Writ allowed for assessee; notices under sections 148A and 148 quashed for lack of jurisdiction and non-faceless procedure

Writ petition allowed in favour of the assessee on jurisdictional grounds; impugned notices issued under sections 148A and 148 of the Act quashed. The HC observed widespread issuance of non-faceless notices contrary to the amended regime and noted the Revenue's failure to adopt pan-India remedial steps, causing heavy litigation. Disposal is made subject to the outcome of the appeals pending before the SC; either party may seek revival of the petition depending on the SC's decision.

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ISSUES PRESENTED AND CONSIDERED

1. Whether notices issued under Section 148A and Section 148 of the Income Tax Act, 1961 and assessments completed under Section 147 are valid where such proceedings were not initiated and conducted in a faceless manner contrary to amendments effected by the Finance Acts of 2020 and 2021 and applicable faceless-framework notifications.

2. Whether subordinate revenue authorities are bound to follow consistent judicial pronouncements of High Courts holding that non-faceless issuance of notices under Sections 148A/148 is procedurally invalid, and whether continued issuance of such notices despite those decisions amounts to abuse, causes undue litigation and violates principles of judicial discipline.

3. Whether disposal of a writ petition that is squarely covered by an existing High Court decision should be deferred merely because Special Leave Petitions (SLPs) are pending in the Supreme Court, and what protection / reservation of rights should be afforded to the Revenue when disposing such covered matters.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of notices under Sections 148A/148 where proceedings were not faceless

Legal framework: The amended Income Tax regime (post Finance Acts 2020/2021) prescribes that specified reassessment-related processes must be conducted in accordance with the faceless assessment framework and applicable notifications (including Notification 18/2022 and provisions such as Section 151A as referenced by the Court). The statutory scheme determines the mode and procedure for initiation of reassessment notices and related proceedings, and non-compliance with mandated procedure vitiates jurisdiction.

Precedent treatment: Multiple High Courts have ruled that initiation of proceedings under Sections 148A and 148 in a non-faceless manner after the amendments is procedurally impermissible and therefore invalid; the Court adopts and follows that consistent line of High Court authorities.

Interpretation and reasoning: The Court reasoned that the legislative amendments and notifications alter the procedural modalities for reassessment proceedings; where those modalities require faceless issuance and processing, any initiation by the jurisdictional Assessing Officer outside the faceless framework is procedurally flawed. Procedural illegality in the initiation stage renders subsequent assessment orders unsustainable because jurisdiction itself is vitiated. The Court emphasized that initiation of proceedings in contravention of the faceless regime undermines the statutory procedure and therefore strikes at the root of the proceedings.

Ratio vs. Obiter: Ratio - Notices and consequent orders under Sections 148A/148/147 issued without adherence to the faceless procedure mandated by the amended statute and notifications are invalid and liable to be set aside. Obiter - Observations on wider administrative practices and recommended remedial measures (e.g., pan-India instructions) and commentary on media-awareness are ancillary.

Conclusions: The notices under Sections 148A and 148 and the consequential assessment orders are set aside/quashed for want of compliance with the faceless-procedure mandated by the statutory amendments and corresponding notifications; when initiation is procedurally wrong, subsequent orders automatically fall.

Issue 2 - Duty of revenue authorities to follow High Court precedent and consequences of non-compliance

Legal framework: Principles of judicial discipline require that subordinate authorities give effect to binding decisions of superior courts; an appellate court's judgment remains binding unless suspended by a competent court. Administrative conduct that persists in disregarding settled judicial pronouncements invites judicial intervention to curb harassment and chaos in tax administration.

Precedent treatment: The Court relies on established jurisprudence stressing that revenue officers cannot refuse to follow High Court decisions on the ground that they are "not acceptable" or because appeals are pending; such an approach is impermissible unless operation of the decision has been stayed.

Interpretation and reasoning: The Court found that despite repeated High Court rulings declaring non-faceless initiation unlawful, the Income Tax Department continued to issue such notices, thereby generating voluminous identical litigation and undermining judicial precedent. The Court characterized the Department's conduct as calculated to prolong initiation and exploit limitation periods and observed that mere pendency of SLPs in the Supreme Court, without any interim order staying the High Court decisions, does not permit continuation of the offending practice.

Ratio vs. Obiter: Ratio - Revenue authorities must abide by binding High Court decisions and cannot persist in a practice declared unlawful absent a stay; continued issuance of non-faceless notices contrary to settled High Court adjudication is unsustainable. Obiter - Critical remarks about administrative malaise, media-awareness and policy-level inaction are supplementary observations.

Conclusions: The persistent initiation of non-faceless proceedings despite binding High Court authority is improper; the Court quashes such notices and reiterates the requirement of judicial discipline while noting the remedial liberty previously reserved to the Revenue.

Issue 3 - Disposal of writ petitions covered by existing High Court rulings while SLPs are pending; protection of Revenue's rights

Legal framework: A High Court can dispose of matters covered by its prior decisions; where the Revenue has a reserved liberty to initiate fresh proceedings in compliance with amended law (as previously recognized), the Court must balance finality and protection of revenue interest. Pending SLPs in the Supreme Court do not automatically preclude disposal unless the Supreme Court has granted interim relief or stay.

Precedent treatment: The Court treated its earlier decision (and consistent High Court authorities) as binding for purposes of disposing covered writ petitions; it noted that the Revenue's recourse to the Supreme Court (SLPs) does not suspend the High Court's authority or justify continued contravention of High Court rulings absent an operative stay.

Interpretation and reasoning: Faced with large-scale repetition of identical petitions and heavy docket explosion, the Court held that leaving matters undecided merely because SLPs are pending would needlessly perpetuate litigation and prejudice petitioners. Simultaneously, the Court recognized the legitimate interest of the Revenue and observed that its previous orders had expressly preserved the Revenue's right to initiate fresh proceedings strictly in accordance with amended provisions and faceless procedure. Consequently, the Court disposed the instant petition subject to the outcome of pending SLPs, and allowed revival if any party so desires in light of the Supreme Court's eventual decision.

Ratio vs. Obiter: Ratio - Where a writ petition is squarely covered by binding High Court precedent and no stay from the Supreme Court exists, the High Court should dispose of the petition rather than keep it pending; disposal may be made subject to the eventual outcome of SLPs to protect both parties' rights. Obiter - Observations about docket-management, administrative motivations for delay, and suggestions for CBDT-level pan-India policy are illustrative and not essential to the holding.

Conclusions: The Court disposed of the writ petition in favour of the assessee on the jurisdictional point, quashed the impugned notices under Sections 148A and 148 and consequential orders, while making the allowance subject to the outcome of any SLPs pending before the Supreme Court and preserving the parties' rights to seek revival or further proceedings as appropriate.

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