Section 148 notice held void where jurisdictional AO lacked power; only FAO may issue such notices, assessee allowed challenge
The HC held the Section 148 notice void because it was issued by the jurisdictional AO who, under the statute, lacked the power to issue such notices-only the FAO could do so. The court ruled that lack of inherent jurisdiction cannot be cured by waiver or consent, so the petitioner may challenge the notice in the writ petition despite earlier relinquishment of contest. Following SC precedent that statutory powers must be exercised by the authority designated by law, the HC decided in favour of the assessee.
ISSUES PRESENTED AND CONSIDERED
1. Whether a notice under Section 148 of the Income Tax Act issued by the Jurisdictional Assessing Officer (as opposed to the Faceless Assessing Officer under the faceless procedure) after 29 March 2022 is invalid for want of jurisdiction.
2. Whether a petitioner who earlier relinquished challenge to a Section 148 notice in earlier proceedings is precluded from raising the jurisdictional defect later, where the issuing authority inherently lacked jurisdiction.
3. Whether the Court should await the outcome of a pending higher court decision construing the requirement that reassessment notices be issued under the faceless procedure before finally adjudicating the present challenges to the notice, assessment order, demand and penalty.
ISSUE-WISE DETAILED ANALYSIS
Issue 1 - Validity of Section 148 notice issued by Jurisdictional Assessing Officer vs. Faceless Assessing Officer
Legal framework: The statutory scheme prescribes that reassessment notices under Section 148 be issued in accordance with the faceless procedure enacted after 29 March 2022; statutory provisions require powers/duties conferred on a particular authority to be exercised by that authority in the prescribed manner, and preliminary conditions for exercise of jurisdiction must be satisfied.
Precedent treatment: A recent Division Bench ruling of the High Court held that notices issued after 29 March 2022 must be issued by the Faceless Assessing Officer and that a Jurisdictional Assessing Officer lacks jurisdiction to issue such notices. A Supreme Court pronouncement (discussing the necessity of compliance with statutory prescriptions and consequences for non-fulfilment of preliminary conditions) was cited as supportive authority for the proposition that statutory requirements going to jurisdiction cannot be waived and that acts without jurisdiction are nullities.
Interpretation and reasoning: Where statute vests power to be exercised in a prescribed manner (here, faceless procedure), any issuance divergent from that prescription (issuance by Jurisdictional Assessing Officer) is inconsistent with the statutory scheme and thus invalid. The Court reasoned that the faceless mechanism is not a mere administrative convenience but a compliance requirement; non-observance deprives the issuing officer of jurisdiction. Consequent orders flowing from an act done without jurisdiction are potentially void.
Ratio vs. Obiter: Ratio - A Section 148 notice issued after 29 March 2022 by a Jurisdictional Assessing Officer who does not satisfy the statutory faceless prerequisites lacks jurisdiction and is invalid. Obiter - Observations on ancillary aspects of faceless scheme administration and potential factual permutations not necessary to the central holding.
Conclusion: The notice issued by a Jurisdictional Assessing Officer in the present facts inherently lacked jurisdiction because it was not issued by the Faceless Assessing Officer under the prescribed procedure; therefore challenge to the notice on jurisdictional grounds is maintainable.
Issue 2 - Effect of prior relinquishment of challenge to Section 148 notice
Legal framework: Principles that consent or procedural waiver cannot confer jurisdiction where jurisdictional prerequisites are absent; public law doctrine that lack of jurisdiction cannot be cured by consent.
Precedent treatment: The Court relied on authoritative propositions that statutory requirements going to root of jurisdiction cannot be waived and that orders passed without jurisdiction are nullities; this rationale was applied notwithstanding prior abandonment of specific contentions in earlier proceedings.
Interpretation and reasoning: A prior procedural decision by the petitioner to forgo challenge to the Section 148 notice in earlier proceedings does not estop the petitioner from later raising a jurisdictional defect if the issuing authority inherently lacked jurisdiction. The Court distinguished between tactical abandonment of a point and the substantive incapacity of an authority to act; when the latter exists, consent or earlier waiver is ineffective to validate the act.
Ratio vs. Obiter: Ratio - A party is not precluded from raising an inherent jurisdictional defect later even if it earlier relinquished that specific challenge; an authority's lack of jurisdiction cannot be cured by consent or prior waiver. Obiter - The Court's remark that ability to challenge on other, non-jurisdictional grounds after earlier waiver may be limited is tentative and fact-sensitive.
Conclusion: The petitioner may challenge the Section 148 notice on the foundational ground that the issuing officer lacked jurisdiction notwithstanding prior abandonment of that challenge; the jurisdictional defect is not waived by earlier conduct.
Issue 3 - Appropriate interim treatment and waiting for pending higher court decision
Legal framework: Judicial discretion to stay implementation of challenged statutory actions and to manage proceedings pending authoritative pronouncements; considerations of prejudice, finality and efficiency.
Precedent treatment: The Court considered pending appellate proceedings in a higher court that directly address the same jurisdictional question; the practice of not routinely staying matters was noted, but exceptional features of the present record were recognized.
Interpretation and reasoning: Given (a) the petitioner's prior relinquishment of the challenge in earlier proceedings, (b) the centrality of a pending higher court determination on the same legal question, and (c) the potential decisional effect on the present petition, the Court exercised discretion to admit the petition, restrain implementation of the notice, assessment, demand and penalty pending final determination, and permit parties liberty to seek further directions after the higher court decision. The Court balanced interests of the parties and public law principle that where jurisdictional validity is in doubt and authoritative guidance is imminent, a pragmatic interim stay is appropriate.
Ratio vs. Obiter: Ratio - The Court will admit and temporarily restrain implementation of impugned actions where a determinative higher court decision on the jurisdictional issue is pending and the facts are peculiarly suited for a stay; the stay preserves parties' rights until institutional clarification. Obiter - General guidance on when courts should defer to higher court outcomes in non-identical factual matrices.
Conclusion: The petition was admitted; implementation of the Section 148 notice, the subsequent assessment order, demand notice and penalty notices was stayed until final disposal of the writ petition or the higher court's decision addressing the faceless issuance requirement; parties granted liberty to mention the matter after that decision.
Cross-references
1. The conclusions on Issue 1 and Issue 2 are interlinked: the holding that the issuing officer inherently lacked jurisdiction (Issue 1) is the predicate for the conclusion that prior waiver does not preclude raising the jurisdictional issue (Issue 2).
2. The interim relief (Issue 3) is grounded on the combined considerations of the jurisdictional holding and the pendency of an authoritative higher court determination addressing the same statutory prescription.
TaxTMI 
AI Drafter ✕
TaxTMI 
TaxTMI 
