Faceless Assessment Notice Invalidated: NFAC Lacks Jurisdiction Under Section 142(1) Before Scheme Notification

The SC/Tribunal found that the National Faceless Assessment Centre (NFAC) lacked jurisdiction to issue a notice under Section 142(1) of the Income Tax Act prior to the notification of the faceless assessment scheme on 29.03.2022. The assessment order was deemed invalid due to premature actions taken without proper legal authorization, and the assessee's appeal was consequently allowed.

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ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the National Faceless Assessment Centre (NFAC) had the jurisdiction to issue a notice under Section 142(1) of the Income Tax Act, 1961, prior to the notification of the faceless assessment scheme on 29.03.2022. This involves examining the validity of the assessment order passed under Sections 147, 144, and 144B of the Act, given the timing of the relevant notifications and the jurisdictional authority of the NFAC.

ISSUE-WISE DETAILED ANALYSIS

Jurisdiction of NFAC to Issue Notice under Section 142(1)

Relevant Legal Framework and Precedents:

The legal framework revolves around the provisions of Sections 142(1), 144B, 147, and 151A of the Income Tax Act, 1961. Specifically, Section 142(1) pertains to the power to issue notices for assessment, Section 144B deals with the faceless assessment scheme, Section 147 pertains to income escaping assessment, and Section 151A relates to the jurisdiction for faceless assessments.

The Tribunal references a precedent from the coordinate bench in the case of Nabiul Industrial Metal Pvt. Ltd. Vs. ITO, which held that the NFAC lacked jurisdiction to issue notices under Section 142(1) prior to the relevant notification dates.

Court's Interpretation and Reasoning:

The Tribunal analyzed the sequence of notifications and the statutory provisions. It noted that the NFAC issued a notice under Section 142(1) on 16.12.2021, at a time when it did not possess the jurisdiction to do so. The relevant notification granting such jurisdiction was only issued on 30.03.2022 (Notification No. 19/2022), with the faceless assessment scheme under Section 151A being notified on 29.03.2022 (Notification No. 18/2022). Therefore, the Tribunal concluded that the NFAC acted without jurisdiction.

Key Evidence and Findings:

The Tribunal found that the NFAC issued notices and conducted assessments without the requisite jurisdictional authority, as the legal framework empowering such actions was not in effect at the time the notices were issued. The Tribunal relied on the specific dates of the notifications and the statutory amendments to support its findings.

Application of Law to Facts:

The Tribunal applied the statutory provisions to the facts, determining that the NFAC's actions were premature and beyond its jurisdiction. The assessment order dated 27.03.2022 was deemed invalid as the jurisdictional authority was only conferred after the relevant notifications were issued.

Treatment of Competing Arguments:

The Tribunal considered the submissions of the Departmental Representative, which attempted to justify the NFAC's actions. However, it found these arguments unpersuasive and lacking in merit, as they did not align with the statutory requirements and the timing of the notifications.

Conclusions:

The Tribunal concluded that the NFAC lacked the jurisdiction to issue the notice under Section 142(1) and complete the assessment under Section 147 prior to the notification dates. Consequently, the appeal of the assessee was allowed, and the assessment order was set aside.

SIGNIFICANT HOLDINGS

The Tribunal established a core principle that jurisdictional authority must be strictly adhered to, particularly in the context of faceless assessments. It held that the NFAC's actions were invalid due to the lack of jurisdiction at the time of issuing the notice under Section 142(1).

Preserve Verbatim Quotes of Crucial Legal Reasoning:

"Therefore, it is apparent from the above that the NFeAC had no jurisdiction to issue notice u/s 142(1) of the Act prior to 30.03.2022, because the scheme of faceless enquiry u/s 142B of the Act for issuance of notice u/s 142(1) of the Act by NFeAC was notified on 30.03.2022 vide Notification no. 19/2022."

Core Principles Established:

The Tribunal reinforced the principle that statutory authority and jurisdiction are prerequisites for valid assessment actions. Notifications conferring jurisdiction must be in effect before any actions are taken under the relevant provisions.

Final Determinations on Each Issue:

The Tribunal determined that the NFAC's issuance of the notice under Section 142(1) and the subsequent assessment order were without jurisdiction and, therefore, invalid. The appeal was allowed, and the assessment order was set aside.

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