2024 (10) TMI 1586 - HC - Income Tax

Validity of Section 148 reassessment notices upheld; JAO may form opinion using RMS, search, audit, and orders

HC upheld validity of reassessment notices under Section 148, holding that a JAO may form the requisite opinion based on RMS data and other specified ... Faceless assessment - faceless reassessment scheme - automated allocation - risk management strategy - concurrent jurisdiction - jurisdictional Assessing Officer - formation of opinion under Section 148A - faceless assessment procedure under Section 144B - information for reassessment (Explanations 1 and 2 to Section 148)Jurisdictional Assessing Officer - faceless reassessment scheme - concurrent jurisdiction - Validity of notices under Section 148 issued by the jurisdictional Assessing Officer after promulgation of the Faceless Reassessment Scheme 2022 - HELD THAT: - The Court held that notices under Section 148 issued by the JAO are not invalid merely because a faceless reassessment scheme exists. The statutory scheme and notifications confer concurrent powers on faceless assessing authorities and the JAO rather than effecting a complete ouster of the JAO's jurisdiction. The faceless framework contemplates situations where cases may be processed centrally, transferred back, or otherwise handled by the JAO; the legislative design preserves the JAO's role, particularly where information is placed in the JAO's hands and requires local consideration. Consequently, the writ petitions challenging Section 148 notices solely on the ground that they were issued by the JAO were dismissed. [Paras 82, 86, 104, 105]Challenge to Section 148 notices solely because they were issued by the JAO is rejected; the JAO is not completely denuded of jurisdiction.Automated allocation - risk management strategy - formation of opinion under Section 148A - Construction of Clause 3 of the Faceless Reassessment Scheme, 2022 and the sequencing of pre-issuance enquiry and faceless assessment - HELD THAT: - The Court construed Clause 3 as reflecting a two-stage process: (i) the RMS/Insight process places information before the JAO and the JAO conducts pre-issuance consideration (including Section 148A procedure and formation of opinion); and (ii) if reassessment proceeds, the records are transmitted to the NFAC and the actual assessment is conducted by automated allocation/faceless units. Punctuation and scheme structure were read to separate the stage of initiation/formation of opinion from the subsequent faceless assessment, producing a harmonious construction that preserves the JAO's role in preliminary evaluation while implementing faceless assessment for final determination. [Paras 56, 99, 101, 102]Clause 3 contemplates initial evaluation by the JAO on information furnished through RMS, followed by faceless randomized allocation for the assessment stage.Faceless assessment procedure under Section 144B - information for reassessment (Explanations 1 and 2 to Section 148) - Whether Section 144B operates as a substantive ouster of other reassessment modes or is primarily procedural - HELD THAT: - The Court held that Section 144B is principally procedural, prescribing how faceless assessments are to be conducted (randomized allocation, units, electronic communications, review, etc.) and does not itself supply the substantive basis for reassessment. Explanations 1 and 2 to Section 148 identify multiple independent sources of 'information' (including RMS, audit objections, search/survey material and information under schemes) that may justify reassessment and which often come to the JAO. Reading Section 144B as the exclusive route would render these provisions and the JAO's statutory functions otiose; a harmonious construction treats 144B as a procedural mechanism complementing, not supplanting, other statutory reassessment triggers. [Paras 72, 73, 76, 77]Section 144B is procedural; it does not extinguish other statutory modes of initiation of reassessment nor the role of the JAO in acting on information described in Explanations 1 and 2 to Section 148.Final Conclusion: Writ petitions challenging reassessment notices solely because they were issued by the jurisdictional Assessing Officer are dismissed; the Faceless Reassessment Scheme and Section 144B prescribe procedural modes for faceless assessment but do not ipso facto oust the JAO's concurrent jurisdiction or preclude the JAO from initiating proceedings where information (including RMS, audit objections, search/survey material or information under Section 135A schemes) supports formation of opinion under the statutory reassessment provisions. Issues Involved:1. Validity of reassessment action under Section 148 of the Income Tax Act, 1961.2. Compliance of reassessment notices with the Faceless Scheme of Assessment.3. Jurisdiction of the Jurisdictional Assessing Officer (JAO) under the Faceless Reassessment Scheme.Comprehensive, Issue-Wise Detailed Analysis:1. Validity of Reassessment Action Under Section 148:The judgment addresses the validity of reassessment notices issued under Section 148 of the Income Tax Act, 1961, particularly after the introduction of the Faceless Scheme of Assessment. The petitioners challenged the notices on the grounds of jurisdiction and compliance with the faceless assessment procedures. The Court examined whether the notices issued by the JAO were valid under the new faceless regime, emphasizing that the JAO retains jurisdiction under certain circumstances as per the statutory framework.2. Compliance of Reassessment Notices with the Faceless Scheme:The Court analyzed the statutory provisions related to the faceless assessment, particularly Sections 144B and 151A, which govern the faceless assessment and reassessment processes. It was noted that the Faceless Reassessment Scheme, 2022, mandates that notices under Section 148 should be issued through automated allocation and in a faceless manner, but this does not entirely exclude the JAO's role. The Court highlighted that the Faceless Scheme is designed to enhance transparency and reduce human interface, but it does not completely eliminate the JAO's authority to issue notices.3. Jurisdiction of the JAO Under the Faceless Reassessment Scheme:The judgment extensively discusses the concurrent jurisdiction of the JAO and the Faceless Assessment Units. The Court clarified that the JAO retains jurisdiction to initiate reassessment proceedings based on information available through the Risk Management Strategy (RMS) and other sources. The Court emphasized that the faceless assessment framework does not entirely replace the JAO's role but operates alongside it to ensure comprehensive and balanced assessments. The judgment also referenced previous decisions, including Sanjay Gandhi Memorial Trust, which supported the view of concurrent jurisdiction.Disposition:The Court dismissed the writ petitions, upholding the validity of the reassessment notices issued by the JAO. It concluded that the notices were not invalid merely because they were issued by the JAO, as the statutory framework allows for concurrent jurisdiction and the initial stages of reassessment may involve the JAO. The Court allowed the petitioners to raise any other objections to the reassessment proceedings in separate, independent proceedings.