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2025 DIGILAW 992 (TS)

D V S Subba Raju v. Union Of India, New Delhi

2025-09-08

NARSING RAO NANDIKONDA, P.SAM KOSHY

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ORDER : P. Sam Koshy, J. Heard Mr. P.Sri Raghuram, learned Senior Counsel, representing Mr. P.Balaji Verma, learned counsel for the petitioners, and Ms. J.Sunita, learned Senior Standing Counsel for Income Tax Department for the respondents. 2. The present writ petitions have been filed by the petitioners under Article 226 of the Constitution of India challenging the intimation dated 27.08.2009 (issued on 14.10.2009 and served on 16.10.2009) by the respondent-authorities under Section 143 (1) of the Income Tax Act, 1961 (for short "the Act") contending that the said intimation is bad in law, unauthorized, void, and ultra vires the provisions of the Act, particularly in light of the commencement of scrutiny assessment proceedings under Section 143 (3) of the Act, initiated by issuance of notice under Section 143 (2) of the Act. The petitioners further seek to quash the proceedings initiated pursuant to the said intimation under Section 143 (1) of the Act, including the judgment dated 09.01.2014, in C.C. No.121 of 2011 and C.C.No.125 of 2011, passed by the Special Judge for Economic Offences, Hyderabad. 3. The writ petitions originally came to be dismissed by a Co- ordinate Bench of this Court vide common order dated 26.10.2016. Subsequently, the petitioners filed review petitions vide I.A.No.3 of 2016 in W.P.No.28677 of 2016 and I.A.No.3 of 2016 in W.P.No.28689 of 2016 which were allowed by this Court vide common order dated 28.02.2024 recalling the order of dismissal and directing the writ petitions to be restored to the file for a fresh consideration. Pursuant thereto, the writ petitions were listed before this Bench, and arguments were duly heard. 4. The undisputed facts of the case, in nutshell, are that the petitioners who are the Directors of the two companies (Himagiri Greenfields Private Limited and Sindhu Greenlands Private Limited) challenged the intimation issued under Section 143 (1) of the Act after the commencement of the scrutiny assessment under Section 143 (3) of the Act and issuance of the notice under Section 143 (2) of the Act. The respondent-authorities prepared intimation under Section 143 (1) of the Act on 27.08.2009; however, it was only issued on 14.10.2009 and subsequently served upon the petitioners on 16.10.2009. Prior to this issuance, the respondent-authorities had already initiated scrutiny assessment proceedings under Section 143 (3) of the Act by serving notice under Section 143 (2) of the Act on 22.09.2009, scheduling a personal hearing on 05.10.2009. Prior to this issuance, the respondent-authorities had already initiated scrutiny assessment proceedings under Section 143 (3) of the Act by serving notice under Section 143 (2) of the Act on 22.09.2009, scheduling a personal hearing on 05.10.2009. This sequence conclusively establishes that the notice under Section 143 (1) of the Act was issued subsequent to the commencement of proceedings under Section 143 (3) of the Act, which formed the basis of the petitioners' challenge to nullify the intimation under Section 143 (1) of the Act. The petitioners contended that such subsequent proceedings were not only superfluous but also contravened the ratio decidendi established by the Hon'ble Supreme Court in the landmark authority of CIT vs. Gujarat Electricity Board , [ (2003) 260 ITR 84 ]. 5. The substantial issue raised in the writ petitions was whether the issuance of intimation under Section 143 (1) of the Act subsequent to the commencement of proceedings under Section 143 (3) of the Act by way of issuance of notice under Section 143 (2) of the Act would be without jurisdiction and void ab initio and as a consequence it deserves to be declared as a nullity. 6. The facts which are undisputed in the Writ Petitions so far as the relevant dates are concerned are that the respondent-authorities prepared intimation under Section 143 (1) of the Act for the petitioners on 27.08.2009; however, the same was issued only on 14.10.2009. The said intimation was subsequently served upon the petitioners only on 16.10.2009. Meanwhile, the respondent authorities even before the intimation under Section 143 (1) could be issued, issued scrutiny assessment proceedings under Section 143 (3) by issuance of notice under Section 143 (2) on 22.09.2009 and called upon the petitioner to appear in person on 05.10.2009. 7. The fact that the date for personal hearing has been given on 05.10.2009 establishes the fact that notice under Section 143 (1) was issued subsequent to the commencement of proceedings under Section 143 (3). It was in this context that the Writ Petitions were filed seeking for nullifying of the intimation under Section 143 (1) dated 28.07.2009. 7. The fact that the date for personal hearing has been given on 05.10.2009 establishes the fact that notice under Section 143 (1) was issued subsequent to the commencement of proceedings under Section 143 (3). It was in this context that the Writ Petitions were filed seeking for nullifying of the intimation under Section 143 (1) dated 28.07.2009. Since even before the issuance of the notice under Section 143 (1), the notice for the scrutiny assessment under Section 143 (2) was already issued on 22.09.2009 and proceedings had commenced under Section 143 (3), therefore it was challenged by the petitioners contending that that subsequent proceedings under Section 143 (1) was totally uncalled for. Further that the same was in contravention to the judgment of the Hon’ble Supreme Court in the Case of Gujarat Electricity Board (supra), which is a landmark authority decision on the said issue. After hearing the parties, the Hon'ble Division Bench hearing the petitions dismissed the writ petitions vide its common order dated 26.10.2016. 8. Learned Senior Counsel stressed on the fact that a notice under Section 143 (2) always has to precede the intimation under Section 143 (1) that is what has been laid down by the Hon’ble Supreme Court in the case of Gujarat Electricity Board (supra). 9. Learned Senior Counsel for the petitioners also presented comprehensive arguments as to how the factual matrix regarding the relevant dates significantly impacted the legal position in their favor. He relied upon several precedents of the Hon’ble Supreme Court, including Gujarat Electricity Board (supra) to reinforce their position that facts warranted a decision in their favor. 10. On the contrary, the learned Senior Standing Counsel for Income Tax Department contended that the petitioners challenge to the intimation under Section 143 (1) was an attempt to circumvent established legal procedures, as the matter had already progressed through statutory channels including penalty proceedings and criminal prosecution. Further, the learned Senior Standing Counsel for Income Tax Department contended that the petitioners were attempting to indirectly challenge proceedings that had already attained finality through appropriate statutory mechanisms, which would undermine the procedural framework established under the Act. 11. Further, the learned Senior Standing Counsel for Income Tax Department contended that the petitioners were attempting to indirectly challenge proceedings that had already attained finality through appropriate statutory mechanisms, which would undermine the procedural framework established under the Act. 11. Moreover, the learned Senior Standing Counsel for Income Tax Department maintained that the sequence of proceedings followed by the respondent-authorities was legally valid, with the intimation under Section 143 (1) of the Act being issued prior to the notice under Section 143 (2) of the Act. The learned Senior Standing Counsel for Income Tax Department argued that this chronology was permissible under the Income Tax Act, unlike the reverse situation which would have been prohibited. The learned Senior Standing Counsel for Income Tax Department also cited relevant case law, including the Gujarat Electricity Board (supra) to support her contentions that while placing "the cart before the horse" was prohibited, the sequence followed in the present case was perfectly legal. 12. Learned Senior Standing Counsel for Income Tax Department further highlighted the petitioners admitted default in payment of self- assessed tax which had rightfully triggered the penalty proceedings under Section 221 of the Act and subsequent prosecution rendering the present challenge to the original intimation untenable at this stage of proceedings. 13. It was also contended that allowing such a challenge would create a dangerous precedent whereby litigants could bypass statutory remedies and challenge initial notices after adverse final orders had been passed against them. Thus, prayed for dismissal of the instant writ petitions. 14. Having heard the arguments advanced by the learned Senior Counsel on either side, it would be relevant at this juncture to take note of the categorical finding given by the Hon’ble Supreme Court in the case of Gujarat Electricity Board (supra), wherein in paragraphs Nos.2, 5 and 7, the Hon’ble Supreme Court had held as under: " 2. The short question which arises in these appeals is: whether it is open to the Revenue to issue intimation under Section 143 (1)(a) of the IT Act after notice for regular assessment has been issued under Section 143 (2) of the Income Tax Act, 1961 ? 5. The short question which arises in these appeals is: whether it is open to the Revenue to issue intimation under Section 143 (1)(a) of the IT Act after notice for regular assessment has been issued under Section 143 (2) of the Income Tax Act, 1961 ? 5. The learned counsel appearing for the respondents have pointed out that in a number of judgments several High Courts have consistently taken the view that once regular assessment proceedings have commenced under Section 143 (2) of the Income Tax Act, 1961 , it is a limitation on the jurisdiction of the assessing officer to commence proceedings under Section 143(1)(a) of the Act. 7. Apart therefrom, the provisions of Section 143 (a)(i) indicate that the intimation sent under Section 143 (1)(a) shall be without prejudice to the provisions of sub-section (2). The legislature, therefore, intended that, where the summary procedure under sub-section (1) has been adopted, there should be scope available for the Revenue, either suo moto or at the instance of the assessee to make a regular assessment under sub-section (2) of Section 143. The converse is not available; a regular assessment proceeding having been commenced under Section 143 (2), there is no need for a summary proceeding under Section 143 (1)(a)." 15. Keeping in view the aforesaid, there does not seem to be any dispute regarding the relevant dates in the instant cases. Admittedly, while the notice under Section 143 (1) of the Act was dated 27.08.2009, it was actually dispatched only on 14.10.2009. It is also undisputed that before the notice under Section 143 (1) of the Act could be issued on 14.10.2009, the notice under Section 143 (2) of the Act, initiating proceedings under Section 143 (3) of the Act was already issued on 22.09.2009, fixing a date for personal hearing on 05.10.2009. Both these dates, 22.09.2009 and 05.10.2009, precede the issuance of the notice under Section 143 (1) of the Act. Thus, it stands established beyond doubt that the notice under Section 143 (2) of the Act was issued on 22.09.2009, prior to the issuance of the intimation under Section 143 (1) of the Act on 14.10.2009. Both these dates, 22.09.2009 and 05.10.2009, precede the issuance of the notice under Section 143 (1) of the Act. Thus, it stands established beyond doubt that the notice under Section 143 (2) of the Act was issued on 22.09.2009, prior to the issuance of the intimation under Section 143 (1) of the Act on 14.10.2009. The above mentioned chronology directly contravenes the legal principle established by the Hon'ble Supreme Court in Gujarat Electricity Board (supra) which clearly held that once the regular assessment proceedings have commenced under Section 143 (2) of the Act, it is not open for the Revenue to issue intimation under Section 143 (1)(a) of the Act. 16. The contention of the learned Senior Standing Counsel that the sequence followed was permissible, cannot be accepted in light of the factual matrix. The Hon’ble Supreme Court has unambiguously held that "upon regular assessment proceeding having been commenced under Section 143 (2) of the Act, there is no need for a summary proceeding under Section 143 (1)(a) of the Act." This ratio decidendi is directly applicable to the facts of the present case. 17. The intimation under Section 143 (1) of the Act issued on 14.10.2009, after the commencement of scrutiny proceedings under Section 143 (3) of the Act through notice under Section 143 (2) of the Act issued on 22.09.2009 is illegal, untenable and must be set aside. Further, all the proceedings emanating from the said intimation, including penalty proceedings under Section 221 of the Act and prosecution initiated against the petitioners cannot be sustained as they originate from a legally invalid notice. 18. In view of the above, the writ petitions are allowed. The intimation issued under Section 143 (1) of the Act dated 14.10.2009 issued by the respondent-authorities is hereby set aside, along with all consequential proceedings emanating there from. No costs. 19. As a sequel, miscellaneous petitions pending if any, shall stand closed.