2026 (2) TMI 266 - HC - Income Tax

Faceless assessment and Section 148 notice jurisdiction: court upholds jurisdictional AO issuing s.148 notices; faceless scheme not displacing AO

Whether a jurisdictional Assessing Officer may issue a notice to reopen assessment under Section 148 when a faceless eassessment scheme exists was ... Faceless assessment - Assumption of jurisdiction by AO to issue notice u/s 148 - such notice was issued by Jurisdictional Assessing Officer and not by Faceless Assessing Officer - scope of provisions of Section 151A of TOLA, 2020’with effect from 01.11.2020 and E-Assessment of Income Escaping Assessment Scheme, 2022 - automated allocation in accordance with the risk management strategy formulated by the Board as referred to in Section 148 - scope of the words “and in faceless manner” as appears in the Scheme, 2022 - two views on the subject Whether the Jurisdictional Assessing Officer has jurisdiction to issue notice under Section 148 of the Act in view of the Scheme, 2022 or not? - HELD THAT:- It appears that if the procedure prescribed under Section 144B of the Act for assessment is to be applied also for the notice to be issued under Section 148 of the Act, then it would also lead that the provisions of Section 148A of the Act which provide for inquiry by the AO and passing of order by the Assessing Officer to come to a prima-facie conclusion that whether it is a fit case to reopen is not available in the Scheme, 2022. If we read the Scheme literally as canvassed before us by learned advocates for both the sides, as it is unambiguous and plain in language, no further interpretation is required to be made by reading the provisions of Section 148A of Act in the Scheme, 2022. If the Scheme is also applied to the procedure prescribed u/s 148A of the Act, the same shall be altered by adding the procedure of discarding which is not intended by the legislature. Therefore, we are of the opinion that the decision of Kairos Properties (P.) Ltd. [2024 (10) TMI 1282 - GUJARAT HIGH COURT] wherein, the Scheme, 2022 is also extended to the procedure prescribed in Section 148A of the Act, would amount to alter the Scheme, 2022 itself. Hon’ble Bombay High Court while considering the provisions of Section 148A of the Act has held that the scope of scheme as defined in paragraph No. 3 by excluding the applicability of Section 148A of Act from the scope of the scheme would lead to an absolute absurdity and would amount to alter the Scheme. In such circumstances, we are with due respect not in agreement with the Bombay High Court to insert the provisions of Section 148A of the Act to be read in the scope of the scheme. Therefore, the logical conclusion which comes that if Section 148A of the Act is not part of the Scheme, 2022, then issuance of notice under Section 148 of the Act by the Faceless Assessing Officer would be an empty formality because issuance of notice under Section 148 of Act is consequence of the order which is passed under Section 148A(d) of the Act. As held by the this Court in case of Talati and Talati LLP [2024 (10) TMI 1282 - GUJARAT HIGH COURT] the notice issued under Section 148 of the Act by the Jurisdictional Assessing Officer in search cases is held to be a valid notice and would also justify our view that the notice under Section 148 of the Act has to be issued by the Assessing Officer who has passed the order under Section 148A(d) of the Act. If the notice is issued by the Faceless Assessing Officer under Section 148 of the Act on the basis of the order which has been passed by the Jurisdictional Assessing Officer under Section 148A(d) of the Act, the same would result into absurdity. Therefore, the logical conclusion which can be deduced from reading of the provisions of the Act together with the intention of the legislature and the Scheme, 2022, we are of the opinion that so far as issuance of notice under Section 148 of the Act is concerned, the contention raised on behalf of the Revenue based upon the Office Memorandum of the Central Board of Direct Taxes dated 20th February, 2023 which is even considered by the Hon’ble Bombay High Court would be in line of the legislative intent so as to operate the two aspects separately, one by issuance of notice under Section 148 of the Act by automated allocation and other by conducting assessment or reassessment proceedings under Section 147 of the Act in a faceless manner to the extent as provided under Section 144B of the Act. In view of the foregoing reasons, so far as the issue, with regard to the challenge to the assumption of jurisdiction to issue the notice under Section 148 of the Act by the Jurisdictional Assessing Officer, fails and the notices issued by the Jurisdictional Assessing Officer under Section 148 of the Act after 01.04.2022 are held to be valid and legal. Issues: Whether notices issued after 01.04.2022 under section 148 of the Income-tax Act, 1961 by the Jurisdictional Assessing Officer (JAO), instead of a Faceless/automated faceless Assessing Officer under the E-Assessment Scheme, 2022 (and connected faceless provisions), are without jurisdiction and liable to be quashed.Analysis: The Court analysed the statutory scheme including Section 151A (power to notify a faceless scheme), the E-Assessment of Income Escaping Assessment Scheme, 2022 (notification dated 29-3-2022), and Section 144B (faceless assessment) as amended effective 01.04.2022. Paragraph 3 of the Scheme separates (a) assessment/reassessment/recomputation under section 147 and (b) issuance of notice under section 148, requiring automated allocation for issuance of notice in accordance with the Board's risk management strategy and qualifying the faceless procedure by the phrase 'to the extent provided in Section 144B' with reference to making assessment or reassessment. Section 144B prescribes the faceless procedure for assessments and reassessments and does not itself prescribe the full procedure for issuance of a notice under section 148 or the separate inquiry stages under section 148A. The Court observed that section 148 is subject to the procedural pre-conditions in section 148A (opportunity to be heard, inquiry and order determining fitness to issue notice) and that those inquiry stages are not detailed in the Scheme. Reading the Scheme and statutes together, and construing the comma-separated structure and qualifying phrase literally and purposively, the Court held that the Scheme mandates automated allocation of cases for issuance of notice but does not oust the statutorily prescribed role of the Assessing Officer in conducting the 148A inquiry and issuing notices under section 148; applying the faceless assessment procedure under Section 144B is limited to assessment/reassessment steps 'to the extent provided'. The Court therefore rejected the view that issuance of section 148 notices must be exclusively in the faceless manner by an FAO to the exclusion of the Jurisdictional AO, and held that notices issued by JAOs after 01.04.2022 are not per se without jurisdiction where the statutory procedure (including section 148A requirements) is followed.Conclusion: The challenge to the assumption of jurisdiction by the Jurisdictional Assessing Officer to issue notices under section 148 after 01.04.2022 fails. The notices issued by Jurisdictional Assessing Officers under section 148 of the Income-tax Act, 1961 after 01.04.2022 are held valid and legal.