Reassessment notices u/s148 issued by jurisdictional officer despite s.151A faceless scheme held invalid; proceedings quashed

The dominant issue was whether the jurisdictional AO had authority to issue notices under s.148 after introduction of the faceless regime under s.151A. Relying on the reasoning adopted by another HC that, once the statutory faceless framework and notifications operate, the jurisdictional AO cannot act dehors that scheme, the Court held that notices issued outside the faceless regime are contrary to law and without jurisdiction; consequently, the impugned show-cause notices were treated as non est and all proceedings founded on them were quashed. Liberty was reserved to the revenue to seek revival if the SC later upholds the revenue's position in the pending matter.

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1. ISSUES PRESENTED AND CONSIDERED

1) Whether, after the Central Government's Notification dated 29-03-2022 made under Section 151A (e-Assessment of Income Escaping Assessment Scheme, 2022), initiation of proceedings for income escaping assessment-through show-cause notices issued under Section 148A-can validly be undertaken by the jurisdictional Assessing Officer outside the faceless/automated allocation regime, or whether such notices are without jurisdiction and liable to be quashed.

2) In view of the jurisdictional conclusion on faceless issuance, whether other challenges raised to the impugned notices/proceedings require adjudication, or should be kept open with liberty dependent on the pending decision of the Apex Court on the same controversy.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity and jurisdiction of Section 148A show-cause notices issued by the jurisdictional Assessing Officer post 29-03-2022 (faceless regime)

Legal framework (as discussed by the Court): The Court examined the scheme of Sections 147 to 151A, emphasising that Section 151A enables the Central Government to make a scheme by notification for faceless assessment/reassessment/recomputation and for issuance of notice under Section 148. The Court specifically considered the Notification dated 29-03-2022 bringing into force the e-Assessment of Income Escaping Assessment Scheme, 2022, whose scope clause mandates that assessment/reassessment/recomputation under Section 147 and issuance of notice under Section 148 shall be through automated allocation and in a faceless manner (to the extent indicated therein).

Interpretation and reasoning: The Court treated the faceless regime introduced by the Notification dated 29-03-2022 as governing the jurisdictional mode of initiation of income escaping assessment proceedings. It accepted the petitioners' core contention that, once such faceless regime is notified, initiation outside that framework by the jurisdictional Assessing Officer is contrary to the scheme and therefore suffers from want of jurisdiction. The Court considered that multiple High Courts have taken the view that proceedings initiated outside the faceless mechanism are without jurisdiction, while noting that an opposite view has also been expressed by another High Court. The Court further noted that the controversy is pending before the Apex Court, and therefore adopted an approach consistent with decisions that quash such notices while reserving liberty to the Revenue depending on the Apex Court's eventual determination.

Conclusions: The Court held that the impugned show-cause notices issued by the jurisdictional Assessing Officer outside the scope of Section 151A and the faceless scheme cannot stand and are to be quashed, along with all further proceedings initiated pursuant thereto, on the ground of lack of jurisdiction arising from non-compliance with the faceless regime.

Issue 2: Treatment of other grounds raised against the notices/proceedings in light of the jurisdictional finding and pending Apex Court consideration

Legal framework (as discussed by the Court): The Court proceeded on the principle that once proceedings are quashed on a jurisdictional defect connected to the mandatory statutory/notification framework, adjudication of remaining contentions becomes unnecessary at that stage. It also took note that the broader question concerning faceless issuance is pending before the Apex Court.

Interpretation and reasoning: Having accepted and decided the jurisdictional challenge relating to faceless initiation, the Court considered it appropriate to avoid deciding other contentions in these petitions. It aligned this course with the approach adopted by other courts in similar circumstances-quashing on the faceless-jurisdiction ground while preserving liberty to the Revenue and keeping other issues open, so that they may be urged if proceedings are revived after the Apex Court's decision.

Conclusions: The Court expressly left open all contentions of both parties other than the faceless-jurisdiction issue, to be considered only if revival becomes necessary. It granted liberty to the Revenue to seek revival in the event the Apex Court holds in favour of the Revenue on the pending issue, and limited the present relief to quashing the impugned notices and consequential proceedings on jurisdictional grounds.

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