Section 148 notices issued by JAO instead of FAO declared invalid for lack of jurisdiction

The Bombay HC held that notices issued under Section 148 by JAO instead of FAO were invalid due to lack of jurisdiction. The court found non-compliance with Section 151A and the Central Government notification dated 29 March 2022, which mandated that only FAO could issue such notices in faceless assessment proceedings. Following the precedent in Hexaware Technologies Ltd., the court declared the impugned notices illegal and invalid, allowing the petition in favor of the assessee and quashing the reassessment notices.

---

---

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.
2. Compliance with the faceless mechanism under Section 151A of the Act.
3. Jurisdiction of Assessing Officers in issuing notices and orders.
4. Requirement of sanction from specified authorities for reassessment proceedings.
5. Applicability of the decision in Siemens Financial Services Pvt. Ltd. case to the present matter.

Issue 1: Validity of Notice under Section 148:
The Writ Petition challenges a notice dated 29 July, 2022 issued under Section 148 of the Income Tax Act, 1961. The petitioner argues that the notice and order were not issued through the mandatory faceless mechanism as per Section 151A of the Act. The Court refers to the Hexaware Technologies case, emphasizing that notices must be issued through automated allocation to ensure fairness and efficiency in the process. The Court holds that the impugned notice and order were not in compliance with the Scheme notified by the Central Government, rendering them invalid.

Issue 2: Compliance with Faceless Mechanism:
The judgment highlights the importance of adhering to the faceless mechanism as per Section 151A of the Act, as outlined in the Scheme framed by the CBDT. The Court clarifies that the Scheme covers both assessment/reassessment and the issuance of notices under Section 148. It emphasizes that only the Faceless Assessment Officer (FAO) can issue notices under Section 148, not the Jurisdictional Assessing Officer (JAO). Any deviation from this mechanism renders the action invalid.

Issue 3: Jurisdiction of Assessing Officers:
The Court rejects the argument of concurrent jurisdiction between the JAO and FAO in issuing notices under Section 148. It underscores the need for adherence to the automated allocation system for fairness and efficiency. The judgment emphasizes that actions taken contrary to the law, such as issuing notices without following due process, are inherently prejudicial to the assessee and must be quashed.

Issue 4: Requirement of Sanction for Reassessment:
The petitioner contends that the reassessment proceedings were initiated beyond the statutory time limit, requiring sanction from authorities specified in Section 151(ii) of the Act. Citing the Siemens Financial Services case, the Court holds that sanctions issued by lower-ranking authorities after the expiry of the time limit are invalid. The judgment emphasizes the importance of obtaining approvals from the correct authorities as per the Act's provisions.

Issue 5: Applicability of Siemens Financial Services Case:
The judgment discusses how the Siemens Financial Services case precedent was applied to similar cases, emphasizing the need for proper sanctioning authorities as per Section 151 of the Act. The Court quashes impugned orders and notices issued beyond the statutory time limit without the required approvals, in line with the Siemens Financial Services ruling.

In conclusion, the Writ Petition is allowed based on non-compliance with Section 151A of the Act, leading to the quashing of the impugned notices and orders. The Court refrains from expressing opinions on other issues raised in the petition, keeping them open for future consideration.

---