Reassessment under Sections 147 and 148 must follow faceless procedures per Finance Act 2021, quashing illegal notices

The HC held that reassessment proceedings under Sections 147 and 148 must be conducted facelessly as mandated by the Finance Act, 2021, and the related schemes introduced thereafter. The Department's initiation of proceedings under pre-amendment provisions violated both the statute and the Supreme Court's directives in Ashish Agarwal, which required adherence to the amended procedure under Section 148A. Consequently, the HC quashed the impugned notices and proceedings, ruling them illegal and unsustainable. The decision was in favor of the assessee.

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Issues Involved:

1. Contravention of Amended Provisions of the Income Tax Act, 1961.
2. Requirement for Faceless Assessment.
3. Validity of Notices Issued by Local Jurisdictional Officer.
4. Compliance with Supreme Court's Judgment in Union of India vs. Ashish Agarwal.

Summary:

Issue 1: Contravention of Amended Provisions of the Income Tax Act, 1961

The petitioners challenged the orders passed by the Income Tax Officer under Section 148-A (d) and the consequential notice under Section 148 for the assessment year 2016-17, arguing that these orders were in contravention of the amended provisions of the Income Tax Act, 1961. The primary objection was the non-adherence to the amended provisions which mandated faceless assessment as per Section 144B and the scheme under Section 151A.

Issue 2: Requirement for Faceless Assessment

The petitioners contended that the reassessment should have been conducted in a faceless manner as mandated by the amendments effective from 29.03.2022. The Central Board of Direct Taxes (CBDT) had issued notifications for e-assessment of Income Escaping Assessment Scheme 2022, which required automated allocation and faceless assessment. The respondent-Department argued that the notices were issued prior to the amendment and thus followed the un-amended provisions.

Issue 3: Validity of Notices Issued by Local Jurisdictional Officer

The petitioners argued that the local jurisdictional officer issuing the notices violated the amended provisions requiring faceless assessment. The respondent-Department contended that both the Jurisdictional Assessing Officer (JAO) and units under the National Faceless Assessment Centre (NFAC) have concurrent jurisdiction and that the issuance of notices by the JAO was valid.

Issue 4: Compliance with Supreme Court's Judgment in Union of India vs. Ashish Agarwal

The Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal had deemed notices issued under the un-amended Section 148 to be treated under the new Section 148A and allowed the Department to proceed with reassessment under the amended provisions. The Court held that the respondent-Department should have adhered to the amended provisions as directed by the Supreme Court.

Judgment:

1. Contravention of Amended Provisions: The Court found that the respondent-Department did not proceed under the substituted provisions of the Finance Act, 2021, thus violating the statute and the Supreme Court's directives.

2. Requirement for Faceless Assessment: The Court held that after the introduction of the schemes for faceless assessment, it became mandatory for the Department to conduct reassessment proceedings in a faceless manner.

3. Validity of Notices: The Court concluded that the notices issued by the local jurisdictional officer were not in compliance with the mandatory faceless assessment requirement, rendering them invalid.

4. Compliance with Supreme Court's Judgment: The Court emphasized that the Supreme Court's judgment required the Department to proceed under the amended provisions, and failure to do so invalidated the proceedings.

Conclusion:

The Court quashed the impugned notices and the consequential orders, holding them procedurally flawed and in contravention of the amended provisions and the Supreme Court's directives. The petitions were allowed on the jurisdictional issue, reserving the right for the Revenue to proceed further from the stage of the Supreme Court's order in Ashish Agarwal's case if they so choose. No order as to costs.

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