JAO lacks jurisdiction to issue Section 148A notice outside mandatory faceless assessment scheme, reassessment proceedings invalid

The Bombay HC held that reassessment proceedings were invalid where the JAO issued notice under Section 148A(b) instead of following the mandatory faceless assessment procedure. The court found that under Section 151A read with Section 144B of the Act, all reassessment notices must be issued through the faceless assessment scheme notified by the Central Government. The JAO lacked jurisdiction to issue the notice outside this scheme. Additionally, the AO failed to consider the petitioner's submissions regarding the project completion method when deciding to reopen the assessment. The petitioner's appeal was allowed.

---

---

Issues Involved:

1. Validity of the notice dated 23/03/2023 under Section 148A(b) of the Income Tax Act.
2. Validity of the approval dated 06/04/2023 granted under Section 151 of the Income Tax Act.
3. Validity of the order dated 06/04/2023 passed under Section 148A(d) of the Income Tax Act.
4. Validity of the consequent notice dated 06/04/2023 issued under Section 148 of the Income Tax Act.
5. Compliance with the Faceless Assessment Scheme under Section 151A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the notice dated 23/03/2023 under Section 148A(b):

The petitioner contended that the notice issued under Section 148A(b) was invalid as it was based on alleged "information" from the insight portal regarding the sale of flats and TDS deducted under Section 194IA, which suggested undisclosed income. The petitioner argued that the notice was issued just before the expiry of six years from the relevant assessment year and that the petitioner was following the project completion method of accounting, which had been accepted in previous assessment years by the ITAT, Mumbai. The petitioner also claimed that the details of the alleged undisclosed income were not provided.

2. Validity of the approval dated 06/04/2023 granted under Section 151:

The approval granted by the Principal Chief Commissioner of Income Tax, Pune, for the issuance of the notice under Section 148A(b) and the passing of the order under Section 148A(d) was challenged. The petitioner argued that the approval was invalid as it was not in accordance with the provisions of Section 151A of the Act, which mandates the faceless assessment scheme.

3. Validity of the order dated 06/04/2023 passed under Section 148A(d):

The petitioner contended that the order passed under Section 148A(d) was invalid as the Assessing Officer failed to address the objections raised by the petitioner. The petitioner argued that the Assessing Officer did not consider the detailed reply provided and mechanically recorded that the petitioner’s reply was evasive, insufficient, and not satisfactory. The petitioner also claimed that the documents on which the opinion was formed were not provided, contrary to CBDT guidelines and the Supreme Court's ruling in Union of India & Ors. vs. Ashish Agarwal.

4. Validity of the consequent notice dated 06/04/2023 issued under Section 148:

The petitioner argued that the notice issued under Section 148 was invalid as it was not issued in a faceless manner, as required under the faceless assessment scheme introduced by Section 151A of the Act. The petitioner cited the Division Bench decision in Hexaware Technologies Limited, which held that notices not issued as per the faceless assessment procedure are illegal and invalid.

5. Compliance with the Faceless Assessment Scheme under Section 151A:

The court found that the Jurisdictional Assessing Officer (JAO) could not issue a notice under Section 148A(b) outside the Faceless Assessment Scheme, as mandated by Section 151A of the Act. The Central Government had notified a scheme for faceless assessment, reassessment, or recomputation of income under Section 147, and the issuance of notice under Section 148 was to be done through automated allocation in a faceless manner. The court referred to the Hexaware Technologies Limited case, which held that notices issued by the JAO and not by the National Faceless Assessment Center (NFAC) were invalid.

Conclusion:

The court ruled in favor of the petitioner, declaring the consequent notice dated 06/04/2023 issued under Section 148 as invalid. The court emphasized that the faceless assessment procedure was mandatory and that the issuance of notices outside this scheme was illegal. The petition was allowed, and the rule was made absolute with no costs.

---