Notices under Section 148A(b) and 148 issued by jurisdictional AO invalid for bypassing faceless procedure; matter remanded for fresh adjudication

ITAT, Hyderabad (AT) held that notices under sections 148A(b) and 148 issued by the jurisdictional AO, instead of faceless officers, were invalid and quashed as contrary to the applicable faceless procedure. The tribunal relied on the HC's earlier rulings on identical issues. As the CIT(A) had summarily dismissed the appeal by an ex parte order, the tribunal remanded the additions to the CIT(A) for fresh adjudication on merits, directing that the assessee be given one more opportunity to file evidence and present the case.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the delay of 32 days in filing the appeal should be condoned on account of the assessee's illness and supporting medical evidence.

2. Whether notices issued under section 148A(b) and section 148 of the Income-tax Act by the jurisdictional Assessing Officer (JAO), instead of a Faceless Assessing Officer (FAO), are valid after the amendments effected by Finance Acts and notifications (i.e., requirement of faceless proceedings), and whether this objection was raised before the lower authorities.

3. Whether, if notices under sections 148A/148 are procedurally invalid (issued by JAO instead of FAO), consequential reassessment orders passed under section 147 read with section 144B are null and void ab initio.

4. In view of the above, whether issues on merits (additions under sections 69A, unexplained investments, duplicate entries, timber purchases, matured time deposits) should be adjudicated by the Tribunal or remitted to the Commissioner (Appeals) for fresh adjudication after opportunity to the assessee.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Condonation of delay in filing appeal

Legal framework: Procedural law permits condonation of delay in filing appeals where reasonable cause is shown; medical incapacity is an acknowledged ground.

Precedent Treatment: Applied ordinary principles of condonation (medical illness constituting reasonable cause) - no novel precedent distinguished or overruled.

Interpretation and reasoning: The Tribunal examined the affidavit and the medical certificate showing treatment and prescribed bed rest for the relevant period, and accepted the explanation that illness prevented timely steps; further delay in handing documents to counsel and portal filing was explained.

Ratio vs. Obiter: Ratio - medical incapacity supported by documentary proof constitutes reasonable cause for condoning short delay; Obiter - none relevant.

Conclusion: Delay of 32 days in filing the appeal is condoned.

Issue 2 - Validity of notices under sections 148A(b) and 148 issued by JAO instead of FAO (faceless procedure)

Legal framework: Post-amendment statutory regime and notifications require certain proceedings (including issuance of notices and reassessment steps) to be faceless - requiring actions to be taken by/designated FAO/assessment unit as per section 144B/section 151A and relevant notifications.

Precedent Treatment (followed/distinguished/overruled): The Tribunal relied on the decision of the jurisdictional High Court in an identical matter and noted a body of High Court decisions uniformly holding that issuance of notices under sections 148A/148 by the jurisdictional AO in breach of the faceless regime is procedurally invalid. The Tribunal expressly followed those High Court rulings while acknowledging that the issue is pending adjudication before the Supreme Court (multiple SLPs).

Interpretation and reasoning: The Tribunal found that the show cause notice under section 148A(b) and the notice under section 148 were indisputably issued by the JAO, not the FAO/assessment unit, and that the issue raised was included in grounds of appeal to the Commissioner (Appeals). Given the consistent High Court jurisprudence, including the jurisdictional High Court decision addressing the identical procedural defect, the Tribunal concluded that the notices were invalid. The Tribunal also addressed the Revenue's contention about non-raising of the point below and rejected it on review of grounds of appeal, finding the issue was raised.

Ratio vs. Obiter: Ratio - where statutory scheme/notifications mandate faceless initiation, notices issued by the JAO (non-faceless) are invalid and liable to be quashed; Obiter - comments on administrative propriety and departmental conduct vis-à-vis pending Supreme Court SLPs.

Conclusion: The show cause notice under section 148A(b) and notice under section 148 issued by the JAO are not valid and are quashed.

Issue 3 - Effect of quashing procedural notices on consequential reassessment orders

Legal framework: Principle that jurisdictional or procedural defects in the initiation vitiate consequential orders; when initiation of proceedings is 'procedurally wrong', subsequent orders based on that initiation are rendered invalid.

Precedent Treatment: The Tribunal relied on High Court rulings which held that where initiation (notice) is illegal, consequential orders under section 147/148 stand quashed; these High Court rulings have been followed by multiple benches and expressly cited.

Interpretation and reasoning: Following the High Courts, the Tribunal reasoned that if the initiation of reassessment is procedurally flawed (non-faceless issue), the consequent assessment/reassessment order cannot stand and must be set aside. The Tribunal observed that High Courts have quashed such notices and consequential orders, while making allowance that the Revenue may seek revival if higher courts modify the position.

Ratio vs. Obiter: Ratio - procedural invalidity of the initiating notice leads to invalidation of consequent reassessment orders; Obiter - the Tribunal's grant of liberty to parties to revive proceedings contingent on Supreme Court outcome is pragmatic guidance rather than core ratio.

Conclusion: Consequential assessment/reassessment orders founded on the invalid notices are quashed; parties are granted liberty to revive proceedings if higher court outcome necessitates.

Issue 4 - Remand of merits for fresh adjudication before Commissioner (Appeals)

Legal framework: Appellate principle - when lower appellate order is ex-parte or summary and merits not properly addressed, Tribunal may remit the matter for fresh adjudication with directions to afford opportunity and to decide by speaking order.

Precedent Treatment: Applied standard appellate practice to set aside ex-parte disposal and remand for full opportunity and adjudication; consistent with authorities emphasizing fair opportunity and speaking orders at appellate stage.

Interpretation and reasoning: Both parties agreed that the Commissioner (Appeals) had dismissed the appeal ex-parte without considering merits. The Tribunal, noting this and in the interest of justice, remitted the merits - including disputed additions under sections 69A (unexplained money), unexplained investments/time deposits, duplicate capture of entries, and timber purchases treated as unexplained - to the Commissioner (Appeals) for fresh adjudication after giving one more opportunity to the assessee to file evidence and make submissions. The Tribunal did not decide the substantive correctness of these additions, but provided procedural relief to ensure merits are adjudicated on record and evidence.

Ratio vs. Obiter: Ratio - where preceding appellate order is ex-parte and merits unadjudicated, remand for fresh, reasoned consideration after opportunity is appropriate; Obiter - observations on specific factual claims (duplicate entries, timber certificates) are left open for adjudication at CIT(A).

Conclusion: Merits of additions and other contested factual issues are remitted to the Commissioner (Appeals) for fresh adjudication by a speaking order after affording opportunity to the assessee to produce details and evidence.

Ancillary Observations

1. The Tribunal acknowledged that the question of faceless versus non-faceless initiation is the subject of pending appeals in the Supreme Court; accordingly, while the Tribunal followed consistent High Court precedent to quash the notices and consequential orders, it granted liberty to parties to seek revival in light of any adverse Supreme Court decision.

2. The Tribunal emphasized procedural fairness: condoning delay for proven medical incapacity, ensuring issues were raised before the lower authority (grounds examined), and remanding ex-parte appellate disposal for fresh hearing - thereby protecting both assessee's right to be heard and Revenue's right to pursue remedy if higher courts alter the law.

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