2024 (10) TMI 1649 - AT - Income Tax

Premature Tax Assessment Invalidated: NFAC Lacks Jurisdiction Before Official Notification Date of 29.03.2022

Nabiul Industrial Metal Pvt. Ltd Versus ITO, IT Department, NFAC, Delhi.

The SC/Tribunal found the National Faceless Assessment Centre (NFAC) lacked jurisdiction when initiating assessment proceedings before the official ... Validity of reopening of assessment u/s 147 - absence of any response from the appellant - HELD THAT:- It appears from the show cause notice issued on 28.03.2022 that at the bottom of the page it was digitally signed thereby giving date 29.03.2022 at 00:20:37 IST. We further find that in the show cause notice the assessee has been directed to furnish explanation on or before 29.03.2022. It is surprising that when it was issued on 29.03.2022 at 00:20:37 IST and directed the assessee to explain the explanation before 29.03.2022. We find substance in the argument of the CIT(A) that assumption of jurisdiction prior to 29.03.2022 by the AO is to be held to be without jurisdiction. Accordingly, the assessment order, passed, is to be deemed without jurisdiction. ISSUES PRESENTED and CONSIDEREDThe core legal issue considered in this judgment revolves around the jurisdictional validity of the assessment proceedings conducted by the National Faceless Assessment Centre (NFAC) under the Income Tax Act, 1961. Specifically, the question is whether the NFAC assumed jurisdiction in accordance with the statutory provisions and notifications in force at the relevant time, particularly concerning the applicability of Section 151A read with Section 144B of the Act.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework centers on Section 147 of the Income Tax Act, which deals with the reassessment of income escaping assessment, and Section 151A, which pertains to the jurisdictional authority for conducting assessments in a faceless manner. The notification dated 29.03.2022, issued by the Ministry of Finance, is crucial as it specifies the commencement date for the e-Assessment of Income Escaping Assessment Scheme, 2022, under Section 151A.Court's Interpretation and ReasoningThe Tribunal examined the timing and procedural aspects of the NFAC's jurisdictional assumption. It was noted that the NFAC initiated proceedings on 29.11.2021, as evidenced by the notice issued under Section 142(1) of the Act. However, the notification enabling the faceless assessment scheme under Section 151A was effective from 29.03.2022. The Tribunal found this discrepancy significant, as it indicated that the NFAC did not have the jurisdiction to conduct assessments in a faceless manner prior to the effective date of the notification.Key Evidence and FindingsThe Tribunal relied on several key documents, including the notification dated 29.03.2022, the notice issued under Section 142(1) on 29.11.2021, and the show cause notice dated 28.03.2022. The show cause notice was digitally signed on 29.03.2022 at 00:20:37 IST, directing the assessee to respond by the same date, which was deemed procedurally flawed.Application of Law to FactsApplying the legal framework to the facts, the Tribunal concluded that the NFAC's assumption of jurisdiction prior to the effective date of the notification was without legal basis. The assessment proceedings initiated before 29.03.2022 were therefore deemed to be conducted without jurisdiction.Treatment of Competing ArgumentsThe Tribunal acknowledged the Department's support for the impugned order but noted the absence of any substantial objection to the legal ground raised by the assessee. The Tribunal emphasized the procedural impropriety of the NFAC's actions and the lack of jurisdictional authority at the time the proceedings were initiated.ConclusionsThe Tribunal concluded that the assessment order, and all subsequent orders based on it, were without jurisdiction due to the premature assumption of jurisdiction by the NFAC. As a result, the appeal filed by the assessee was allowed.SIGNIFICANT HOLDINGSThe Tribunal held that the assumption of jurisdiction by the NFAC prior to the effective date of the notification under Section 151A was without jurisdiction. This holding underscores the importance of adhering to statutory timelines and procedural requirements in the conduct of faceless assessments.Preserve Verbatim Quotes of Crucial Legal ReasoningThe Tribunal stated, 'Keeping in view the entire facts and discussions made above, we find substance in the argument of the ld. CIT(A) that assumption of jurisdiction prior to 29.03.2022 by the ld. AO is to be held to be without jurisdiction.'Core Principles EstablishedThe judgment establishes the principle that jurisdictional authority in faceless assessments must strictly adhere to the statutory framework and effective dates of relevant notifications. Any deviation from these requirements renders the proceedings void ab initio.Final Determinations on Each IssueThe Tribunal's final determination was that the assessment order and subsequent proceedings were without jurisdiction, leading to the allowance of the assessee's appeal.