TaxTMI 
TaxTMI 
2024 (10) TMI 1586
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....kan Goel, Ms. Parithi Kohli, Mr. Himanshu Gaur, Advs. Mr. Gaurav Gupta, SSC with Mr. Shivendra Singh & Mr. Yojit Pareek, JSCs for IT Deptt. TABLE OF CONTENTS A. FACTUAL BACKGROUND 4 B. ARGUMENTS ADVANCED BY RESPECTIVE SIDES 11 C. STATUTORY PROVISIONS RELEVANT TO THE FACELESS SCHEME OF ASSESSMENT 41 D. NOTIFICATIONS AND INSTRUCTIONS PERTAINING TO THE FACELESS SCHEME OF ASSESSMENT 58 E. RATIONALE AND LEGISLATIVE INTENT UNDERLYING THE FACELESS SCHEME OF ASSESSMENT 69 F. RMS AND OTHER MODES OF SELECTION OF CASES 76 G. "INFORMATION" RELEVANT FOR ASSESSMENTS 80 H. THE CONCURRENT CONFERRAL OF JURISDICTION 84 I. ASSESSMENT AND RE-ASSESSMENT ACTION IN LIGHT OF THE FACELESS ASSESSMENT REGIME 86 J. DISPOSITION 106 JUDGMENT YASHWANT VARMA, J. A. FACTUAL BACKGROUND 1. This batch of writ petitions assail the validity of reassessment action initiated under Section 148 of the Income Tax Act, 1961 [Act]. Although that action is impugned on various grounds, learned counsels for the writ petitioners have confined their submissions to the issue of whether a notice issued by the Jurisdicti....
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....ide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter. 25.2. The requirement of conducting any enquiry with the prior approval of the specified authority under Section 148-A (a) be dispensed with as a one-time measure vis-a-vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. 25.3. The assessing officers shall thereafter pass an order in terms of Section 148-A (d) after following the due procedure as required under Section 148-A (b) in respect of each of the assessees concerned. 25.4. All the defences which may be available to the assessee under Section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available. 25.5. The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended Section 148 ....
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....ces within two weeks thereafter. 28.2. The requirement of conducting any enquiry, if required, with the prior approval of specified authority under Section 148-A (a) is hereby dispensed with as a one-time measure vis-a-vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. 28.3. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the assessing officers concerned to hold any enquiry, if required. 28.4. The assessing officers shall thereafter pass orders in terms of Section 148-A (d) in respect of each of the assessees concerned; Thereafter after following the procedure as required under Section 148-A may issue notice under Section 148 (as substituted). 28.5. All defences which may be available to the assessees including those available under Section 149 of the IT Act and all rights and contentions which may be available to the assessees concerned and Revenue under the Finance Act, 2021 and in law shall continue to be available. 29. The present ord....
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...."209. For the reasons and principles that we have laid down, we dispose of these Writ Petitions with the following directions: 210. Category 'A' : The Notices falling under category 'A', which were digitally signed on or after 1st of April, 2021, are held to bear the date on which the said Notices were digitally signed and not 31st March 2021. The said petitions are disposed of with the direction that the said Notices are to be considered as show-cause-notices under Section 148A (b) of the Act as per the directions of the apex Court in the Ashish Agarwal (Supra) judgment. 211. Category 'B' : The Notices falling under category 'B' which were sent through the registered e-mail ID of the respective JAOs, though not digitally signed are held to be valid. The said petitions are disposed of with the direction to the JAOs to verify and determine the date and time of its despatch as recorded in the ITBA portal in accordance with the law laid down in this judgment as the date of issuance. If the date and time of despatch recorded is on or after 1 of April, 2021, the Notices are to be considered as show-cause-notices under Section 148A (b) as per the directions of the apex ....
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....a). 216. We may note that in the writ petitions, the petitioners have raised additional defenses to challenge the impugned Notices. Such additional defenses have not been considered by this Court and the petitioners shall be at liberty to raise all such additional defenses as available inlaw. 217. We are conscious that the time granted by the Supreme Court in Ashish Agarwal to the Department has since expired on 3rd June, 2022 however, the proceedings in the present writ petitions were stayed on 24th March, 2022 until the pronouncement of this judgment. Therefore, we grant the JAOs in the first instance eight (8) weeks time from today to determine the date of issuance of the Notices as per the law laid down in this judgment. 218. The Notices which in accordance with the law laid down in this judgment has been verified by the JAOs to have been issued on or after 01st April 2021 and until 30th June, 2021 shall be deemed to have been issued under Section 148A of the Act of 1961 as substituted by the Finance Act, 2021 and construed to be show-cause notices in terms of Section 148A (b) as per the judgment of the apex Court in Ashish Agarwal (Supra) and the JAO....
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....h was addressed before that High Court to the Section 148 notices was that once the respondents had adopted faceless assessment in terms of the scheme enacted under Section 151A, the JAO would stand denuded of power and authority to commence proceedings under Section 148A and that it was only the faceless route of assessment which could have been followed. 11. Dealing with this issue, the Telangana High Court in Kankanala Ravindra Reddy had observed as follows: - "25. A plain reading of the aforesaid two notifications issued by the Central Board of Direct Taxes dated 28-3-2022 and 29-3-2022, it would clearly indicate that the Central Board of Direct Taxes was very clear in its mind when it framed the aforesaid two schemes with respect to the proceedings to be drawn under section 148A, that is to have it in a faceless manner. There were two mandatory conditions which were required to be adhered to by the Department, firstly, the allocation being made through the automated allocation system in accordance with the risk management strategy formulated by the Board under section 148 of the Act. Secondly, the re-assessment has to be done in a faceless manner to the extent prov....
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....art of assessment procedure. 20. In the considered opinion of this Court, clause 3(b) of the notification dated 29.03.2022, in specific, deals with issuance of notice under Section 148 of the Act. For that purpose, the notification seeks to apply e-assessment of income escaping assessment scheme, 2022. A microscopic reading of clause 3(b) shows that its only literal interpretation could be that issuance of notice under Section 148 of the Act is squarely covered under the scheme, and for the purpose of issuance of notice, the faceless procedure must be followed. The expression 'to the extent provided in Section 144B of the Act' in our judgment does not deal with 'issuance of notice' under Section 148. The said expression is applicable with reference to 'assessment' and 'reassessment'. Sub-section (2) of Section 144B relates to "assessment" and does not deal with issuance of notice under Section 148 of the Act. xxxx xxxx xxxx 22. A careful reading of the scheme points out that law makers consciously provided two different sub clauses (a) and (b). Clause 3 '(a)' specifically deals with assessment, reassessment and recomputation whereas sub-clause '(b)' deals....
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....to be drawn under Section 148A, that is to have it in a faceless manner. There were two mandatory conditions which were required to be adhered to by the Department, firstly, the allocation being made through the automated allocation system in accordance with the risk management strategy formulated by the Board under Section 148 of the Act. Secondly, the re-assessment has to be done in a faceless manner to the extent provided under Section 144B of the Act." (Emphasis Supplied) 13. By the time the Telangana High Court came to pronounce its verdict in Venkataramana Reddy Patloola, it also had the benefit of considering a detailed decision which had come to be pronounced by the Bombay High Court in Hexaware Technologies Ltd. v. Assistant Commissioner of Income Tax 2024 SCC OnLine Bom 1249. In Hexaware Technologies, the Bombay High Court, apart from the various other questions which were formulated, also had an occasion to examine the issue of whether a notice under Section 148, if issued by the JAO, would sustain in light of the scheme formulated in accordance with Section 151A of the Act. Since most of the High Courts have thereafter followed the opinion expressed in Hexaware Te....
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....is specially the case when the document does not even consider or even refer to the Scheme. Further the said document is clearly intended to be a manual/guide as to how to use the Income-tax Department's portal, and does not even claim to be a statement of the Revenue's position/stand on the issue in question. Our observations with respect to the guidelines dated August 1, 2022 relied upon by the Revenue will equally be applicable here. 35. Further, in our view, there is no question of concurrent jurisdiction of the jurisdictional Assessing Officer and the Faceless Assessing Officer for issuance of notice under section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the jurisdictional Assessing Officer or the Faceless Assessing Officer in the Scheme dated March 29, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of the Revenue is to be accepted, then even when notices are issued by the Faceless Assessing Officer, it would be open to an assessee to ma....
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....gly, it is only the Faceless Assessing Officer which can issue the notice under section 148 of the Act and not the jurisdictional Assessing Officer. The argument advanced by the respondent would render clause 3(b) of the Scheme otiose and to be ignored or contravened, as according to the respondent, even though the Scheme specifically provides for issuance of notice under section 148 of the Act in a faceless manner, no notice is required to be issued under section 148 of the Act in a faceless manner. In such a situation, not only clause 3(b) but also the first two lines below clause 3(b) would be otiose, as it deals with the aspect of issuance of notice under section 148 of the Act. The respondents, being an authority subordinate to the Central Board of Direct Taxes, cannot argue that the Scheme framed by the Central Board of Direct Taxes, and which has been laid before both Houses of Parliament is partly otiose and inapplicable. The argument advanced by the respondent expressly makes clause 3(b) otiose and impliedly makes the whole Scheme otiose. If clause 3(b) of the Scheme is not applicable, then only clause 3(a) of the Scheme remains. What is covered in clause 3(a) of the Schem....
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.... the Income-tax authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to the assessee. Therefore, there is no question of the petitioner having to prove further prejudice before arguing the invalidity of the notice." 14. A reading of the decision in Hexaware Technologies would compel one to notice a detailed reference being made to an Office Memorandum dated 20 February 2023. It, however, becomes pertinent to clarify here that the document dated 20 February 2023, and which has been described to be an "Office Memorandum", was actually instructions provided to counsels for the Revenue in connection with the batch of writ petitions which were pending before that High Court. They were thus rightly construed as not being statutory instructions which the Central Board of Direct Taxes [CBDT] is otherwise, and undoubtedly, empowered to issue under the Act. 15. However, those instructions were duly examined and dealt with by the Bombay High Court in the following terms: - "38. With respect to the Office Memorandum dated February 20, 2023, the said Office Memorandum merely contains the comm....
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....ondents is clearly unsustainable. If the case of the respondent is that the applicability of section 148 of the Act is on random basis, then the provisions of section 148 itself would become contrary to article 14 of the Constitution of India as being arbitrary and unreasonable. Randomly selecting cases for reopening without there being any basis or criteria would mean that the section is applied by the Revenue in an arbitrary and unreasonable manner. The word "random" is used in clause 2(1)(b) of the said Scheme in the definition of "automated allocation"."Automated allocation" is defined in the said clause to mean "an algorithm for randomised allocation of cases....". The term "random", in our view, has been used in the context of assigning the case to a random Assessing Officer, i.e., an Assessing Officer would be randomly chosen by the system to handle a particular case. The term "random" is not used for selection of case for issuance of notice under section 148 as has been alleged by the Revenue in the Office Memorandum. Further, in paragraph 3.2 of the Office Memorandum, with respect to the reassessment proceedings, the reference to "random allocation" has correctly been made....
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.... been deleted by the Finance Act, 2022, with effect from April 1, 2022. In any case, whether only cases which are flagged can be reopened or not is not relevant to decide the scope of the Scheme framed under section 151A of the Act, which required the notice under section 148 of the Act to be issued on the basis of random allocation and in a faceless manner. (v) The Revenue has wrongly contended in paragraph 3.1 of the Office Memorandum that "Therefore, whether jurisdictional Assessing Officer or National Faceless Assessment Centre should issue such notice is decided by administration keeping in mind the end result of natural justice to the assessees as well as completion of required procedure in a reasonable time". In our opinion, there is no such power given to the administration under either section 151A of the Act or under the said Scheme. The Scheme is clear and categorical that notice under section 148 of the Act shall be issued through automated allocation and in a faceless manner. Therefore, the argument of the Revenue is clearly contrary to the provisions of the Scheme. (vi) In paragraph 3.3 of the Office Memorandum, it is again erroneously stated that "H....
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....and modify procedures with time while remaining confined to the principles laid down in the said section and Scheme, is without appreciating that one of the main principles laid down in the Scheme is that the notice under section 148 of the Act is required to be issued through automated allocation and in a faceless manner. There is no leeway given on the said aspect and, therefore, there is no question of the administration to device and modify procedures with respect to the issuance of notice." 16. The reasoning assigned by the Bombay High Court in Hexaware Technologies then came to be adopted by the High Court of Gauhati in Ram Narayan Sah v. Union of India and Others 2024 SCC OnLine Gau 1424. This becomes apparent from the following passages of that judgment: - "8. A careful perusal of the scheme reveals that the scope of the scheme is for the purpose of the assessment, reassessment, recomputation under section 147 of the Act and issuance of notices under section 148 of the Act and the same shall be by a process through automated allocation in accordance with the risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of....
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....assages forming part of that decision: - "15. From the perusal of section 151A, it is quite evident that the scheme of faceless assessment is applicable from the stage of show-cause notice under section 148 as well as section 148A. Clause 3(b) of notification dated March 29, 2022 issued under section 151A clearly provides that scheme would be applicable to notice under section 148. Even otherwise, it is a settled proposition of law that assessment proceedings commence from the stage of issuance of show-cause notice. The object of introduction of faceless assessment would be defeated if show-cause notice under section 148 is issued by the jurisdictional Assessing Officer. The respondents are heavily placing reliance upon the office memorandum and letter issued by the Departmental authorities. It is axiomatic in tax jurisprudence that circulars, instructions and letters issued by the Board or any other authority cannot override statutory provisions. The circulars are binding upon the authorities and the courts are not bound by such circulars. The mandate of sections 144B, 151A read with notification dated March 29, 2022 ((2022) 442 ITR (Stat) 198) issued thereunder is quite ....
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....iament. 13. It is thus clear from the implications as brought about by the provisions of Section 151A that the notification dated 29th March, 2022 is issued in terms of what has been provided under Section 151A. It has been issued after the amendments were incorporated in subsection (1) by Finance Act, 2021 with effect from 1 April, 2022. It would be thus difficult to accept a proposition when in paragraph 3(a) of the Scheme defining the scope of the Scheme when the words "assessment", "reassessment" or "re-computation" under Section 147 of the Act are explicitly provided, and further when clause (b) in paragraph 3 of the Scheme provides for issuance of notice under Section 148 of the Act, it would not take within its ambit the provisions of Section 148A which are the initial steps, which in a given case are required to be taken in issuance of notice under Section 148 of the Act. Section 148A provides for "Conducting inquiry, providing opportunity before issue of notice under section 148". Thus, this provision postulates a procedure inextricably linked to Section 148 which would apply to all cases of reassessment with a proviso stipulating exceptions to the rule. In other ....
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....amifications of an action annulling innumerable notices which had come to be issued in the meanwhile. 20. Pursuant to the said direction, a detailed additional affidavit came to be submitted by the respondents. We deem it apposite to extract paragraphs 6 to 19 thereof hereunder: - "6. That as envisioned in the Section 148 of the Act, the Directorate of Systems randomly selects a number of cases based on the criteria of the Risk Management Strategy. The Assessing Officer has no role to play in such selection. Consequent to such selection, the information is made available to the Assessing Officer who, with the prior approval of specified authority, determines which of these cases are fit for proceedings under the Section 147 of the Act as per the procedure provided in Section 148A of the Act. This involves conducting an enquiry, if needed and giving the assessee an opportunity of hearing. 7. That the procedure outlined under Section 148A of the Act is a mandatory process (for cases other than search cases) and initiation of proceedings under Section 148A is based on risk assessment strategy and randomness. The notice under Section 148A issued thereafter is natur....
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....48 of the Act, there can be no ambiguity in the fact that the JAO still has the jurisdiction to issue notice under Section 148 of the Act. 15. That in the present context it is apt not to lose sight of the parent Section, that is Section 151A of the Act, as the power to notify the scheme originates in the said Section. 16. That in terms of sub-section (1) of the said Section it has been provided that the Central Government may notify a scheme for conduct of procedures mentioned therein by:- (a) eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible; (b) optimizing utilisation of the resources through economies of scale and functional specialisation; (c) introducing a team-based assessment, reassessment, re-computation or issuance or sanction of notice with dynamic jurisdiction. Therefore, the parent Section takes in to account that procedures may be modified under the Act or laid down taking into account their technological feasibility at the time. Further, instead of laying down specifics of the procedure, the Section clarifies that the scheme so no....
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.... Risk Management Strategy [RMS] as well as the identification of cases on a random basis. They assert that the Directorate of Systems selects a number of cases based on the criteria of the RMS and thereafter flags those matters for the consideration of the JAO. It is averred that the selection of cases under the RMS is on the basis of an algorithm adopted and the data thus compiled being thereafter made available on the Insight Portal which is accessible by the JAO. 22. They assert that cases selected randomly in terms of the RMS are principally picked up by the Directorate of System and which process of selection is undertaken independently and without the involvement of the JAO. It is thus asserted that since the cases are selected in a random manner, the JAO has no way of predicting or determining beforehand which case would come to be flagged by the Directorate of Systems. 23. It is then submitted that the cases so flagged by the Directorate of Systems are then forwarded to the JAO, who remains in seisen of proceedings till the issuance of a notice under Section 148 and whereafter the assessment is randomly allocated to an Assessment Unit by the National Faceless Assessme....
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....e Court by placing for our consideration the legislative measures adopted from time to time, the evolution of faceless assessment over the years as well as the various instructions, circulars and clarifications which had been issued by the respondents to aid and guide faceless assessment. 28. Mr. Chawla at the outset drew our attention to the following table which attempts to capture the evolution of the faceless assessment regime over time:- S.No. Parameters E-Assessment Scheme, 2019 (September 12, 2019) Faceless Assessment Scheme (August 13, 2020) Faceless Assessment (Section 144B of the Act) Faceless Assessment, 2022 (Section 144B of the Act) 1. Nomenclature E-assessment 2019 Faceless assessment scheme, 2019 Faceless assessment Faceless assessment 2. Act/CBDT Notification S.O 3264 (E) S.O 2745 (E) TOLA, 2020 Finance Act, 2022 3. Applicability Regular assessment u/s 143 (3) of the Income Tax, 1961 ("the Act"), selected on pilot basis (i) All assessment specified (except non-residents and search cases) All assessments Section 143 (3), 144, 147 of the Act except 142A of the Act cases 4. Excluded Oth....
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....ct of faceless assessment, perform review of draft order checking relevant material evidence, relevant points of fact and law and issues requiring incorporation of addition and disallowance and other required review functions. Facilitate conduct of faceless assessment, perform review of "ILDP" (Income & Loss Determination Proposal) and checking relevant material evidence, relevant points of fact and law ad issues requiring addition or disallowance are incorporated and other required review functions. 9. Technical Unit (TU) Technical assistance on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or other technical matters. Technical assistance on audit in addition to legal, accounting, forensic, information technology, valuation, Transfer, pricing, data analytics, management or other technical matters Technical assistance on audit, legal, accounting, forensic, information technology, valuation, Transfer pricing, data analytics, management or other technical matters. Technical assistance on audit, legal, accounting, forensic, information technology, valuation, Transfer pricing, data analytics, mana....
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....tended. Compliances failure by assessee, NCAC to serve show cause notice Assessee to file response within time specified or extended; 15. Assessment Unit to Draft Revised Draft Assessment Order Revised Draft Order, incorporating suggested by Review Unit (RU), by same Unit which drafted original draft order. Revised Draft Order, incorporating the suggestion by the Review Unit (RU), is to be prepared by a new Regional Assessment Unit of (ReAC), selected by NeAC on random allocation basis. Final Draft Order, incorporating the suggestion by the Review Unit (RU), is to be prepared by a new Assessment Unit of (RCAC), selected by NFAC on random allocation basis. Prepare 'income/loss determination proposal' Draft Order, considering modification suggested by the Review Unit (RU). Prepare draft send to eligible assessee or finalise in other case as conveyed by NeFC. Or on receipt of DRP directions. 16. Response Time Assessee was required to file his response to draft assessment order, on or before the date and time specified in the notice Scheme suggests provision for extension of time. Scheme suggests provision for extension of time. Sche....
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....ay of video conferencing/ telephony 20. Communication mode between the assessee and Assessment Unit, Technical Unit, Verification Unit, and Review Unit All communication between the assessee, Technical, Verification and Review Units All communication with assessee, various Units by exclusive electronic mode; except with Verification Unit for conducting enquiry/ verification. All communication only through NFAC and exclusively by electronic mode; except with enquiry Verification by Verification Unit, All communications only through NFAC and exclusively by electronic mode; except with enquiry/ verification by Verification Unit. 21. Authentication of Electronic Record Authentication/signing of the electronic record was to be done by affixing the digital signature Authentication/ signing of the electronic record has to be done by NeAC by affixing its digital signature An electronic record shall be authenticated by ---NFAC and Units affixing digital signature. An electronic be record shall be authenticate d by--- the NFAC by way of an electronic communication, Units by affixing its digital signature; 22. Power to specify format, mode, procedure ....
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.... and Recovery of Tax [Section 231 of the Act] * Assessment, reassessment or recomputation under Section 147 of the Act, OR * Issuance of notice under Section 148 or Sanction for issue of such notice under Section 151 of the Act, OR * Conducting enquiries of or issuance of show cause notice or passing of order under Section 148A of the Act, OR * Rectification of any mistake apparent from record under Section 154 or other amendments under Section 155 of the Act, OR * Issue of notice of demand under Section 156 of the Act, or intimation of loss under Section 157 of the Act * Issuance of certificate for deduction of income tax at any lower rates or no deduction of income-tax under Section 197 of the Act, OR * Deeming a person to be an assessee in default under Section 201 (1) or under Section 206C (6A) of the Act, * Issuance of certificate for lower collection of tax under Section 206C (9) of the Act, OR * Passing of order or amended order under Section 210 (3)/(4) of the Act, OR * Reduction or waiver of the amount of interest paid or payable by an assessee under Section 220 (2A) of the Act, OR * Extending the time for payment or allowing payment by ins....
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.... through economies of scale and functional specialisation; (c) introducing a team-based exercise of powers, including to call for, or collect, or process, or utilise, the information, with dynamic jurisdiction. (2) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (1), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, 2022: [Provided further that the Central Government may amend any direction, issued under this sub-section on or before the 31st day of March, 2022, by notification in the Official Gazette.] (3) Every notification issued under sub-section (1) and sub-section (2) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.]" 32. Section 144B came to be inserted for the first time by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [TOLA] with effect from 01 Apri....
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.... serve appropriate notice or requisition on the assessee or any other person for obtaining the information, documents or evidence requisitioned by the assessment unit and the assessee or any other person, as the case may be, shall file his response to such notice within the time specified therein or such time as may be extended on the basis of an application in this regard, to the National Faceless Assessment Centre which shall forward the reply to the assessment unit; (vi) where a request,- (a) for conducting of enquiry or verification by the verification unit has been made by the assessment unit under sub-clause (b) of clause (iv), the request shall be assigned by the National Faceless Assessment Centre to a verification unit through an automated allocation system; or (b) for reference to the technical unit has been made by the assessment unit under sub-clause (c) of clause (iv), the request shall be assigned by the National Faceless Assessment Centre to a technical unit through an automated allocation system; (vii) the National Faceless Assessment Centre shall send the report received from the verification unit or the technical unit, as the ca....
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....response to the notice served under sub-clause (b) of clause (xii) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit; (xv) the assessment unit shall, after considering the response received under clause (xiii) or after receipt of intimation under clause (xiv), as the case may be, and taking into account all relevant material available on record, prepare an income or loss determination proposal and send the same to the National Faceless Assessment Centre; (xvi) upon receipt of the income or loss determination proposal, as referred to in sub-clause (a) of clause (xii) or clause (xv), as the case may be, the National Faceless Assessment Centre may, on the basis of guidelines issued by the Board,- (a) convey to the assessment unit to prepare draft order in accordance with the income or loss determination proposal, which shall thereafter prepare a draft order; or (b) assign the income or loss determination proposal to a review unit through an automated allocation system, for conducting review of such proposal; (xvii) the review unit....
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....pecified in sub-section (2) of Section 144-C; (xxv) the National Faceless Assessment Centre shall,- (a) upon receipt of acceptance from the eligible assessee; or (b) if no objections are received from the eligible assessee, within the period specified in sub-section (2) of Section 144-C, intimate the assessment unit to complete the assessment on the basis of the draft order; (xxvi) the assessment unit shall, upon receipt of intimation under clause (xxv), pass the assessment order, in accordance with the relevant draft order, within the time allowed under subsection (4) of Section 144-C and initiate penalty proceedings, if any, and send the order to the National Faceless Assessment Centre; (xxvii) where the eligible assessee files objections with the Dispute Resolution Panel, under sub-clause (b) of clause (xxiv), the National Faceless Assessment Centre shall send such intimation along with a copy of objections filed to the assessment unit; (xxviii) the National Faceless Assessment Centre shall, in a case referred to in clause (xxvii), upon receipt of the directions issued by the Dispute Resolution Panel under sub-section (5) of ....
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....celess assessment, to perform the function of making assessment, which includes identification of points or issues material for the determination of any liability (including refund) under this Act, seeking information or clarification on points or issues so identified, analysis of the material furnished by the assessee or any other person, and such other functions as may be required for the purposes of making faceless assessment, and the term "assessment unit", wherever used in this section, shall refer to an Assessing Officer having powers so assigned by the Board; (iii) such verification units, as it may deem necessary to facilitate the conduct of faceless assessment, to perform the function of verification, which includes enquiry, cross verification, examination of books of account, examination of witnesses and recording of statements, and such other functions as may be required for the purposes of verification and the term "verification unit", wherever used in this section, shall refer to an Assessing Officer having powers so assigned by the Board: Provided that the function of verification unit under this section may also be performed by a verification unit l....
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.... of making a faceless assessment shall be through the National Faceless Assessment Centre; (ii) between the National Faceless Assessment Centre and the assessee, or his authorised representative, or any other person shall be exchanged exclusively by electronic mode; and (iii) between the National Faceless Assessment Centre and various units shall be exchanged exclusively by electronic mode: Provided that the provisions of this sub-section shall not apply to the enquiry or verification conducted by the verification unit in the circumstances as may be specified by the Board in this behalf. (6) For the purposes of faceless assessment- (i) an electronic record shall be authenticated by- (a) the National Faceless Assessment Centre by way of an electronic communication; (b) the assessment unit or verification unit or technical unit or review unit, as the case may be, by affixing digital signature; (c) assessee or any other person, by affixing his digital signature or under electronic verification code, or by logging into his registered account in the designated portal; (ii) every notice or order or any other....
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....e with the procedure laid down by the Board; (ix) subject to the proviso to sub-section (5), any examination or recording of the statement of the assessee or any other person (other than the statement recorded in the course of survey under Section 133-A) shall be conducted by an income-tax authority in the relevant unit, exclusively through video conferencing or video telephony, including use of any telecommunication application software which supports video conferencing or video telephony, to the extent technologically feasible, in accordance with the procedure laid down by the Board; (x) the Board shall establish suitable facilities for video conferencing or video telephony including telecommunication application software which supports video conferencing or video telephony at such locations as may be necessary, so as to ensure that the assessee, or his authorised representative, or any other person is not denied the benefit of faceless assessment merely on the consideration that such assessee or his authorised representative, or any other person does not have access to video conferencing or video telephony at his end; (xi) the Principal Chief Commissio....
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....(a) "addressee" shall have the same meaning as assigned to it in clause (b) of sub-section (1) of Section 2 of the Information Technology Act, 2000 (21 of 2000); (b) "authorised representative" shall have the same meaning as assigned to it in sub-section (2) of Section 288; (c) "automated allocation system" means an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources; (d) "automated examination tool" means an algorithm for standardised examination of draft orders, by using suitable technological tools, including artificial intelligence and machine learning, with a view to reduce the scope of discretion; (e) "computer resource" shall have the same meaning as assigned to it in clause (k) of sub-section (1) of Section 2 of the Information Technology Act, 2000 (21 of 2000); (f) "computer system" shall have the same meaning as assigned to it in clause (l) of sub-section (1) of Section 2 of the Information Technology Act, 2000 (21 of 2000); (g) "computer resource of assessee" shall include assessee'....
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....ile number, or by way of update on his Mobile App, or by way of an email at his registered email address, so as to alert him regarding delivery of an electronic communication; (s) "registered account" of the assessee means the electronic filing account registered by the assessee in designated portal; (t) "registered e-mail address" means the e-mail address at which an electronic communication may be delivered or transmitted to the addressee, including- (i) the e-mail address available in the electronic filing account of the addressee registered in designated portal; or (ii) the e-mail address available in the last income tax return furnished by the addressee; or (iii) the e-mail address available in the Permanent Account Number database relating to the addressee; or (iv) in the case of addressee being an individual who possesses the Aadhaar number, the e-mail address of addressee available in the database of Unique Identification Authority of India; or (v) in the case of addressee being a company, the e-mail address of the company as available on the official website of Ministry of Corporate Affairs; or (vi) an....
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....147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within a period of three months from the end of the month in which such notice is issued, or such further period as may be allowed by the Assessing Officer on the basis of an application made in this regard by the assessee, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained pri....
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.... documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, v. the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee 67[where] the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3.-For the purposes of this section, specified authority means the specified authority referred to in section 151.]" "Faceless assessment of income escaping assessment.- 151A. (1) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of assessment, reassessment or recomputation under section 147 or issuance of notice under section 148 or sanction for issue of such notice under section 151, so as to impart gre....
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....ned to them in the Act. Scope of the Scheme 3. For the purpose of this Scheme,-- (a) assessment, reassessment or recomputation under section 147 of the Act, (b) issuance of notice under section 148 of the Act, shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of notice, and in a faceless manner, to the extent provided in section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee." 37. With the advent of technology, the Revenue appears to have over a course of time adopted new tools for assembling, accumulation and analysis of data embedded in the millions of returns which come to be filed every financial year. It has thus over a period of time adopted measures such as Computer Aided Scrutiny Selection [CASS], Annual Information Return [AIR] data and Central Information Branch [CIB] data. These measures appear to have been formulated in order to aid and assist the Revenue with respect to scrutiny assessment, investigation and evaluation. 38. For instance, AIR is stated to be a Ret....
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....crutiny cases; and (d) if so, the reasons for targeting small tax payers having less than one crore income; and (e) whether Government would revise guidelines so as to include industrial houses in random scrutiny and, if not, the reasons therefor? ANSWER THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY) (a) No sir. The Income-tax Department has not issued any guidelines prescribing framework for selection of cases through Computer Aided Scrutiny Selection (CASS) for Financial Year 2021-22. For scrutiny, cases are not selected randomly but are selected as per the Board (Central Board of Direct Taxes) approved selection rules through a Computer Aided Scrutiny Selection (CASS) process in an identity blind manner. The cases get selected only if they meet the selection criteria based on the various risk parameters across different income brackets. (b) CASS 2022 with respect to Income-tax Returns (ITRs) for Financial Year 2021-22 has not been executed yet as the parameter finalisation is pending. The latest cycle for which counts are available is CASS 2021 covering ITRs pertaining to Assessment Year 2020-21(Financi....
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....PAN, as the case may be. iv. Assessment orders in cases (a) set aside to be done de novo or (b) to be done u/s 147 of the act For which the time limit for completion expires on 30.09.2021 pending with the jurisdictional Assessing officer as on 11.09.2021 on thereafter, which cannot be completed as per the procedure laid down under section 144B of the act due to technical/ procedural constraints in the given period of limitation.] 3. In partial modification of the said Order, the Central Board of Direct Taxes in exercise of powers under section 119 of the Act, hereby directs that in addition to exceptions (i) & (ii) provided in Para 2 of the Order, the following exception is also hereby added as under:- iii. Assessment Orders in cases where pendency could not be created on ITBA because of technical reasons or cases not having a PAN, as the case may be. 4. Further, the Central Board of Direct Taxes clarifies that assessment in cases transferred by the Principal Chief Commissioner or the Principal Director General in charge of National Faceless Assessment Centre (NaFAC) under section 144B(8) of the Act shall be handled as ....
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....er Profile (TMP) d. list of accounts, immovable assets etc under Asset Details (TAD) e. list of key persons, shareholders etc uncle, Relationship (TRL) f. Third Party Information, Aggregated TDS Payments, Aggregated GST Transactions, and other information under Taxpayer Annual Summary (TAS) 6. Following activities are available on Case Detail screen which can be accessed by clicking Initiate Activity drop down button. a. Mark case as untraceable: This generic functionality allows user to mark such cases where the communications are not getting delivered to the taxpayers untraceable for feedback purpose. b. Mark case as Non-Responsive: User can mark such crises where the communications are getting delivered to the taxpayer but the taxpayer is not responding to the queries sent on Compliance Portal through this functionality. c. Enter Comments: User can record remarks at the case level. d. Case Reassignment: The user can select multiple cases and re-assign/ transfer them. e. No Return Required: In Non-filing of Return (NMS): RMS cases, the user can mark a case as 'No Return Required', if the user....
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....facilitate the conduct of Faceless Assessment proceedings in respect of territorial areas mentioned in the column (4), persons or classes of persons mentioned in the column (5) and cases or classes of cases mentioned in the column (6) of the Schedule-I of the notification No. 50 of 2014 in S.O. 2752 (E) dated the 22nd October, 2014 published in the Gazette of India, Extraordinary Part II, Section 3, sub-section (ii): SCHEDULE S. No. Income Tax Authority Headquarters (1) (2) (3) 1 Principal Chief Commissioner of Income-tax (NeAC), Delhi Delhi 2 Income - tax Officer (NeAC)(HQ), O/o Principal Chief Commissioner of Income-tax (NeAC), Delhi Delhi ............" 45. Having noticed the rival submissions which were addressed, it becomes apparent that the principal plank of the challenge raised by the writ petitioners is that by virtue of the introduction of Section 144B, a JAO stands completely denuded of the power to assess or reassess. The petitioners would argue that once the faceless scheme of assessment came to be promulgated and which encompassed the power to reassess under Section 147, Section 144B is liable to be construed as ousting all ....
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.... the Department. The relevant extracts of the Budget Speech dated 05 July 2019 are accordingly reproduced hereinbelow: "Faceless e-assessment 124. The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances, and to give shape to the vision of the Hon'ble Prime Minister, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner. To start with, such e-assessments shall be carried out in cases requiring verification of certain specified transactions or discrepancies. 125. Cases selected for scrutiny shall be allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department. This new scheme of assessment will represent a paradigm shift in the functioning of the Income Tax Depart....
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.... orders; (e) submission of remand report, or any other report to be furnished, or any representation to be made, or any record to be produced before the Commissioner (Appeals), Appellate Tribunal or Courts, as the case may be; (f) proposal seeking sanction for launch of prosecution and filing of complaint before the Court;" 51. Similarly, the Notification dated 13 August 2020, which had introduced amendments to the previous Notification of 12 September 2019 had contemplated the role of the JAO in the faceless assessment scheme as follows: "(2) for clause 1, the following clause shall be substituted, namely:- xxxx xxxx xxxx (xxvi) The National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act; (2) Notwithstanding anything contained in sub-paragraph (1), the Principal Chief Commissioner or the Principal Director General, in charge of National e-assessment Centre, may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Off....
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....ion, as the case may be, under Section 147 as well as the issuance of notices under Section 148. As is manifest from the plain language of that provision, the underlying objective of such a scheme was to meet the legislative objective of eliminating the interface between an income tax authority and the assessee, optimal utilization of resources through economies of scale and functional specializations, the introduction of team based assessment, reassessment, recomputation as well as issuance or sanction of notices. Such team based assessment was intended to be in accordance with the randomized allocation of cases and thus the usage of the expression "dynamic jurisdiction". 55. Thus, both Sections 144B as well as Section 151A sought to introduce a system in terms of which assessment or reassessment proceedings could be entrusted to Assessment Units which would be randomly identified. Section 144B and the Explanation appended thereto defined an "automated allocation system" to mean an algorithm for randomized allocation of cases with the aid of suitable technological tools and which were envisaged to extend to the employment of artificial intelligence and machine learning. While t....
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.... Sabha on 07 December 2021. The Hon'ble Minister stated that for the purposes of scrutiny, cases are selected randomly through the CASS process and "in an identity blind manner". It would thus appear that by this time the Income Tax Department clearly had in place a selection criteria which took into consideration various risk parameters and which would operate as red flags enabling and assisting the respondents to assess or reassess as well as to scrutinize in a more effective and efficient manner. This process uses data analytics and algorithms to identify cases that may need closer inspection based on specific risk parameters, such as unusual financial activity, discrepancies in tax returns, or high-value transactions. The CASS process minimizes human intervention in the selection phase, aiming to make the scrutiny process more objective, efficient, and unbiased by focusing on risk-based criteria rather than manual selection. 59. Turning then to the concept of RMS which is frequently referenced and finds repeated mention in the statute as well as the instructions issued by the CBDT, we take note of the Insight Instruction No. 71 issued by the Directorate of Income Tax (System....
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....rst instance. From the additional affidavit which has been filed by the respondents and which explains the working and the implementation of RMS, the following position emerges. 62. The deponent discloses that the Directorate of Income Tax (Systems) is accorded the ability to randomly select cases which may have been cross referenced on the basis of the criteria and factors on which the RMS is founded. Upon such cases coming to be randomly selected and flagged, the cases so identified are then forwarded to the concerned JAO. What the respondents seek to emphasize is that the cases which are selected by the Directorate of Income Tax (Systems) based on the RMS is an exercise independently undertaken with the JAO having no control over the selection process. It is in that light that the respondents assert that the JAO can neither predict nor determine beforehand whether a case would be flagged by the Directorate of Income Tax (Systems). 63. Apart from the aforenoted technological aspects and the analytical tools which appear to have been adopted by the Income Tax Department, the Act enables the JAO itself to select cases which may merit further inquiry or investigation on the ba....
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.... other valuable articles as well as require the surveyed entity to furnish such information as may be warranted. Similar powers for the purposes of collection of information stand conferred on an income tax authority in terms of Sections 133B and 133C of the Act. 67. Section 135A enables the Union Government to frame a scheme for the purposes of calling for information in terms contemplated under Sections 133, 133B and 133C. Such a scheme has in fact come to be formulated and published on 13 December 2021. It would be relevant for our purposes to take note of the provisions contained in Clauses 3 and 4 of that scheme and which are reproduced hereinbelow:- "3. Scope of the Scheme.- (1) The scope of the Scheme shall be in respect of: (i) calling for information under section 133 of the Act; (ii) collecting certain information under section 133B of the Act; (iii) calling for information by the prescribed income-tax authority under section 133C of the Act; (iv) exercise of power to inspect registers of companies under section 134 of the Act; and (v) exercise of power of Assessing Officer under section 135 of the Act. (2)....
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....sessee and the amount reported by the reporting entity persists, the information after such initial e-verification shall be run through a risk management strategy laid down by the Board and the information found to be no or low risk on such risk criteria, where no further action is required, shall be processed for closure. (6) The remaining information shall be transferred electronically by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, to the Prescribed Authority through a process of automated allocation system. (7) The verification of the information so allocated, shall be completed by the Prescribed Authority in the manner as per the procedure laid down in this regard by the Director General of Income-tax (Intelligence and Criminal Investigation),with the prior approval of the Board. (8) The information verified as above, shall be sent back electronically in the form of a preliminary verification report for verification to the Commissioner of Income-tax (e-Verification). (9) The Commissioner of Income-tax (e-Verification) shall match the preliminary verification report wi....
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....audited under sub-section (2A) of section 142 of the Act, (d) estimating the value of any asset, property or investment by a Valuation Officer under section142A of the Act, shall be in a faceless manner, through automated allocation, in accordance with and to the extent provided in section 144B of the Act with reference to making faceless assessment of total income or loss of assessee." H. THE CONCURRENT CONFERRAL OF JURISDICTION 69. We then take note of the elaborate provisions which the Act incorporates for the purposes of delineating jurisdictional boundaries and conferment of powers amongst income tax authorities. This becomes evident from a reading of Section 120 which enables the CBDT to issue directions specifying the territorial area, persons or classes of persons, incomes or classes of income, as well as cases or classes of cases which may be placed under the jurisdiction of income tax authorities. Notwithstanding such a distribution of cases and territories, Section 127 enables the authorities prescribed therein to transfer any case for the purposes of centralized assessment. That power to transfer can be exercised so as to place a particular batch....
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....to unnecessary litigation. It is, therefore, proposed to omit this sub-section i.e., sub-section (9) of section 144B from its date of inception. This amendment will take effect retrospectively from 1st April, 2021." Overall, this section captures the legislative intent to create an effective, fair, and flexible tax assessment process that balances structured jurisdictional roles with the adaptability needed for centralized, faceless assessments. Notably, among the various factors that influenced this decision, what is not lost is the delicate balance sought to be struck by the Legislature between procedural adherence and practical efficiency. The Legislature recognised that while strict procedural compliance is fundamental to maintaining fairness and transparency in the assessment process, an inflexible adherence to procedure-especially in a digital and faceless assessment environment-could inadvertently lead to administrative bottlenecks and a surge in litigation. The legislature sought to ensure that the intent of the law is not overshadowed by technicalties. I. ASSESSMENT AND RE-ASSESSMENT ACTION IN LIGHT OF THE FACELESS ASSESSMENT REGIME 72. Having noticed the....
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.... of assessment and assigns roles to different constituents of the NFAC, it does not, at least explicitly, incorporate any machinery provisions which may be read as intended to regulate the pre-issuance stages of a notice under Section 148. While it is true that Section 144B does specifically refer to reassessment, the significance of that insertion would perhaps have to adjudged bearing in mind the interpretation of the scheme for reassessment which has been advocated for our consideration by the respondents and which not only appeals to reason but may also be the more sustainable view to adopt if one were to harmoniously interpret the provisions of the Act alongside the schemes for faceless assessment coupled with the underlying objectives of reducing human interface.// While it is indeed acknowledged that Section 144B expressly includes a reference to reassessment, the true import and scope of this inclusion must be interpreted in a manner that aligns with the overarching framework advocated by the respondents. 74. The respondents' interpretation, which has been advanced for our consideration, not only presents a logical approach but also offers a more sustainable understa....
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....44B is primarily procedural and is principally concerned with prescribing the manner in which a faceless assessment may be conducted as opposed to constituting a source of power to assess or reassess in itself. 77. Consequently, to ascribe substantive value to Section 144B as the primary basis for reassessment would be to misinterpret its intended meaning. Section 144B is not intended to establish a substantive basis for the exercise of reassessment powers; rather, it is inherently procedural. Its function is confined to outlining the processes through which faceless assessments are to be conducted, ensuring efficiency and consistency in the manner of assessment rather than determining the substantive grounds upon which reassessment is founded. Therefore, Section 144B must be rightly and necessarily conceived as procedural, forming part of the broader legislative framework aimed at structuring the assessment process without encroaching upon the substantive grounds for reassessment itself 78. As noted above, Section 144B is fundamentally concerned with the assessment of returns duly filed and their distribution by way of randomized allocation to different Assessment Units. We,....
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....ing Officer (JAO) when appropriate. This flexibility further emphasises that Section 144B cannot be viewed as the exclusive basis for all assessment and reassessment procedures. The randomised allocation, reinforced by tools such as artificial intelligence and machine learning, is intended to reduce direct human interface for reasons of integrity and to prevent individual arbitrariness. Nevertheless, it would be incorrect to interpret Section 144B as the sole pathway envisioned by the Act for conducting assessments or initiating reassessments. Instead, it should be recognized as one component within a broader statutory framework that provides multiple avenues for the lawful assessment and reassessment of returns. 82. As was noticed by us hereinbefore, the conferred jurisdiction upon authorities for the purposes of faceless assessment itself uses the expression "concurrently". That word would mean contemporaneous or in conjunction with as opposed to a complete ouster of the authority otherwise conferred upon an authority under the Act. This too is clearly demonstrative of the Act not intending to deprive the JAO completely of the power to reassess. In understanding the concept of....
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....icer. In fact, pursuant to exercise of power under Section 120(5) of the Act which empowers CBDT to confer concurrent jurisdiction on two or more assessing officers for proper management of the work, the CBDT has vide Notification No. 64/2020 dated 13-8-2020 conferred power upon the income tax authorities of the National e-Assessment Centre to exercise the power and function of assessment "concurrently" while the original jurisdiction continues with the jurisdictional assessing officer. The relevant portion of the said notification is reproduced hereinbelow: "S.O. 2756(E).-In pursuance of the powers conferred by subsections (1), (2) and (5) of Section 120 of the Income Tax Act, 1961 (43 of 1961) (hereinafter referred to as "the said Act"), the CBDT hereby directs that the Income Tax Authorities of the National e-Assessment Centre (hereinafter referred to as "the NeAC") specified in column (2) of the Schedule below, having its headquarters at the place mentioned in column (3) of the said Schedule, shall exercise the powers and functions of assessing officer concurrently, to facilitate the conduct of faceless assessment proceedings) .... (emphasis supplied)" ....
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....ent Centre, at any stage of the assessment i.e. during assessment, to send back the case to the assessing officer having jurisdiction over such case, with prior approval of the Board. Clause (2) of the Scheme only authorises a transfer back to the jurisdictional assessing officer holding original jurisdiction, which he never loses as it is only the function of assessment that is to be carried out by the faceless assessing officer having concurrent jurisdiction. Consequently, clause (2) of the Scheme only retransfers the function of assessment to the jurisdictional assessing officer holding concurrent jurisdiction. Further, the said clause confers power of transfer upon Principal Chief Commissioner or Principal Director General of National e-Assessment Centre and not upon any other Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner." As is evident from the above, the Court came to the firm conclusion that irrespective of the system of faceless assessment that had come to be introduced and adopted, it would be wholly incorrect to hold or construe the provisions of the Act as denuding the JA....
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.... information. This concurrent authority of the JAO reinforces the integrity and adaptability of the faceless system, ensuring that both centralized and jurisdictional assessments operate cohesively within the larger statutory framework. 89. Regard must also be had to the fact that an Assessing Unit of the NFAC derives no authority or jurisdiction till such time as a case is randomly allocated to it and which triggers the assessment process in accordance with the procedure prescribed by Section 144B. The evaluation of data and information would indubitably precede the actual process of assessment. If the interpretation which is advocated by the writ petitioners were to be countenanced, the appraisal and analysis of information and data functions which the Act entrusts upon the JAO would be rendered wholly unworkable and clearly be contrary to the purpose and intent of the assessment power as constructed under the Act. 90. The notion of entirely ousting the JAO from the assessment process is both impractical and misaligned with the objectives of the faceless assessment system. The faceless framework was established to reduce direct human interaction in assessments thereby enhan....
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....n of a concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148. From a reading of the record, it is unclear whether the notifications conferring jurisdiction on authorities of the NFAC for the purposes of conducting faceless assessment was placed before the High Court. At least the decision makes no reference to the notification of 13 August 2020 which has been produced in these proceedings and which in clear and unambiguous terms declares that the officers empowered to conduct faceless assessment were being conferred concurrent powers and functions of the AO. We, with respect, also find ourselves unable to concur with Hexaware Technologies bearing in mind the various sources of information and material which may assist a JAO in forming an opinion as to whether income had escaped assessment and have been noticed herein above. Those aspects clearly do not appear to have been either taken into consideration or engaged with by the High Court in Hexaware Technologies. The view expressed in Hexaware Technologies then came to be reiterated by the Bombay High Court in Kairos Properties. This decision too fails to advert or allude to the notifications in ter....
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....1), Ahmedabad 2024: GUJHC: 54567-DB. 97. The solitary question which arose for consideration in the aforesaid matter was whether the Section 148 notice was rendered invalid on the ground of having been issued by the JAO. In a judgment penned by the learned Chief Justice of that High Court in Talati and Talati LLP, it was held as follows:- "(22) From a further reading of Explanation 1 and Explanation 2 attached to Section 148, it is clear that the provisions under Section 148 for issuance of notice before making assessment, re-assessment or re-computation under Section 147 operate in two different ways. For the purpose of Section 148, where Section 148A is applicable, Explanation 1 provides: xxxx xxxx xxxx (23) The provisions contained in Explanation 1 shows that the information with the Assessing Officer for the purpose of Section 148, which suggests that the income chargeable to tax has escaped assessment under the Explanation would mean: (i) any information in the case of the assessee, for the relevant assessment year, in accordance with the risk management strategy formulated by the Board from time to time; or (ii) any audit object....
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....d on the part of the Satisfaction Note may also become subject matter of scrutiny by the Court in a case of challenge, where the Court in exercise of power of judicial review may examine as to whether they are actuated by mala fides or passed on extraneous or irrelevant considerations. (27) The decision of the Division Bench of the Bombay High Court in the case of Hexaware Technologies Ltd. (supra) has been rendered in a case, which falls within the arena of Explanation 1 to Section 148 and not where Explanation 2 to Section 148 of the Income Tax Act' 1961, would be attracted. (28) From the above, by reading all the relevant provisions of the Income Tax Act' 1961 as also the notification dated 29.03.2022 issued by the Central Government framing scheme for "E-Assessment of Income Escaping Assessment" under sub-sections (1) and (2) of Section 151 A of the Act' 1961, we reach at an irresistible conclusion that the challenge to the notice under Section 148 dated 22.03.2024 for A.Y. 2021 - 2022 on the sole premise that the said notice could have been issued only through automated allocation in faceless manner and not by Jurisdictional Assessing Officer (JAO....
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....e clear intent of the author to separate and segregate the phases of initiation of action in accordance with RMS, the formation of opinion whether circumstances warrant action under Section 148 of the Act being undertaken by issuance of notice and the actual undertaking of assessment itself. 100. Beyond the specific use of punctuation within Clause 3, a comprehensive reading of the Faceless Reassessment Scheme 2022, supported by the extensive material presented by the respondents, bolsters the clear intent underlying each phase of the faceless assessment process// 101. As we had noticed in the preceding parts of this decision, the RMS and the Insight Portal pushes information to the JAO and is principally not concerned with faceless assessment at all. The RMS essentially enables the JAO to firstly examine the veracity of disclosures made and examine the return against various parameters and information which has been collated by the Directorate of Systems. It thus provides the JAO with an insight in respect of various transactions to which the assessee may be connected as well as data pertaining to that assessee which has otherwise been aggregated and mapped on the basis of m....
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....cess of reassessment into two stages and when viewed in that light it is manifest that it strikes a just balance between the obligation of the JAO to scrutinise information and the conduct of assessment itself through a faceless allocation. The distribution of functions between the JAO and NFAC is complimentary and concurrent as contemplated under the various schemes and the statutory provisions. This balanced distribution underscores the legislative intent to create a seamless integration of traditional and faceless assessment mechanisms within a unified statutory framework. This we so hold and observe since we have, principally, been unable to countenance a situation where the JAO stands completely deprived of the jurisdiction to evaluate data and material that may be placed in its hands. J. DISPOSITION 104. We, accordingly and for all the aforesaid reasons find ourselves unable to sustain the challenge as addressed. The contention that the impugned notices are liable be quashed merely on the ground of the same having been issued by the JAO is thus negated. 105. Accordingly, while we dismiss these writ petitions, we clarify that any other objection that the petitioners m....