Notice under Section 148 invalid when issued by Jurisdictional Officer violating Section 151A faceless assessment regime

The Bombay HC ruled that a notice issued by the Jurisdictional Assessing Officer under Section 148 for income escaping assessment was invalid as it violated Section 151A of the IT Act. The court held that Section 151A establishes a faceless assessment regime, making it impermissible for jurisdictional officers to issue such notices. Following precedents from Nainraj Enterprises and Hexaware Technology cases, the court decided in favor of the assessee, invalidating the assessment notice.

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Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reassessment of returns filed by the Petitioner-Assessee for the Assessment Year 2016-17 due to non-compliance with faceless assessment procedure under Section 151A and the Scheme notified by the Central Government.

Analysis:

1. The Writ Petition was filed to challenge a notice issued under Section 148 of the Income Tax Act, 1961, for reassessment of returns filed by the Petitioner for the Assessment Year 2016-17. The impugned notice and orders were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) as required by Section 151A of the Act. The Central Government had introduced a faceless mechanism through a notification dated 29 March 2022, mandating compliance with Section 151A for valid notice issuance under Section 148 of the Act.

2. The Division Bench of the High Court, in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, clarified that the jurisdiction for issuing notices under Section 148 of the Act is exclusive to either the JAO or the FAO, not concurrent. The Scheme framed by the CBDT under Section 151A applies to both assessment and notice issuance under Section 148. Failure to adhere to the Scheme renders the notice invalid, as it violates the due process of law and prejudices the assessee.

3. The Court referred to its decisions in Nainraj Enterprises Pvt. Ltd. and Kairos Properties Pvt. Ltd., where similar non-compliance with Section 151A led to the petitions being allowed. The Revenue conceded that the present proceedings fell within the purview of the judgments in Hexaware and Kairos Properties, acknowledging the invalidity of the notice issued by the JAO.

4. Consequently, the Court allowed the Writ Petition, quashing the impugned notice and orders dated 7 April 2022 and 25 March 2022 seeking to reopen the assessment for the Assessment Year 2016-17. The judgment was based on the non-compliance with Section 151A, without expressing an opinion on other issues raised in the petition. The Rule was made absolute in favor of the Petitioner, with no costs imposed.

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