2024 (7) TMI 176 - AT - Income Tax

Validity of re-assessment notice issued by the jurisdictional AO and not by NFAC - Faceless Assessing Officer (FAO) - assumption of jurisdiction by the Ld. AO u/s 148 was in violation of mandatory jurisdictional conditions as stipulated in Notification No 18/2022 dated 29th March 2022 - HELD THAT - Section 151A of the Act itself contemplates formulation of Scheme for both assessment, reassessment or re-computation under Section 147 as well as for issuance of notice u/s 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under Section 148 of the Act being assessment, reassessment or recomputation under Section 147 of the Act and inapplicable to the issuance of notice under Section 148 of the Act. The Scheme is clearly applicable for issuance of notice under Section 148 of the Act and accordingly, it is only the FAO which can issue the notice under Section 148 of the Act and not the JAO. For the purposes of making assessment or reassessment, the provisions of Section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term to the extent provided in Section 144B of the Act is not relevant. The Scheme provides that the notice under Section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, to the extent provided in Section 144B of the Act does not go with issuance of notice and is applicable only with reference to assessment or reassessment. The phrase to the extent provided in Section 144B of the Act would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub-section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme. The Hon ble Telangana High Court in the case of Kankanala Ravindra Reddy 2023 (9) TMI 951 - TELANGANA HIGH COURT has held that in view of the provisions of Section 151A of the Act 14 (2023) read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We hold that the assessment framed u/s 147 based on the notice issued u/s 148 by the JAO is bad in law and the same is quashed as void ab initio. Decided in favour of assessee.

Summary

Issues:
Validity of assessment under section 147 based on notice issued by jurisdictional AO instead of NFAC.

Analysis:

Issue 1: Validity of assessment under section 147

The appellant challenged the assessment under section 147, arguing that the notice issued by the jurisdictional AO, rather than NFAC, was in violation of Notification No. 18/2022 and Section 151A of the Income Tax Act, 1961. The appellant contended that the jurisdictional AO's assumption of jurisdiction under section 148 was against mandatory conditions. The appellant relied on the case of M/s National Thermal Plant Co. Ltd. v. CIT to support the admission of additional grounds for appeal. The Tribunal admitted the additional grounds for adjudication as they raised legal issues without requiring new facts.

Issue 2: Jurisdictional conflict between FAO and JAO

The Tribunal examined the jurisdictional conflict between the Faceless Assessing Officer (FAO) and Jurisdiction Assessing Officer (JAO) in issuing notices under section 148. The Tribunal noted that the notice in this case was issued by the JAO, Katra, and not by NFAC, as required by the faceless scheme. The Tribunal emphasized that the Scheme dated 29th March 2022 mandated automated allocation for notices under section 148, eliminating the interface between tax authorities and assesses. The Tribunal held that the JAO's issuance of the notice was in violation of the Scheme and Section 151A, leading to the quashing of the assessment under section 147 as void ab initio.

Precedent and Conclusion

The Tribunal referred to the case of Kankanala Ravindra Reddy vs. Income Tax Officer, where the Telangana High Court held that notices issued by JAOs were invalid under Section 151A and the Scheme dated 29th March 2022. Based on this precedent and the legal arguments presented, the Tribunal concluded that the assessment under section 147, based on the notice issued by the JAO, was invalid and quashed. Consequently, the appellant succeeded on the legal issue of the assessment's validity under section 147, leading to the allowance of the appeal.

This detailed analysis highlights the legal intricacies surrounding the validity of assessments under section 147 and the jurisdictional conflict between FAO and JAO in issuing notices under section 148, as addressed in the judgment delivered by the Appellate Tribunal ITAT Amritsar.