2025 (4) TMI 1679 - HC - Income Tax

Proceedings under s.148A are integral to reassessment under ss.147-151 and cannot be excluded from s.151A scheme

TVS Credit Services Limited, United Overseas Finance Limited, M/s. HM Textiles Private Limited, Successor in interest of M/s. Subbura Spinning Mills Private Limited, M/s. Kinex India Private Limited, Formerly known as Antanium India Private Limited, and other Versus Deputy Commissioner of Income Tax, Corporate Circle 3 (1), Chennai; Chief Commissioner of Income Tax -1, Chennai; The Income Tax Officer, Corporate Circle 3 (1), Chennai; The Principal Commissioner of Income Tax-3, Chennai; Deputy Commissioner of Income Tax, Corporate Circle, No. 2, Madurai; Assessment Unit, Income Tax Department, New Delhi. and other

TVS Credit Services Limited, United Overseas Finance Limited, M/s. HM Textiles Private Limited, Successor in interest of M/s. Subbura Spinning Mills ... 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether the jurisdiction to conduct enquiry, issue show-cause notice and pass order under Section 148A of the Income Tax Act and to issue the consequential notice under Section 148 vests with the Faceless Assessing Officer (FAO) / NaFAC or continues to vest exclusively with the Jurisdictional Assessing Officer (JAO). 1.2 Whether the Scheme framed under Section 151A (and related faceless schemes under Sections 130 and 144B) can validly omit express provision for processing proceedings under Section 148A while providing for faceless issuance of notice under Section 148 and faceless reassessment under Section 147. 1.3 Whether proceedings under Section 148A form an integral, non-severable part of reassessment (Section 147) such that 'reassessment' must be treated as a single integrated process commencing with Section 148A enquiry and culminating in Section 147 order, thereby attracting faceless mechanism from the 148A stage itself. 1.4 Ancillary issue addressed: whether alternative statutory remedies preclude writ relief (availability of efficacious alternative remedy). 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Jurisdiction: FAO/NaFAC v. JAO to conduct Section 148A enquiry and issue Section 148 notice Legal framework: 2.1 Sections 147-151 (as amended w.e.f. 01.04.2021) including newly inserted Section 148A; Section 144B (faceless assessment); Section 151A (power to frame scheme for faceless reassessment/issuance of notice); Schemes/Notifications under Sections 130 and 151A (Faceless Jurisdiction Scheme 2022; E-Assessment of Income Escaping Assessment Scheme 2022) and risk management strategy/automated allocation mechanism. Precedent Treatment (followed/distinguished/overruled): 2.2 Several High Courts (Bombay, Telangana, Punjab & Haryana, Rajasthan, Bombay benches in multiple decisions) have held that after the scheme and statutory amendments it is mandatory to conduct proceedings under Sections 148A/148/147 in a faceless manner and that FAO/NaFAC must process/issue notices by automated allocation; contrary views were expressed by other benches (Delhi High Court and a prior Division Bench of this Court in Mark Studio) holding JAO retains exclusive jurisdiction to initiate 148A/148 but FAO/JAO have concurrent jurisdiction for assessment stage. Interpretation and reasoning: 2.3 The Court examines the textual amendments to Section 151A (which expressly inserted reference to 'conducting of enquiries or issuance of show-cause notice or passing of order under Section 148A') and the Schemes under Sections 130 and 151A. It finds that the legislative intent behind Section 151A and the faceless architecture is to bring reassessment (including preliminaries under 148A) within faceless mechanism: team-based assessment, automated allocation and elimination of direct interface. The Court rejects an artificial dissection that treats 148A as removed from reassessment, noting authoritative Supreme Court dicta that 'assessment' is comprehensive and cannot be split into isolated stages. The Court holds that allowing JAO to alone exercise 148A/148 jurisdiction would frustrate the statutory scheme of dynamic, automated, faceless jurisdiction and create concurrent/overlapping jurisdictions that undermine the scheme's objectives. Ratio vs. Obiter: 2.4 Ratio - Where the Central Government, under Section 151A, framed a scheme for faceless reassessment and expressly included matters of enquiries, show-cause and orders under Section 148A, the processing of proceedings under Section 148A and issuance of notice under Section 148 must be carried out in accordance with the faceless scheme (i.e., subject to automated allocation and team-based procedure) unless a specific statutory exception applies. Obiter - observations critiquing the reasoning of decisions holding contrary views (and detailed contrasts with those cases) are explanatory but not treated as binding precedents on other benches. Conclusions: 2.5 The Court aligns with the High Courts that hold faceless procedure governs reassessment inclusive of 148A; accordingly FAO/NaFAC (subject to exceptions carved out by statute/scheme) must have power to process enquiries and issue notices under Section 148A/148 in eligible cases where the scheme and automated allocation apply. Exclusive JAO jurisdiction over 148A/148 is not accepted as a general rule. Issue 2 - Validity/interpretation of Scheme omissions: can a delegate omit Section 148A from a scheme framed under Section 151A? Legal framework: 2.6 Principles of delegated legislation: the delegate must act within the scope and policy laid down by parent Act; schemes/notifications must conform to Section 151A's mandate. Authorities on cassus omissus and read-down/read-in principles where subordinate instruments omit necessary corollaries of parent Act. Precedent Treatment: 2.7 The Court references authorities establishing that a delegate cannot widen or constrict parent Act's scope; jurisprudence exists where courts have supplemented omissions to harmonise related provisions when omission frustrates legislative policy. Interpretation and reasoning: 2.8 The Court finds that omission of Section 148A in the notified Scheme (while including Section 148 and reassessment under Section 147) creates a lacuna that constricts the statutory scheme because Section 151A expressly contemplates inclusion of enquiries/148A matters. The Court reasons that the scheme thus cannot be read to exclude 148A without defeating legislative intent; where the parent Act expressly authorises framing of scheme covering 148A, a subordinate instrument omitting it is susceptible to interpretation as encompassing 148A to give effect to the parent legislation's policy. The Court invokes established principles allowing harmonisation where related provisions are inconsistent with subordinate rules and the omission produces anomalous results. Ratio vs. Obiter: 2.9 Ratio - A scheme framed under Section 151A that omits provisions necessary to effectuate the parent Act's clear mandate (here inclusion of Section 148A matters) should be construed in conformity with the parent Act; the omission cannot be allowed to constrict the statutory scheme. Obiter - reliance on extrinsic purposive aids and discretion-balancing observations addressing limits of judicial supplementation. Conclusions: 2.10 The Scheme must be read so as to cover (or not frustrate) Section 148A proceedings in appropriate cases; the delegate's omission cannot be given an interpretation that thwarts Parliament's express inclusion of 148A within Section 151A's remit. Issue 3 - Is Section 148A an integral, non-severable part of reassessment? Legal framework: 2.11 Statutory text of Sections 147-151 and newly inserted 148A (condition precedent), and Supreme Court precedents treating 'assessment' as a comprehensive process starting with filing/notice and ending with assessment order (S. Sankarappa; J.K. Iron & Steel; Auto & Metal Engineers). GKN Driveshafts procedure as legislativeised by 148A. Precedent Treatment: 2.12 The Court cites Supreme Court authority rejecting compartmentalisation of assessment proceedings; recent apex observations (Union of India v. Ashish Agarwal) treating 148A as condition precedent and part of reassessment procedure are relied upon. Interpretation and reasoning: 2.13 The Court holds that 148A enquiry is triggered only when information suggests escaped income and is thus an integral part of reassessment. Dissecting reassessment into pre-148A and post-148 segments is artificial and inconsistent with the expansive meaning of 'assessment' in Supreme Court jurisprudence. Section 148A was inserted precisely to statutoryise the GKN procedure, demonstrating that enquiry/opportunity stages are part of reassessment and therefore fall within the faceless scheme when Section 151A so provides. Ratio vs. Obiter: 2.14 Ratio - Section 148A is a condition precedent and integral stage of reassessment under Sections 147-151 and, where faceless scheme applies, must be processed consistent with the scheme. Obiter - observations on the consequences of deeming earlier notices as 148A notices in other factual matrices (drawing on Ashish Agarwal) to temper strict application as needed. Conclusions: 2.15 Reassessment proceedings commence with Section 148A enquiry; therefore faceless treatment (where applicable under the statutory scheme) must attach to that stage and not be confined only to post-notice assessment stages. Issue 4 - Availability of alternative remedy (scope for writ jurisdiction) Legal framework & precedent: 2.16 Principle that writ petitions are generally not entertained where efficacious alternative statutory remedies exist (citing settled law). The Court notes this submission but frames primary resolution around interpretation of statutory scheme and constitutional writ power. Interpretation and reasoning & conclusion: 2.17 While alternative remedy arguments were advanced by Revenue, the Court proceeds to decide the core question of statutory construction and jurisdictional competence because the issue is of widespread applicability and affects numerous petitions; the decision to refer the question to a Larger/Division Bench is taken for uniformity given conflicting High Court pronouncements. Overall Disposition and Administrative Outcome 3.1 Having analysed statutory text, schemes, precedents and policy, the Court is unable to concur with earlier contrary view taken by certain benches that 148A/148 initiation remains exclusively with JAO. The Court prefers the line of decisions holding that faceless mechanism governs reassessment inclusive of 148A and that subordinate schemes must be read in conformity with Section 151A. 3.2 Because divergent High Court decisions exist on this fundamental question of jurisdiction and scheme-construction, the matter is referred to a Division/Larger Bench for final authoritative determination; no final order on individual petitions is made pending such reference. 3.3 Ratio for guidance: (a) Section 148A is part of reassessment and, subject to statutory exceptions, faceless procedures under Section 151A/144B apply to 148A/148; (b) a scheme framed under Section 151A that omits 148A cannot be construed to defeat the parent Act's express inclusion of 148A; (c) concurrent jurisdiction of JAO and FAO for issuance of 148/148A notices should be avoided to preserve scheme coherence.