Reassessment notice under Section 148 by Jurisdictional AO instead of Faceless AO held invalid; proceedings quashed with liberty

ITAT Hyderabad (AT) held that a notice issued u/s 148 by the Jurisdictional Assessing Officer (JAO), instead of the designated Faceless Assessing Officer (FAO), after the CBDT notification is invalid. Relying on consistent rulings of the Telangana HC, the Tribunal quashed the notice dated 07.04.2022 and consequential reassessment proceedings. The assessee's appeal was allowed. Noting that the issue is pending before SC in a related matter and that Telangana HC has granted liberty to seek revival depending on the SC's decision, corresponding liberty was preserved for the parties.

---

---

ISSUES PRESENTED AND CONSIDERED

1. Whether a notice under section 148 and an order under section 148A(d) of the Income-tax Act issued on or after 29.03.2022 by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) pursuant to CBDT Notification No.18/2022 (e-Assessment Scheme, 2022) are valid, or are void for want of jurisdiction and liable to be quashed.

2. Whether the Tribunal should follow the decisions of coordinate Benches and the jurisdictional High Court holding that post-notification notices under section 148 must be issued in faceless manner, and the effect of pending Special Leave Petitions (SLPs) in the Supreme Court on the present adjudication and reliefs.

3. Ancillary: Whether the specific challenge to validity of reassessment proceedings was sufficiently raised before lower authorities such that it is maintainable before the Tribunal.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Validity of notices/orders under section 148 and section 148A(d) issued by JAO after CBDT Notification No.18/2022

Legal framework: The e-Assessment of Income Escaping Assessment Scheme, 2022 (CBDT Notification No.18/2022, issued under section 151A) prescribes that issuance of notice under section 148 and reassessment under section 147 shall be through automated allocation and "in a faceless manner" to the extent provided in section 144B. The statutory provisions read with the Notification thus restrict the authority to issue such notices to the FAO (faceless mechanism) with effect from notification's operative date.

Precedent treatment: Multiple High Courts and Coordinate Benches of the Tribunal have held that notices under section 148 issued after the Notification must be issued in faceless manner and that notices issued by JAO post-notification are without jurisdiction and liable to be quashed. The Tribunal referred to and followed the line of authority from the jurisdictional High Court and other High Courts (including decisions summarized from Kanakala/Kotha Kanthaiah and others) which set aside such notices. The Revenue's contention that the matter is sub judice before the Supreme Court (Hexaware SLP) was noted.

Interpretation and reasoning: The Court examined the chronology of events: show-cause notice under section 148A(b) was issued before the Notification, but the order under section 148A(d) and the notice under section 148 were issued after 29.03.2022 and bore the name/designation of the JAO. Applying the Notification's plain mandate (para 3(b) requiring faceless issuance of notices under section 148 on/after 29.03.2022), the Tribunal held that the JAO "ceased to have authority" to issue notices under section 148 w.e.f. that date. The Tribunal treated issuance by JAO after that date as non-faceless and therefore not in accordance with the scheme mandated by the Notification; as the authority issuing the notice lacked jurisdiction in law to do so, the notice was void ab initio and consequent reassessment stood vitiated.

Ratio vs. Obiter: The holding that a notice under section 148 issued by JAO after the operative date of the Notification is invalid and such consequential proceedings are null and void is ratio decidendi for the appeal. The reliance on the Notification's text and the binding effect of jurisdictional High Court decisions forms the binding part of the decision. Observations about department prudence and policy considerations, and citations to other High Court jurisprudence, are clarificatory/obiter but supportive of the ratio.

Conclusion: The Tribunal quashed the order under section 148A(d) and the notice under section 148 issued on 07.04.2022 by the JAO as invalid for non-compliance with CBDT Notification No.18/2022, and set aside the consequential reassessment proceedings to the extent they proceeded from that invalid initiation.

Issue 2 - Application of precedent and effect of pending Supreme Court SLPs

Legal framework: Judicial discipline requires subordinate authorities to give effect to higher courts' decisions until set aside by competent court; conflicting views in other High Courts and existence of SLPs in Supreme Court do not in themselves neutralize binding effect of jurisdictional High Court decisions.

Precedent treatment: The Tribunal expressly followed the authoritative view of the jurisdictional High Court and other High Courts which uniformly found the post-notification issuance by JAO to be ultra vires. The Tribunal acknowledged the Revenue's reliance on pending SLPs (Hexaware) but noted High Court decisions that allowed litigants liberty to revive proceedings if Supreme Court ultimately pronounces otherwise.

Interpretation and reasoning: The Tribunal emphasized that the assessee had raised the jurisdictional challenge before the lower appellate authority (CIT(A)) and that the issue was squarely covered by High Court decisions; hence it was appropriate to follow those decisions. Given the pendency of SLPs, the Tribunal granted procedural liberty-allowing parties to seek revival of the appeal in light of any adverse Supreme Court decision-while not withholding immediate relief.

Ratio vs. Obiter: The application of binding jurisdictional High Court precedent to quash the notice is ratio. The grant of liberty to revive proceedings pending Supreme Court outcome is a procedural direction ancillary to the ratio (practical/administrative in character) and not a binding determination on merits beyond jurisdictional question.

Conclusion: The Tribunal followed the jurisdictional High Court's position and quashed the impugned notices/orders. However, recognising the pendency of SLPs in the Supreme Court, the Tribunal granted liberty to either party to apply for revival/modification of the order if the Supreme Court's decision so requires.

Issue 3 - Whether the jurisdictional objection was raised before lower authorities

Legal framework: Appellate forum may decline to entertain grounds not raised before lower authority; however, a jurisdictional challenge, if raised at any stage, is to be adjudicated on merits.

Precedent treatment: The Tribunal examined the grounds of appeal filed before CIT(A) and found that the assessee had raised the issue regarding initiation by JAO and non-compliance with prescribed procedure in grounds 2-5; therefore the jurisdictional contention was before the lower authority.

Interpretation and reasoning: The Tribunal rejected the Revenue's contention that the point was not raised earlier, pointing to the written grounds before CIT(A) and concluding the jurisdictional issue had been properly raised and preserved for appellate consideration.

Ratio vs. Obiter: The finding that the issue was adequately raised below and thus entertainable on appeal is an incidental ratio necessary to decide the main jurisdictional question.

Conclusion: The Tribunal proceeded to decide the jurisdictional challenge on merits, holding the notices invalid and allowing the appeal; the Tribunal also recorded that parties may seek revival in light of any contrary Supreme Court ruling.

Final Disposition

The appeal was allowed: the show-cause order under section 148A(d) dated 07.04.2022 and the notice under section 148 dated 07.04.2022 issued by the JAO were quashed for non-compliance with CBDT Notification No.18/2022 (faceless scheme), and consequential reassessment proceedings were set aside. Liberty granted to parties to seek revival/modification of the order if the Supreme Court's decision in pending SLPs requires it.

---