2025 (7) TMI 1953 - AT - Income Tax

Reassessment notices u/s147 issued by jurisdictional officer, not faceless scheme AO, held invalid; proceedings quashed.

The dominant issue was the validity of reassessment initiation under s.147 where notices under ss.148A(d)/148 were issued by the jurisdictional AO instead ... Validity of reopening of assessment u/s 147 - Scope of Faceless Assessment scheme - notices issued by the JAO v/s FAO - HELD THAT:- As decided in TVS Credit Services Ltd [2025 (8) TMI 217 - MADRAS HIGH COURT] in view of the provisions of Sec.151A of the Act read with Faceless Scheme dated 29.03.2022, notices issued by the JAO u/s.148A(d)/148 of the Act was invalid and bad in law. Appeal filed by the assessee is allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether an additional jurisdictional ground challenging reassessment initiation could be admitted at the appellate stage as a pure question of law arising from the record. (ii) Whether, after the CBDT Notification dated 29.03.2022 introducing the 'e-assessment of income assessment scheme, 2022', a notice under section 148 and the order under section 148A(d) issued/passed by the Jurisdictional Assessing Officer (and not through faceless/automated allocation) are valid. (iii) Whether dismissal of a revenue special leave petition at the admission stage creates binding declaration of law or attracts the doctrine of merger so as to govern the controversy. (iv) What relief should follow where the notice under section 148 is held invalid for non-compliance with the mandatory faceless procedure, and whether rights/contentions should be kept open pending outcome before the Apex Court in another matter. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Admission of additional jurisdictional ground Legal framework: The Court applied the principle that a pure question of law, going to jurisdiction and arising from facts already on record, can be admitted at the appellate stage. Interpretation and reasoning: The assessee's additional ground concerned the authority/competence to issue the reassessment notice in light of the CBDT Notification dated 29.03.2022. The Tribunal treated it as a legal/jurisdictional issue capable of being decided on existing record (the impugned notice and the section 148A(d) order). Conclusion: The additional jurisdictional ground was admitted for adjudication. Issue (ii): Validity of section 148 notice and section 148A(d) order issued by JAO post Notification dated 29.03.2022 Legal framework: The Tribunal relied on the CBDT Notification dated 29.03.2022 formulating the 'e-assessment of income assessment scheme, 2022', which contemplates issuance of notice under section 148 through automated allocation in a faceless manner to the extent provided in section 144B, and governs reassessment/recomputation under section 147. Interpretation and reasoning: The Tribunal found that both the notice under section 148 and the order under section 148A(d) were issued/passed after the Notification and were issued by the Jurisdictional Assessing Officer rather than through the faceless/automated mechanism. On that factual premise, the Tribunal held that the Notification directly applied and the issuance by the JAO was not in accordance with the mandatory scheme procedure. Conclusion: Non-compliance with the mandatory faceless procedure vitiated the reassessment initiation; the notice under section 148 and consequential orders were liable to be set aside. Issue (iii): Effect of dismissal of special leave petition at admission stage; doctrine of merger and binding force Legal framework: The Tribunal examined principles governing the doctrine of merger and the legal effect of refusal/dismissal of special leave at the threshold. Interpretation and reasoning: The Tribunal held that a simpliciter dismissal of a special leave petition at the admission stage does not, by itself, constitute a declaration of law binding under Article 141, nor does it attract merger of the impugned decision into the Supreme Court's order. Accordingly, such dismissal did not control the Tribunal's determination of the jurisdictional issue; instead, binding jurisdictional High Court law on the faceless issuance requirement was followed. Conclusion: The Tribunal concluded that dismissal of the revenue special leave petition at the admission stage had no declaration of law and no binding effect under Article 141 for deciding the present controversy. Issue (iv): Relief and preservation of parties' rights pending Apex Court outcome Legal framework: The Tribunal applied the binding decision of the jurisdictional High Court holding that issuance of such notices must be by the faceless assessing authority and that issuance by the JAO renders the notice invalid; the High Court's clarification regarding future reversal by the Apex Court was also applied. Interpretation and reasoning: Respectfully following the jurisdictional High Court, the Tribunal set aside the section 148 notice and consequential orders. However, consistent with the High Court's approach, it preserved rights and contentions and granted liberty to seek revival/appropriate relief if the Revenue succeeds before the Apex Court on the governing legal issue. Conclusion: The appeal was allowed by quashing the impugned notice under section 148 and all consequential orders, while keeping parties' rights/contentions open with liberty to approach for revival depending on the Apex Court's eventual decision.