2024 (9) TMI 878 - HC - Income Tax

JAO cannot issue Section 148 notice when faceless assessment scheme mandates FAO jurisdiction under Section 151A

The Bombay HC held that a notice issued by the Jurisdictional Assessing Officer (JAO) under Section 148 was invalid as it violated Section 151A provisions ... 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 AO to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A - HELD THAT:- As decided in 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 u/s 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. In the present case, it is apparent that the respondent-Revenue has not complied with the Scheme notified by the Central Government pursuant to Section 151A(2) of the Act. The Scheme has also been tabled in Parliament and is in the character of subordinate legislation, which governs the conduct of proceedings under Section 148A as well as Section 148 of the Act. In view of the explicit declaration of the law in Hexaware, the grievance of the petitioner-Assessee insofar as it relates to an invalid issuance of a notice is sustainable and consequently, the very manner in which the proceedings have been initiated, vitiates the proceedings. Issues Involved:1. Validity of the notice issued under Section 148 of the Income Tax Act, 1966.2. Compliance with the faceless assessment mechanism under Section 151A of the Act.3. Applicability of the Scheme notified by the Central Government under Section 151A.4. Jurisdiction of the Jurisdictional Assessing Officer (JAO) versus the Faceless Assessing Officer (FAO).Detailed Analysis:1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1966:The petitioner challenged the notice dated 20 April 2023 issued under Section 148 of the Income Tax Act, 1966, along with the prior notice and order under Sections 148A(b) and 148A(d) respectively. The reassessment was initiated for the Assessment Year 2019-20. The court observed that the impugned notices and orders were issued by the Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessing Officer (FAO), which is required by Section 151A of the Act.2. Compliance with the Faceless Assessment Mechanism Under Section 151A of the Act:The court noted that the Central Government, through a Notification dated 29 March 2022, introduced a faceless mechanism. The provisions of Section 151A mandate that the issuance of notices under Section 148 must adhere to this faceless mechanism. The court referenced the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, where it was held that there is no concurrent jurisdiction between the JAO and the FAO for issuing notices under Section 148. The issuance of notices must be through automated allocation, which is mandatory and leaves no discretion to the Department.3. Applicability of the Scheme Notified by the Central Government Under Section 151A:The court emphasized that the Scheme notified under Section 151A, which has been tabled in Parliament, governs the conduct of proceedings under Sections 148A and 148. The court referred to the decision in Hexaware, which clarified that the Scheme applies to the issuance of notices under Section 148 and not just to the assessment or reassessment proceedings under Section 147. Therefore, the notices issued by the JAO were invalid as they did not comply with the Scheme.4. Jurisdiction of the Jurisdictional Assessing Officer (JAO) Versus the Faceless Assessing Officer (FAO):The court held that the JAO did not have the jurisdiction to issue the notices under Section 148 as per the Scheme. The argument that the central charge cases are excluded from the Scheme was rejected. The court referenced several decisions, including Nainraj Enterprises Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax and Kairos Properties Pvt. Ltd. vs. Assistant Commissioner of Income-tax, which supported the view that the Scheme under Section 151A applies universally, including to central and international tax charges.Conclusion:The court allowed the writ petition, quashing the notices and orders issued under Sections 148 and 148A of the Act due to non-compliance with Section 151A. The court did not express an opinion on other issues raised in the petition, as it was unnecessary given the decision on the primary issue. The rule was made absolute with no costs.