2023 (9) TMI 951 - HC - Income Tax

Jurisdiction to issue notice u/s 148 - Income escaping assessment - Assessee submitted that, it was required to get the re-assessment done in a faceless manner, rather than being assessed by the jurisdictional officer - Faceless Jurisdiction of the Income Tax Authorities Scheme, 2022 - e-Assessment of Income Escaping Assessment Scheme, 2022 - Department has not proceeded against the petitioner under the substituted provisions of the Finance Act, 2021. Rather, it proceeded with the unamended provisions of law - HELD THAT - After the introduction of the above two schemes, it becomes mandatory for the Revenue to conduct/initiate proceedings pertaining to reassessment under Section 147, 148 148A of the Act in a faceless manner. Proceedings under Section 147 and Section 148 of the Act would now have to be taken as per the procedure legislated by the Parliament in respect of reopening/ re-assessment i.e., proceedings under Section 148A of the Act. Parliament had by virtue of the Finance Act 2021, brought certain amendments to the provisions of the Income Tax Act, more particularly, in respect of the manner in which the reassessment and the procedure to be adopted by the Income Tax Department. The amendment was brought with an intention to make the law more transparent and effective. The Hon ble Supreme Court also while deciding the case of Ashish Agarwal, supra, as is discussed with in the preceding paragraph had specifically directed the Union of India to proceed further in terms of the substituted provisions brought in by way of Finance Act 2021. What is also relevant to take note of the fact that the Hon ble Supreme Court ASHISH AGARWAL 2022 (5) TMI 240 - SUPREME COURT while exercising its power under Article 142 of the Constitution of India has also not relaxed the applicability of the Finance Act 2021. Rather, the Hon ble Supreme Court in very clear and unambiguous terms had held that the notices issued under the un-amended provisions, which were struck down by the High Court, shall be treated as a notice under new amended provisions and the Union of India was directed to proceed further from that stage in terms of the amended provisions of law. In spite of such specific clear directions by the Hon ble Supreme Court, the Union of India for reasons best known again proceeded with the procedure as it stood prior to the amended provisions which came into force from 01.04.2021. It is by now very clear that the procedure to be followed by the respondent-Department upon treating the notices issued for reassessment being under Section 148A, the subsequent proceedings was mandatorily required to be undertaken under the substituted provisions as laid down under the Finance Act, 2021. In the absence of which, we are constrained to hold that the procedure adopted by the respondent-Department is in contravention to the statute i.e. the Finance Act, 2021, at the first instance. Secondly, it is also in direct contravention to the directives issued by the Hon ble Supreme Court in the case of Ashish Agarwal, supra. The impugned notices issued and the proceedings drawn by the respondent-Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed. Decided in favour of assessee.

Issues Involved:

1. Contravention of Amended Provisions of the Income Tax Act, 1961.
2. Requirement for Faceless Assessment.
3. Validity of Notices Issued by Local Jurisdictional Officer.
4. Compliance with Supreme Court's Judgment in Union of India vs. Ashish Agarwal.

Summary:

Issue 1: Contravention of Amended Provisions of the Income Tax Act, 1961

The petitioners challenged the orders passed by the Income Tax Officer under Section 148-A (d) and the consequential notice under Section 148 for the assessment year 2016-17, arguing that these orders were in contravention of the amended provisions of the Income Tax Act, 1961. The primary objection was the non-adherence to the amended provisions which mandated faceless assessment as per Section 144B and the scheme under Section 151A.

Issue 2: Requirement for Faceless Assessment

The petitioners contended that the reassessment should have been conducted in a faceless manner as mandated by the amendments effective from 29.03.2022. The Central Board of Direct Taxes (CBDT) had issued notifications for e-assessment of Income Escaping Assessment Scheme 2022, which required automated allocation and faceless assessment. The respondent-Department argued that the notices were issued prior to the amendment and thus followed the un-amended provisions.

Issue 3: Validity of Notices Issued by Local Jurisdictional Officer

The petitioners argued that the local jurisdictional officer issuing the notices violated the amended provisions requiring faceless assessment. The respondent-Department contended that both the Jurisdictional Assessing Officer (JAO) and units under the National Faceless Assessment Centre (NFAC) have concurrent jurisdiction and that the issuance of notices by the JAO was valid.

Issue 4: Compliance with Supreme Court's Judgment in Union of India vs. Ashish Agarwal

The Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal had deemed notices issued under the un-amended Section 148 to be treated under the new Section 148A and allowed the Department to proceed with reassessment under the amended provisions. The Court held that the respondent-Department should have adhered to the amended provisions as directed by the Supreme Court.

Judgment:

1. Contravention of Amended Provisions: The Court found that the respondent-Department did not proceed under the substituted provisions of the Finance Act, 2021, thus violating the statute and the Supreme Court's directives.

2. Requirement for Faceless Assessment: The Court held that after the introduction of the schemes for faceless assessment, it became mandatory for the Department to conduct reassessment proceedings in a faceless manner.

3. Validity of Notices: The Court concluded that the notices issued by the local jurisdictional officer were not in compliance with the mandatory faceless assessment requirement, rendering them invalid.

4. Compliance with Supreme Court's Judgment: The Court emphasized that the Supreme Court's judgment required the Department to proceed under the amended provisions, and failure to do so invalidated the proceedings.

Conclusion:

The Court quashed the impugned notices and the consequential orders, holding them procedurally flawed and in contravention of the amended provisions and the Supreme Court's directives. The petitions were allowed on the jurisdictional issue, reserving the right for the Revenue to proceed further from the stage of the Supreme Court's order in Ashish Agarwal's case if they so choose. No order as to costs.

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