Notices issued under Section 148 by jurisdictional AO invalid; faceless assessment applies from show-cause under Sections 148 and 148A

HC held that notices issued under section 148 by the Jurisdictional Assessing Officer were invalid and quashed, ruling that the faceless assessment scheme applies from the stage of the show-cause notice under sections 148 and 148A. The court rejected reliance on departmental memoranda or circulars that purportedly authorized AO issuance, finding such instructions cannot override clear statutory provisions. The matter was remitted with liberty for the revenue to proceed only in conformity with the faceless procedure prescribed by statute and relevant notification.

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Issues Involved:
1. Validity of the Notice under Section 148 issued by the Jurisdictional Assessing Officer (JAO) after the introduction of the Faceless Assessment Scheme.
2. Validity of the Approval under Section 151 of the Income Tax Act.
3. Compliance with the procedure prescribed under Section 144B of the Income Tax Act.
4. Applicability and interpretation of the Finance Act, 2021 and related notifications.

Issue-wise Detailed Analysis:

1. Validity of the Notice under Section 148 issued by the Jurisdictional Assessing Officer (JAO) after the introduction of the Faceless Assessment Scheme:

The petitioner challenged the notice dated 28.03.2024 issued under Section 148 by the JAO, arguing it was in contravention of the notification dated 29.03.2022 and Section 151A of the Income Tax Act, which introduced the concept of Faceless Assessment. Citing judgments from the Telangana, Bombay, and Gauhati High Courts, the petitioner contended that the notice should have been issued by a Faceless Assessing Officer (FAO) rather than the JAO. The respondent countered by referencing an office memorandum dated 20.02.2023 issued by the CBDT, which they argued allowed the JAO to issue such notices.

The court reviewed the relevant legal provisions and precedents, including the Finance Act, 2021, and the e-Assessment of Income Escaping Assessment Scheme, 2022. It concluded that the scheme mandates the issuance of notices under Section 148 in a faceless manner. The court found that the JAO's issuance of the notice was in direct contravention of the statutory provisions and the scheme, thereby rendering the notice invalid and unsustainable.

2. Validity of the Approval under Section 151 of the Income Tax Act:

The petitioner also sought to quash the approval dated 22.03.2024 accorded by Respondent No.2 under Section 151, arguing it was issued without due application of mind and without disclosing any information to the petitioner. The court noted that the approval process under Section 151 requires careful consideration and application of mind by the approving authority. Given the procedural lapses and the invalidity of the initial notice under Section 148, the court found that the approval under Section 151 was also flawed and could not stand.

3. Compliance with the procedure prescribed under Section 144B of the Income Tax Act:

The petitioner received an intimation dated 21.06.2024 indicating that the case had been selected for Faceless Assessment under Section 144B. The court emphasized that Section 144B prescribes a detailed procedure for faceless assessment, which aims to eliminate the interface between the Income Tax Authority and the assessee. The court found that the issuance of the notice by the JAO and not the FAO was a significant deviation from the prescribed procedure, thus violating the statutory requirements of Section 144B.

4. Applicability and interpretation of the Finance Act, 2021 and related notifications:

The court examined the Finance Act, 2021, and the related notifications, particularly the e-Assessment of Income Escaping Assessment Scheme, 2022. It highlighted that the scheme's objective is to ensure transparency, efficiency, and accountability by conducting assessments in a faceless manner. The court referred to the judgments from the Telangana, Bombay, and Gauhati High Courts, which consistently held that notices under Section 148 must be issued by the FAO post the Finance Act, 2021. The court rejected the respondent's reliance on the office memorandum and other departmental instructions, stating that such documents cannot override statutory provisions.

Conclusion:

The court allowed the petitions, quashing the notices issued by the JAO under Section 148 and the subsequent approval under Section 151. It directed the respondent to proceed in accordance with the law, ensuring compliance with the faceless assessment procedures as mandated by the Finance Act, 2021, and the e-Assessment of Income Escaping Assessment Scheme, 2022.

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