Reassessment notices for AY 2018-19 issued outside mandatory faceless scheme u/s151A held invalid, reopening quashed

The dominant issue was whether reassessment was valid when notices under ss. 148A(b), 148A(d) and 148 were issued by the jurisdictional AO after the Central Government notified the mandatory faceless mechanism under s. 151A. The Tribunal held that once the faceless scheme became operative, issuance of reassessment notices outside the faceless framework was contrary to the statute and violated the rule of law, rendering the notice under s. 148 and the consequent reopening for AY 2018-19 void. The reassessment proceedings and resultant assessment order were therefore declared illegal and null, and the taxpayer succeeded on the jurisdictional/legal ground.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether, after notification of the faceless "e-Assessment of Income Escaping Assessment Scheme, 2022" dated 29.03.2022 under section 151A, a notice and allied proceedings under sections 148A(b), 148A(d) and the notice under section 148 could validly be issued by the Jurisdictional Assessing Officer, or whether such actions were required to be through the faceless mechanism/automated allocation, failing which the reopening is invalid.

(ii) If the notice under section 148 is held invalid as having been issued contrary to the mandatory faceless scheme, whether the consequential reassessment order is a nullity in law, without requiring the assessee to prove "prejudice", and whether merits of additions need not be examined.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of section 148A/148 actions when issued by the Jurisdictional Assessing Officer after 29.03.2022

Legal framework (as discussed by the Court): The Court considered that section 151A empowers formulation of a scheme for assessment/reassessment and for issuance of notice under section 148, including inquiry/show cause/order under section 148A and sanction under section 151. It noted that a scheme was notified on 29.03.2022 providing that reassessment proceedings and issuance of notice under section 148 shall be through automated allocation and in a faceless manner. The Court treated this scheme as mandatory and binding on the Department.

Interpretation and reasoning: The Court rejected the contention that the faceless authority and Jurisdictional Assessing Officer had concurrent jurisdiction for issuing section 148 notice. It reasoned that once the scheme assigns the function (issuance of notice) to the faceless mechanism through automated allocation, it operates to the exclusion of the Jurisdictional Assessing Officer; otherwise the faceless regime would be rendered redundant and lead to procedural chaos. The Court held itself bound by the jurisdictional High Court (Division Bench) view adopting the reasoning that notices issued by the Jurisdictional Assessing Officer, contrary to the scheme, are invalid.

Conclusions: Since the section 148A(b) notice, the section 148A(d) order, and the section 148 notice (dated 31.03.2022) were issued by the Jurisdictional Assessing Officer after the scheme was notified on 29.03.2022, the Court held the section 148 notice invalid and bad in law, as being contrary to the mandatory faceless scheme and the "Rule of Law", thereby vitiating the reopening.

Issue (ii): Effect of invalid section 148 notice on reassessment order; need to show prejudice; decision on merits

Legal framework (as applied): The Court proceeded on the principle that when action is taken contrary to mandatory legal procedure governing reopening, the foundational jurisdiction fails, and the consequential reassessment cannot survive.

Interpretation and reasoning: The Court accepted that the invalidity of the foundational notice vitiates the entire reassessment. It also rejected the argument that absence of "prejudice" saves the notice, treating illegality in assuming jurisdiction through a non-compliant process as sufficient to invalidate the proceedings.

Conclusions: The reassessment order dated 16.03.2023 was held to be null in the eyes of law because it was founded on an invalid section 148 notice. Having allowed the appeal on this legal issue, the Court declined to examine the merits of the additions made in reassessment.

---