]RABLESRIJUSTICE P'SAM KOSHY} rrrE HoNouurr-,nsffiisrrcE^{NAR.TNG RAo}

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PETITIONN o.20593^of2025

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ORDER,^{(per Hon'ble Sri Justice NarsingRaoNandikanda)}

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learned^{counselfor the} Heard^{Mr.Dundu Manmoharu} petitioner^{and Mr'K'sudhkarReddy'Iearned Senior Standing} Counsel^{for the Income Tax Department appearing for the} respondents.^{Perusedthe record'}

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This is^{a writ petition where the proceedings are either} challenged^{to the notices which were issuedunder Section148A} and^{148 of the Income Tax Act' 1961 (for short'the Act') or the} assessment^{orders those have been passedunder Section147 of} the Act^{which have been assailed'}

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l. This^{writ petitionis being taken up today onlyon one of the} grounds,^{that the notices issued under Section t48A ol'theAct} and the^{subsequent initiationof proceedings under Section 148 of} the Act^{by the jurisdictionalAssessingOfficer'whereas in terms} of the amendment^{that was brought to the lncome Tax Act by way} .qf Finance Act, 2021 w'e'f''^{01'04'2021 onwards' proceedings}

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under Section l48A of the Act as also under Section l4g of the Act ought to have also been issued and proceeded in a faceless manner.

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The contention of the petitioner is that the issue of proceedings being in violation of the Financ e Act, 2021i.e., the impugned notices under Section l4gA and Section r4g ofthe Act not being issued in a faceless mamer, have already been dealt with and decided b1, this Court in the case of KANKANALA RAVINDRA REDDY vs. INCOME_TAX OFFICERT decided on 14.09.2()23 whereby a batch of writ petitions were allowed and the proceedings initiated under section l4gA as arso under Section I48 of the Acr r.vere held to be bad with consequential reliefs on the ground of it being in violation of the provisions of Section 15lA of the Act read wirrr Notification tg/2022 dated29.03.2o22. The said judgment passed by this Court has also been subsequently followed in a large number ol u,rit petitions which were allowed on similar terms.

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'[(202]) Li6 taxrnann.conr lTll (Telangana)l

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@y: i^,;-tn ,P ) 2..2-| ' I' :r,ia,.}. . ,:; .,/

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Down^{the line, we find that the same issuehas. also beeu} decided^{againstthe Revenueby various High Courts i'e''} by the^{Bombay High Court in the case of IIEXAWARE} TECHNOLOGIES^{LTD"vs' ASSISTAIT{T COMMISSIONER} OF INCOME^{TAX & OTHERS2'Gauhati High Court in the case} of RAM^{NARAYAN SAII vs' UI{IONOF INDIA3' Punjaband} Haryana^{High Court in the case of JATINDERSINGII BANGU} vs. UNION^{oF INDIA4, and TelanganaHigh court in the case of} SRI^{VENKATARAMANAREDDY PATLOOLAVS. DEPUTY} COMMISSIONER^{OF INCOMETAX5where the issuewas in} respect^{of internationar taxation, BombayHigh courtin the case of} ABHIN^{ANILKUMAR SIIAHvs' INCOME TAX OFFICER'} INTERNATIONAL^{TAXATIOIfwhichis again on intemational} taxation^{and central circle' High Court of HimachalPradeshin the} case of^{GOVIND SINGII vs' INCOMETAX OFFICER"} Gujarat^{High Court inthe case ofMANSUKHBHAT}

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t lzoz+1 464 ITR43o (Bom) 'tizoz+t^{156 taxmann.com 478(Gauhati)l} ' t(2024)^{[65 taxmann'com 115 @unjab & Haryana)]}

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' [2024)^{167 taxmann.com 411 (Telangana)]} " 12014) I66 taxmann.com^679(Bombay)l 'i:o:+i ins ta\mann.com^{I l3 (Himachal Pradesh)l}

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DAHYABIIAI RADADTYA vs. INCoME TAx OFF.ICER, WARD 3(3Xr8, Jharkand High Court in the case of SIIyAM SUNDAR SAW vs. UNION OF INDIAe, Rajasthan High Court in the case of SHARDA DEVI CHHAJER vs. INCOME TAX OFFICER & ANOTHER and batch of writ petitionsro which stood decided on 19.03.2024. Similar views have also been taken by the Division Bench of Calcutta High Court in the case of GIRDHAR GOPAL DALMIA vs. UNION OF rNDIA & ORS (M.A.T 1690 of 2023), decided on25.09.2024.

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Even though the same issue having been decided by a large number of High Courts. we are still confronted with large filing of identical matters on daily basis ranging between 5 to l0 writ petitions. That upon the instructions being sought from the Department, they have been taking a solitary ground that the decision o1- the Bombay High Court in the case of Hexaware Technologies Ltd., (2 supra) as also the one which has been decided by this Court in rhe case of Kanakala Ravindra Reddy

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82024 SCC ont.inc Cu.i 40 t2 '2025 SCC Onl.ine Jhar 2B:to 12023^{: RI-J} l):.l9ti4- DI) l

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(1 supra)^{has been subjected to challengein a SpecialLeave} Petition^{i.e., SLP No'3574 of 2024 before the Hon'bleSupreme} Court^{and the Hon'ble SupremeCourt is seized of the matter'} In addition,^{there are about1200SLPs also irled arising out ofthe} same^{issuebeing decidedby various High Courts'}

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7 - To a^{query being put to the leamed counsel for the Revenue'} they have^{categoricallyacceptedthe fact that there is no interim} order^{grantedby the Hon'ble Supreme Court in any of these} matters^{pending before it'Meanurhile' fresh writ petitions of} identical^{natureare beingpiled up before this Bench on dailybasis} and the^{pendencyis gettingincreased on matter which otherwise} has already^{beendealt and decidedby this very High Court itself'}

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On the^{one hand' even though the order of this Court that} was passed^{as early as on t4'09'2023and more16 months have} tapsed,^{titl date,we do not find any rernedialsteps having been} taken by^{the lncome Tax Departmentto take appropriatesteps to} either hold^{back issuance of notice under Section148,4. and under} Section^{148 of the Act by the jurisdictionat AssessingOfficer'} rather the^{authorities concerned in the teeth of series of decisions}

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by all the major High Courts in India are continuously still initiating proceedings under Section I4gA of the Act and also initiating proceedings under Section l4g of the Act in contravention to the amendments brought into the Income Tax Act pursuant to the Finance Act,2020 as also the Finance Act 2021.

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Upon a query being put as to why can,t this writ petition be disposed of in the teeth of the decision rendered by this Court in the case of Kanakala Ravindra Reddy (l supra), leamed Standing counsel for the Income Tax Departmenr contends that those would unnecessarily burden the Income Tax Department where they would be required to file equal number of SLps before the Hon'ble Supreme Court and it would be further burdening the exchequer of the Union of India. It was also the contention of the Ieamed Standing Counsel that no prejudice would be caused to the interest of the petitioners in case it this writ petition is kept pending till the finalization of the St_ps pending before the Hon,ble Supreme Court and the fact rhar rhe petitioner is already enjoying the benefit of interirn protection. Nonetheless, on the earlier query of this Court as to why the [ncome Tax Department have not come out with a mechanism to issrrc appropriate instructions or l.o take

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appropriate^{steps in ensuring thatproceedingsunder Section 148A} of the Act^{as also the assessmentordersunderSection 148 ofthe} Act are^{kept in a hold in the light of the decisions dedcidedby the} various High^{Courts, it was submitted by the leamed Standing} Counsel^{that the saidstepscan onlybe taken at the level of CBDT} as any^{such steps would have to be taken Pan India and cannot be} limited^{to any o[these jurisdictional High Courts'}

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l0.Asaresultofwhich,whatwearefacingissteepincreaseof litigation^{day in and day out even though variousorders havebeen} passed by^{this High Court atlowing writ petitions on the very sa rc} issue.^{The Incomel'ax authorities concemed are still even now in} 2025 alsoinitiating^{proceedings in contraventionto the provisions} of Section^{t5lA of the Actandas a result by now' more than600} to 700^{petitions have been alreadygot piled up before *ris High} Court^{on an issue whichotherwisestands squarely covered by the} judgment of this^{Court in the case of Kanakala Ravindra Reddy} (l supra).^{Whatis also surprisingis the fact that thoughwhile} allowing the^{rvrit petitionsin the case of KanakalaRavindra} Reddy (l supra),^{the Division Benchwhite reserving the right of} the Revenue,^{has also protectedthe interest of the petitioners}

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insofar as the liberty which was granted to the Revenue for initiating fresh proceedings strictly in accordance with the amended provisions of the Act, as amended by the Finance Act, 2020 and the Finance Act, 2021 . The petitioner assessee would be entitled to challenge or raise the other legal objections if the Revenue initiates fresh proceedings. The Department has made no endeavour in availing the said liberty that was reserved for the Revenue. on the contrary, they have been still sticking on to the stand, which this High Court as well as many other High Courts already held to be bad

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It appears that because of rhe aforesaid liberty that this High Court had granted permitting the Revenue fbr initiating fresh proceedings as a one-time measure in a faceless manner, the Income Tax Department wants to take advantage of the same by protracting these proceedings which would enable them to meet the limitation that would otherwise come in the way. Likewise, if the rvrit petition is kept pending for a considerable long period of time and finally at a later stage if the Hon,ble Suprenre Court confims the decision taken by this High Couft as also by ttre other High Clourts in which the SLps are still pending, the Income Tax

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aaaQV.'.' f.'-.:s// pi;*?}X'' iirli.Y'

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-t/

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Department^{wouldget the advantage of the libeny that is. otherwise} protected in^{favour of the Revenue for initiationof fresh} proceedings^{from the disposalof these matters at a much later stage} which^{wouldbe advantageousand beneficialto the Revenueand} would be^{equallydisadvantageous and detrimentalso far as interest} of the^{assesses are concemed'As a consequence'the IncomeTax} Department^{getsan extended period of time for initiationof fresh} proceedings.

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The^{alarming trend of docket explosion in this Court'despite} the clear^{precedentsetin Kanakala RavindraReddy (l supra)' is a} matter of^{grave conceffI' ThetncomeTax Department'spersistent} initiation^{of fresh proceedings' disregarding the established judicial} pronounc€ments,^{has led to an unprecedented surgein litigation} with over^{600-700 petitionspiting up on the sameissue' This} deliberate^{approach not only underminesthe principle of judicial} precedent but^{also strains the judicialresources unnecessarily' The} Department's^{strategyof awaitingthe SupremeCourt's decisionon} pending SLPs^{whilecontinuing to initiate fresh proceedings} appears to be^{a calculated move to buy time and circumvent} limitation^{periods, ratherthan adheringto the established legal}

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position. Such conduct raises serious questions . about the administrative efficiency and the respect for judicial pronouncements, particularly when this Court has already provided a balanced approach by preserving both the Revenue,s rights and assesses interests

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l3' Another aspect which needs to be considered is that in fact it should have been realized by the Income Tax Department itself and should have found out via media in ensuring that proceedings under Sections 14g_A and l4g should not have been issued in a faceless maruler, at least till the Hon,ble Supreme Court decide the twelve hundred (1200) odd SLps which it is already seized ofor, at least the Income Tax Department should have fbund out some remedial steps to ensure that wherever the authorities intend to initiate proceedings under Sections l4g_A and 148. other rhan in a fbceless manner, the proceedings should have been deferred rvithout precipitating the matter further intinrating the assessee that they shall initiate appropriate proceedings onry after rhe SLp,s are decided by the Hon,ble Supreme Courr on the very same issue. This again, the Income Tax Department, has not been able to give a convincing reply, except for the fact that such a decision ilat all

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has to^{be taken,has to be taken for the whole of India'and which} otherwise^{has to be by way of a policy decisionand that too at the} level of^{CentralBoard of Direct Taxes'Though the leamed} Standing^{Counsel for the Income Tax Department contended that} the Delhi^{HighCourtdismisseda writ petition of similarnature' on} the one^{hand whenthe High Court is struggting to reduceits} pendency,^{such noticeswhich are under challengein this writ} petition^{are forcing the assesseeto knock the doors of this High} Court^{resulting in frling of hundredsof neu' writ petitionswhich in} the long^{run not onlyaffects the disposat of the writ petitionsbut} also^{consumes substantialtime oi the Benchin hearing these} matters^{again and againon daily basis'Admittedly'in spite of the} matter^{before the Hon'bleSupreme Courthaving been taken on} many^{occasions,the Hon'ble SupremeCourtwhichis seized of the} matterhasbeenreluctantingrantinganyinterimprotectiontothe Income^{Tax Department' Yet' the authoritiesconcemedat the} State level^{are not ready to acceptthe verdict passed by a maj ority} of High^{Courtsof different States on the same issuel and to make} things further^{worse,the lncome Tax Department is showing} audacity^{by issuing notices continuously under Sections 148-4and}

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148 through the jurisdictional Assessing Officer whereas it ought to have been only in the faceless manner.

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In the case of BANK OF INDIA vs. ASSISTANT COMMISSIONER, INCOME TAXrr, on an issue whether ir was justifiable on the part of the Income Tax Department in not fbllowing an order passed by the adjudicating authority only on the ground that the appeals are pending, the Division tsench of the High Court of Rombay held at paragraph No.25 as under, viz., :

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"25. Mr.^paridwalla has righfly drawn out attention to the decision of this Court in Gommissioner of lncome Tax vs. Smt. Godavaridevi Sarafr2 as also the recent decision of the co_ ordinate Bench of this Court in Samp Furniture (p) Ltd. v. tTO,3 of which one of us (Justice G.s. Kurkami) was a member, wherein the court categoricafly observed that the Revenue having not "accepted" the judgment of the High Court would not mean that till the sante is set aside in a manner known to law, it would loose (s brnding force. Referring to the decision of the Supreme Court in Union of lndia vs. Kamlakshi Finance Corporation Ltd.,o, the court observed that the approach of the officiars of Revenue of treating decisions being "not acceptable" was criticized by the Supreme Court. ln such decision, following are the retevant observations made by the Supreme Court.

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,,I (2025) t7 0 raxmann.com 422 (Bombay))

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', I I9781 lll It'R -589 (Bombay) ,, I 20241 165 raxmann.com 5gl/300 Taxman 452 (llornbay) ,, I l9eli1;1r1'l3pn.rorn l6l55 ELT433 .] (SC)^\V h

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"6. Sri ReddY is perhaPs^{right in saYing that the} officers^were not actuated^{bY any mala fides in} passing the impugned orders.^TheYPerhaPs genuinely felt that the^{claimof the assessee was not} tenable and^{that, if it was accepted, the Revenue} would suffer.^{Butwhat Sri Reddyoverlooks is that we} are not concEmed^{herewith the correctrEssor} otherwise of^{theirconclusion or of any factual} malafides^{but with the fact that the officers,in reaching} in their conclusion,^{by-passed two appellate ordersin} regard to the^{same issuewhich were placedbefore} them, one of^{the Collector (Appeals) and the other of} the Tribunal.^{The High Court has, in our view'rightly} criticized this^{conductof the Assistant Collectorsand} the harassment^{to the assessee caused by the failure} of these ofiicers^{to give effectto the orders of} authorities^{higher to themin the appellatehierarchylt} cannot be too^{vehemently emphasizedthat it is of} utmost importance^{that, indisposing ofthe} quasijudicial issues^{before them, revenue officersare} bound by the^{decisions of the appellate authorities'} The order of^{the Appellte Collectoris bindingon the} Assistant Cotlectors^{working within his iurisdictionand} the order^{of the Tribunal is binding uponthe Assistant} Collectors and^{the Appellate Collec{ors whofunction} under the^{jurisdictionof the TribunalThe principtesof} judicial discipline require that lhe orders^{of the higher} appellate authorities^{should be foHowed unreservedly} by the subordinate authorities.^{The merefact that the} order of the appellate authority^{is not 'acceptable"to} the depadment - in itself an obiectionable^phrase - and is the subject matter of an appeal^{can furnishno} ground for not following it unless its operation^has been suspend€d by a competent^{court.lf this healthy}

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a<br>

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rule is not followed, the result will only.be undue harassment to assesses and chaos in adminiskation of tax laws.

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12 We have dealt with this aspec{ at some length, because it has been suggested by the leamed Additional Solicitor General that the observations made by the High Court, have been harsh on the officers. It is clear that the observations of the High Court, seemingly vehement, and apparenfly unpalatable to the Revenue, are only intended to curb a tendency in revenue mafters which, if allowed to become widespread, could result in considerable harassment to the assesses_public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and the utmost regard should be paid by the adjudicating authorities and the appellate authorities to the requirements of judicial drscipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them."

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What is wotrying this Bench more is the fact thar an

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endeavoul- is being made whole heartedly to ensure not to generate further litigation on issues which have been laid to rest by a large number of t{igh Courts all of whom have taken a consistent stand that the action olthe lncome Tax Department being violative olthe

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Finance^{Lct,2020andFinance Act'2O21'Now' in order to protect} the interest^{of the Reventreas alsothat of the assessee' it wouldbe} trite at^{this juncture, if we disposeof the writ petitionwith an} observation/direction^{that the disposatof the instant writ petition in} terms of^{the judgmentrenderedby this High Court in the case of} Kankanals^{Ravindra Retldy (l supra) shall howeverbe subject to} the outcome^{of the SLPs whichwere frled by the lncomeTax} Department^{and whichis pending considerationbeforethe Hon'ble} Supreme^Court'

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16.^{In the givenfacts and circumstances'this Bench is of the} considered^{opinion that unless and until we do not timely dispose} of matters^{whichare squarely coveredby the decisionof this Court} and^{which standsfortifredby the decisions of the variousother} High^{Courtson the verysame issue' the pendencyof this High} Court^{wouldfurtherbe burdened which otherwise canbe decided} and disposed^{of as a coveredmatter'}

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So^{far as the interest of the Revenueis concerned' we are ol} the considered^{opinionthat the interest of the Revenuehas already} been considered^{and protected, as has been observed in paragraphs}

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36, 37 and 3 8 of the order which, for ready refeience, is reproduced

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hereunder:

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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 14g 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 subseguent orders also gets nullified automatically.

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The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on th,s very lurisdiclional issue. Since the impugned notices and orders are gefting 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.

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Since the Hon,ble Supreme Court had, in the case of Ashish Agarwal, supra, as a onetime measure exercising the powers under Article 142 of the Constitution of lndia, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right

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confened^{on ttte Revenue wouldremain reserved to} proceed further^{if they so wantfrom the stageof the} order of^{the SupremeCourtin the case of Ashish} Agarwal,^suPra

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18.^{We would onty furtherlike to make observations that since} we are^{inclined to disposeof the instant writ petition' conscious of} the fact^{that the earlier order of this High Court in the case of} KanakalaRavindraReddy(lsupra)issubjectedtochallenge before^{the Hon'bleSupreme Court in SLP No'3574 of 2024'} preferred^{by the Income Tax Department' we make it clear that} allowing^{of the instant writ petitionis subject to outcomeof the} aforesaid^{SLP preferred by the Revenue against the decision ofthis} High Court^{in the case of Kanakala Ravindra'Reddy (t supra)'} This. in^{otherwords, wouldmean that eitherof the parties' if thev} so^{want, may move an appropriatepetition seekingrevival of this} writ petition^{in the light of the decision of the Hon'bleSupreme} Court^{in the pending SLP on the verysameissue'}

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Accordingly,^{the instant writ petitionstandsallowedin} favour of^{the assesseeso far as theissue of jurisdictionis} the impugned^{notice under} concemed.^{As a consequence'} challenge^{under Sections148-4 and 148 stands set aside/quashed'}

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The consequential orders, if any, also stand set aside/quashed in

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similar telms as have been passed by this High Court in the case of

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Kankanala Ravindra Reddy (l supra). There shall be no order as

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to costs.

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Consequently, miscellaneous petitions pending, if any, shall