2024 (9) TMI 743 - HC - Income Tax

Jurisdictional Assessing Officers cannot issue Section 148 notices when faceless assessment provisions under Section 151A apply

Seth Iron & Steel Pvt. Ltd. Versus Assistant Commissioner of Income Tax, Circle-5 (3) (1), Mumbai & Ors.

The Bombay HC held that Jurisdictional Assessing Officers (JAO) cannot issue notices under Section 148 for income escaping assessment when faceless ... Faceless assessment of income escaping assessment - validity of notice issued by the JAO as not in accordance w/sec 151A - not permissible for the Jurisdictional Assessing Officer to issue a notice u/s 148, as the same would amount to breach of the provisions of section 151A - HELD THAT:- As decided in case recent decision of this Court in Nainraj Enterprises Pvt. Ltd. [2024 (7) TMI 511 - BOMBAY HIGH COURT] relying on Hexaware Technology Ltd. [2024 (5) TMI 302 - BOMBAY HIGH COURT] provisions of Section 151A of the IT Act had clearly brought a regime of faceless assessment. The Court held that it was not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A of the IT Act. There is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148. When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Decided in favour of assessee. Issues Involved:1. Validity of notices issued under Section 148 and Section 148A of the Income Tax Act, 1961.2. Compliance with Section 151A of the Income Tax Act, 1961.3. Jurisdiction of the Jurisdictional Assessing Officer (JAO) versus Faceless Assessing Officer (FAO).4. Validity of sanction under Section 151 of the Income Tax Act, 1961.5. Prejudice to the assessee due to non-compliance with statutory provisions.Detailed Analysis:1. Validity of Notices Issued Under Section 148 and Section 148A of the Income Tax Act, 1961:The petitioner challenged the notice dated 7 April 2022, issued under Section 148 of the Income Tax Act, 1961, and the preceding notices and orders under Section 148A(b) and Section 148A(d). The reassessment was initiated for the Assessment Year 2018-19. The court found that the notices and orders were issued by the Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessing Officer (FAO), as mandated by the provisions of Section 151A of the Act.2. Compliance with Section 151A of the Income Tax Act, 1961:The Central Government issued a notification on 29 March 2022, introducing a faceless mechanism for reassessment procedures. The court referred to the Division Bench's decision in Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, which clarified that the faceless mechanism is mandatory. The court emphasized that the issuance of notices must comply with the faceless scheme, and any deviation renders the proceedings invalid.3. Jurisdiction of the Jurisdictional Assessing Officer (JAO) Versus Faceless Assessing Officer (FAO):The court reiterated that there is no concurrent jurisdiction between the JAO and the FAO for issuing notices under Section 148. The scheme mandates automated allocation of cases to FAOs, and any notice issued by the JAO in contravention of this scheme is invalid. The court found that the respondent-revenue did not comply with the faceless scheme, thereby vitiating the proceedings.4. Validity of Sanction Under Section 151 of the Income Tax Act, 1961:The petitioner argued that the sanction for initiating reassessment should have been granted by higher authorities as specified in Section 151(ii) of the Act, given that the proceedings were initiated after three years from the end of the relevant assessment year. The court referred to its decision in Siemens Financial Services Pvt. Ltd. vs. Deputy Commissioner of Income Tax, which held that sanctions granted by authorities not specified in Section 151(ii) are invalid. The court concluded that the sanction obtained in the present case was not in accordance with the law, rendering the notices and orders invalid.5. Prejudice to the Assessee Due to Non-Compliance with Statutory Provisions:The court emphasized that any action taken by the Income Tax Authority contrary to the provisions of the statute inherently causes prejudice to the assessee. The petitioner is not required to establish further prejudice beyond the non-compliance with statutory provisions. The court held that the invalid issuance of notices itself results in prejudice to the assessee.Conclusion:The court allowed the writ petition, quashing the impugned notices and orders due to non-compliance with Section 151A of the Income Tax Act, 1961. The court did not express any opinion on other issues raised in the petition, as the non-compliance with Section 151A was sufficient to dispose of the case. The rule was made absolute, and no costs were imposed.