Bombay High Court Imposes Fine On JAO & Chief Commissioner For Disregarding Binding Judgement

The Bombay High Court has imposed a fine of Rs. 25000/- on the Jurisdictional Assessing Officer (JAO) for disregarding the binding judgment passed in the case of Hexaware Technologies Limited vs. Assistant Commissioner of Income Tax & 4 Ors., in which it was held that under the faceless assessment scheme introduced by Section 151A of the Income Tax Act, 1961, the National Faceless Assessment Centre (NFAC) has exclusive jurisdiction to issue reassessment notices.

The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan has observed that the case reflects a very poor state of affairs on the part of the JAOs, which is also not being corrected by the higher officials, namely, the Commissioner and Chief Commissioner of Income-tax. Even the Chief Commissioner of Income Tax has acted with total non-application of mind.

The bench remarked that it is a classic case of an absolute abuse of the powers vested in the public officer, namely, the Jurisdictional Assessing Officer.

The JAO has initiated proceedings against the petitioner or assessee under Section 148A of the Income-tax Act, 1961. Although at the time the notice under Section 148A(b) was issued, the order by the CIT (A) was yet to be passed; however, by the time the order under Section 148A(d) was passed on March 8, 2024, the JAO was fully aware of the outcome of the appeal.

The order passed under Section 148A(d) is conspicuously silent about adjudication on the very facts on which reassessment is being contemplated. The JAO himself was a party to the appeal; hence, he was aware of the order passed by the CIT (A).

Despite all the materials being available with the department, a mechanical sanction has been granted under Section 151(ii) of the Act by the Chief Commissioner of Income-Tax, which is also without application of mind. Contrary to the provisions of Section 151A, namely, outside the faceless mechanism as applicable under the notification dated March 29, 2022, issued by the Central Government, the notice under Section 148 was issued to the petitioner.

The JAO filed a reply to the writ petition, stating that the department does not agree with the judgment of the Bombay High Court in Hexaware Technologies.

The petitioner contended that the actions initiated by concerned officers against the petitioner were initiated with gross non-application of mind and/or much more than mechanically, as the entire basis of notices is the amount that was the subject matter of consideration for the Assessing Officer in the assessment order, which has ultimately resulted in its deletion. The notice under Section 148 was issued contrary to the provisions of Section 151A. The actions and notices would be required to be held illegal.

The petitioner contended that a reply affidavit was filed by the JAO. First, the JAO refused to acknowledge the petitioner's case in regard to the amount of Rs. 4 crore already being considered on its merits in the assessment orders, in which the JAO had added amounts to the petitioner's income. In the second instance, the deponent of the reply affidavit has not accorded any sanctity to the order dated February 26, 2024, passed by the CIT(A) in appellate proceedings under Section 250, by which the addition as made by the Assessing Officer had been deleted. There was no acceptable or cogent reason or any justification whatsoever for the assessing officer not to consider, discard, and overlook the legal effect of such orders passed by the appellate authority. The significant material that had a direct bearing on any notice to be issued under Section 148A(b) and an order to be passed, and in the issuance of notice under Section 148, was certainly quite gross, amounting to a dereliction of duty and discarding from the path of law.

The court noted that it cannot be accepted that the JAO was totally alien to the proceedings leading to the assessment order dated December 20, 2019 and the subsequent appellate proceeding before the CIT(A), culminating in the order dated February 26, 2024. A perusal of the reply affidavit indicates that quite astonishingly, the Assessing Officer has thought it proper not to deal with such vital facts, which were paramount in initiating any reassessment proceedings, on the very same issue, which had attained finality. The JAO in fact proceeded to resort to a Section 148 action, as if there were no assessment order dated December 20, 2019 and the appellate order passed by CIT (A). It is clear from the reasons the JAO has set out in the reply affidavit. The statements and/or justifications to initiate action under Section 148A(b) and (d) show something more than a gross non-application of mind.

The court stated that it may be that the Revenue has not “accepted” the judgment of the Bombay High Court, but that would not mean that till it is set aside in a manner known to law, it has lost its binding force, as the JAO intends to say in an affidavit, so as to proceed as if there is no such decision of this Court, and much less a binding decision. This very approach to treating judgments as “not acceptable” is in the teeth of the law as laid down by the Supreme Court.

The court noted that the concerned officers, who are supposed to know the Income Tax Act and the law and that the decisions of the jurisdictional high court would bind them, cannot have an approach of such open disregard for the orders passed by the high court.

The court directed the JAO, as well as the Chief Commissioner, to deposit personal costs of Rs. 25,000 each with the “National Association for the Blind” within two weeks.

Counsel For Petitioner: Devendra Jain

Counsel For Respondent: Akhileshwar Sharma

Case Title: Samp Furniture Pvt. Ltd. Versus Income Tax Officer

Case No.: Writ Petition No. 3290 Of 2024

Click Here To Read The Order