JAO lacks jurisdiction to issue Section 148 notices; only FAO authorized under Section 151A

The Bombay HC held that notices issued under Section 148 by JAO instead of FAO were invalid due to non-compliance with Section 151A and the Central Government notification dated 29 March 2022. The court determined that JAO lacked jurisdiction to issue faceless assessment notices for income escaping assessment. Following the precedent established in Hexaware Technologies Ltd., the HC declared the impugned notices illegal and invalid, allowing the petition in favor of the assessee and quashing the notices issued without proper jurisdictional authority.

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Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.
2. Compliance with Section 151A of the Income Tax Act, 1961.
3. Limitation period for issuing notice under Section 148 as per Section 149 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued under Section 148 of the Income Tax Act, 1961:
The Petitioner challenged the notice dated 19 April 2024 issued under Section 148 of the Income Tax Act, 1961, along with the underlying prior notice and order under Sections 148A(b) and 148A(d) respectively. The reassessment was initiated for the Assessment Year 2017-18. The court observed that the impugned notice and the related orders were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO), as mandated by Section 151A of the Act. The court referred to the Division Bench decision in Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax & 4 Ors. (2024) 464 ITR 430, which clarified that only the FAO has jurisdiction to issue such notices under the faceless scheme introduced by the Central Government's Notification dated 29 March 2022. The court emphasized that the scheme mandates automated allocation, which must be strictly adhered to, thereby invalidating the notices issued by the JAO.

2. Compliance with Section 151A of the Income Tax Act, 1961:
The court noted that the Central Government's Notification dated 29 March 2022 introduced a faceless mechanism for issuing notices under Section 148. The court reiterated the interpretation from Hexaware that the scheme under Section 151A applies to both the issuance of notices and the subsequent assessment, reassessment, or recomputation proceedings. The court found that the Respondent-Revenue did not comply with this scheme, thus rendering the notices and subsequent proceedings invalid. The court highlighted that any action contrary to the provisions of the statute itself causes prejudice to the assessee, and therefore, the petitioner does not need to establish further prejudice.

3. Limitation Period for Issuing Notice under Section 148 as per Section 149 of the Income Tax Act, 1961:
The court examined whether the notice issued under Section 148 was barred by the limitation period specified in Section 149. According to the court, the limitation period for issuing such notices is three years, which expired on 31 March 2021 for the Assessment Year 2017-18. The court referred to Hexaware, which emphasized that the limitation period must be considered based on the provisions of Section 149 at the time of issuing the notice. Since the notice in the instant case was issued on 19 April 2024, well beyond the three-year period, it was deemed time-barred. The court cited relevant paragraphs from Hexaware to support its conclusion that the notice was invalid due to being issued after the limitation period had expired.

Conclusion:
The court concluded that the notices and orders issued by the JAO were invalid due to non-compliance with Section 151A and the limitation period under Section 149. Consequently, the court allowed the petition, quashing the impugned notices and orders. The court did not express any opinion on other issues raised in the petition, as it was unnecessary to do so given the primary grounds for allowing the petition. The rule was made absolute, and no costs were awarded.

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