2025 (8) TMI 202 - AT - Income Tax

Notice under Section 148 must be issued by NFAC as per CBDT 2022 notification, not JAO, says ITAT ruling

The ITAT Chennai held that the notice under section 148 issued by the Jurisdictional Assessing Officer (JAO) instead of the National Faceless Assessment ... Faceless Assessment - Jurisdiction of Jurisdictional Assessing Officer (‘JAO’) in the light of the CBDT Notification dated 29.03.2022 - HELD THAT:- We find that the CBDT issued a Notification dated 29.03.2022 formulating “the e-assessment of income assessment Scheme, 2022”. The Scheme provides that (a) the assessment/re-assessment are re-computation u/s. 147 of the Act and (b) issuance of notice u/s. 148 of the Act shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred u/s. 148 of the Act for issuance of notice and in a faceless manner to the extent providing in Section 144B of the Act with reference to making assessment/re-assessment of total income or loss of the assessee. We find that the impugned notice u/s. 148 dated 05.04.2022 has been issued by the ITO, Ward 2(4), TPR/ [JAO] and not by the NFAC which is not in accordance with the aforesaid Scheme. We also find that the impugned order under Clause (d) to Section 148A of the Act has been passed after CBDT Notification dated 29.03.2022. Hence, the aforesaid CBDT Notification dated 29.03.2022 is directly applicable in this case. Hon’ble Telangana High Court in Kankanala Ravindra Reddy [2023 (9) TMI 951 - TELANGANA HIGH COURT] and Hexaware Technologies Ltd [2024 (5) TMI 302 - BOMBAY HIGH COURT] has decided the controversy in favour of the assessee. ISSUES: Whether the notice issued under Section 148 of the Income Tax Act, 1961 by the Jurisdictional Assessing Officer (JAO) complies with the mandatory faceless procedure prescribed under the CBDT Notification dated 29.03.2022 ('the e-assessment of income assessment scheme, 2022').Whether the issuance of notice under Section 148 by JAO instead of the Faceless Assessment Officer (FAO) renders the notice and subsequent proceedings invalid.Whether the CBDT Notification dated 29.03.2022 is applicable to the assessment year and proceedings in question.Applicability and effect of the doctrine of merger in the context of dismissal of Special Leave Petition (SLP) by the Supreme Court at admission stage.Whether the impugned notices and consequential assessment orders issued without following the faceless procedure stand vitiated.Whether the decisions of various High Courts and the Supreme Court's orders on related issues are binding and determinative for the present case.RULINGS / HOLDINGS: The notice under Section 148 and order under Clause (d) to Section 148A issued by the JAO are not in accordance with the CBDT Notification dated 29.03.2022, which mandates issuance of notices through automated allocation by the FAO in a faceless manner; hence, the impugned notice and order are invalid.The CBDT Notification dated 29.03.2022 is directly applicable to the present case as the notice and order were issued after the Notification's effective date.Following the judgments of the Hon'ble Telangana High Court and Hon'ble Bombay High Court, issuance of notice under Section 148 by JAO instead of FAO is mandatory and non-compliance renders the notice invalid.The doctrine of merger, as summarized by the Supreme Court, does not apply to a simplicitor dismissal of Special Leave Petition at admission stage; such dismissal does not constitute a binding declaration of law under Article 141 of the Constitution of India.The impugned notices under Section 148 and all consequential assessment orders based thereupon stand set aside for non-compliance with the mandatory faceless procedure.The rights and contentions of parties remain open, including liberty to revive proceedings if the Revenue succeeds before the Supreme Court.RATIONALE: The Court applied the statutory provisions of the Income Tax Act, 1961, specifically Sections 147, 148, 148A, and 144B, and the CBDT Notification dated 29.03.2022 which prescribes a faceless assessment scheme requiring notices under Section 148 to be issued by the FAO through automated allocation.The Court relied on binding precedents from the Hon'ble Telangana High Court and Hon'ble Bombay High Court, which held that issuance of notices by JAO instead of FAO violates the mandatory faceless procedure and vitiates the proceedings.The Court considered the Supreme Court's jurisprudence on the doctrine of merger, clarifying that dismissal of Special Leave Petition at admission stage does not merge or substitute the order under challenge and does not have binding effect as a declaration of law under Article 141.The Court noted the ongoing litigation before the Supreme Court regarding the correctness of these High Court decisions but held that until reversed, the existing High Court rulings and CBDT Notification govern the validity of the notices.The Court preserved the parties' rights to revive the appeal if the Supreme Court overturns the High Court rulings, reflecting judicial prudence in balancing current binding precedent and potential future developments.