Notices under s.148/148A(b) issued by jurisdictional AO instead of faceless AO invalid; reassessment quashed for lack of jurisdiction

ITAT HYDERABAD held that notices under s.148/148A(b) issued by the jurisdictional AO instead of the faceless AO are invalid and set aside. The tribunal also ruled that where the AO made no addition on the specific issue that prompted reopening, the AO lacked jurisdiction to proceed with further reassessment and the reassessment order was quashed. Parties were granted liberty to revive the appeal if the SC or HC subsequently alters the legal position on the faceless-assessment issue.

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Issues: (i) Whether notices under section 148A/148 issued by the jurisdictional Assessing Officer instead of a faceless Assessing Officer are valid; (ii) Whether reassessment and additions made on issues different from those forming the basis of reopening (i.e., when the original ground for reopening yields no addition) are valid.

Issue (i): Validity of notices issued under section 148A and section 148 by the jurisdictional Assessing Officer instead of the faceless Assessing Officer.

Analysis: The Tribunal examined whether the notices issued by the Jurisdictional Assessing Officer complied with the faceless jurisdiction scheme and whether the issue was raised before the appellate authority. The Tribunal considered binding High Court precedent which held that notices under Sections 148A and 148 issued otherwise than in the faceless manner are procedurally invalid, and observed that the assessee had raised the jurisdictional contention before the CIT(A).

Conclusion: The notices issued under section 148A(b) dated 21.02.2023 and section 148 dated 30.03.2023 by the Jurisdictional Assessing Officer are not valid and are quashed. This conclusion is in favour of the assessee.

Issue (ii): Validity of reassessment and additions where the Assessing Officer did not make any addition on the issue which formed the basis of reopening but proceeded to make additions on a different issue.

Analysis: The Tribunal analysed the scope of reassessment in light of statutory provisions and precedent, including the principle that an AO reopening assessment must assess the income which formed the basis of the reason to believe and may assess other income that comes to notice during those proceedings; however, if the original ground for reopening is not sustained (no addition on that issue), the AO cannot validly proceed to assess a wholly different issue without fresh valid initiation. The Tribunal relied on precedents (including the Bombay High Court in CIT v. Jet Airways) applying this principle and found that the AO had originally reopened on alleged accommodation entries of Rs. 1.25 crores but made no addition on that issue and instead made an addition of Rs. 4.95 crores on share capital received a different issue not legitimately within the reassessment scope in the circumstances.

Conclusion: The reassessment order and consequential addition of Rs. 4,95,00,000/- are invalid and are quashed. This conclusion is in favour of the assessee.

Final Conclusion: The substantive effect of the decision is that the initiation notices issued by the Jurisdictional Assessing Officer are set aside for want of adherence to faceless jurisdiction requirements, and the reassessment founded on a different issue than the one forming the basis for reopening is quashed; the appeal is allowed and the reassessment order is set aside, with liberty to revive proceedings if higher courts later modify the governing law.

Ratio Decidendi: Notices under sections 148A and 148 issued in breach of the faceless assessment scheme are procedurally invalid, and a reassessment cannot sustain additions on issues different from those forming the basis of valid reopening where the original ground is not upheld unless a fresh valid initiation is made.

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