2024 (7) TMI 724 - HC - Income Tax

Validity of Faceless assessment of income escaping assessment - Challenge to notice u/s 148 as non-compliance with Section 151A of the Act - notices issued by JAO instead of FAO - HELD THAT - It is now well settled that for a notice to be validly issued for reassessment u/s 148, the Revenue would need to be compliant with Section 151A of the Act, which has been interpreted and analysed in detail by a Division Bench of this Court in the case of Hexaware Technologies Limited 2024 (5) TMI 302 - BOMBAY HIGH COURT wherein held notices issued by JAO instead of FAO are invalid and bad-in-law u/s 151A of the Income Tax Act, 1961. Therefore, it is apparent that the Revenue is not in compliance with the Scheme notified by the Central Government pursuant to Section 151A (2) of the Act. The Scheme is also required to be tabled in Parliament and is in the character of subordinate legislation, which governs the conduct of proceedings under Section 148A as well as Section 148. In view of the explicit findings returned in Hexaware, the grievance of the Petitioner insofar as it relates to an invalid issuance of a notice is unsustainable and consequently, the very manner in which the proceedings have been initiated, vitiates the proceedings. Thus, proceedings initiated under Section 148 of the Act would not be sustainable.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reassessment of returns filed for the Assessment Year 2016-17 due to non-compliance with Section 151A of the Act.

Analysis:

1. The petition challenged a notice dated 16 April, 2024, issued under Section 148 of the Income Tax Act, 1961, for reassessment of returns filed for the Assessment Year 2016-17. The notice and underlying orders were issued by the Jurisdictional Assessing Officer (JAO) and not by a Faceless Assessing Officer (FAO) as required by Section 151A of the Act.

2. The High Court referred to a previous Division Bench judgment in the case of Hexaware Technologies Limited, which clarified that the FAO is exclusively responsible for issuing notices under Section 148 of the Act. The Scheme framed by the CBDT for faceless assessment is applicable for both issuance of notice under Section 148 and subsequent assessment proceedings.

3. It was emphasized that the FAO must issue the notice under Section 148 in a faceless manner as per the Scheme, and any deviation from this process renders the notice invalid. Non-compliance with the Scheme vitiates the proceedings, and the act of an authority acting contrary to law must be quashed, causing prejudice to the assessee.

4. The Court held that the Revenue's failure to comply with the Scheme notified under Section 151A of the Act renders the notice invalid. The petition was allowed based on the non-compliance with the Scheme, and the impugned notice dated 16 April, 2024, was quashed.

5. The judgment clarified that the decision was based solely on the non-compliance with Section 151A of the Act, and no opinion was expressed on other issues raised in the petition. The rule was made absolute in favor of the petitioner, and the writ petition was disposed of without costs.