2024 (7) TMI 725 - 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 based on non-compliance with Section 151A and the Scheme framed by CBDT.

Analysis:

1. The writ petition challenged a notice dated 13 April, 2023, issued under Section 148 of the Income Tax Act, 1961, for reassessment of returns filed for the Assessment Year 2019-20. The petition also contested the underlying prior notice and order under Section 148A (b) and Section 148 (A) (d) of the Act, respectively.

2. The High Court noted that the notice and order were issued by the Jurisdictional Assessing Officer (JAO) and not by a Faceless Assessing Officer (FAO) as required by Section 151A of the Act. The court referred to the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, where it was clarified that the FAO has exclusive jurisdiction to issue notices under Section 148, as per the Scheme framed by CBDT.

3. The court emphasized that the Scheme for faceless assessment, as mandated by Section 151A, applies to both assessment/reassessment under Section 147 and the issuance of notices under Section 148. Therefore, the FAO, not the JAO, is authorized to issue notices under Section 148 in a faceless manner, as per the Scheme.

4. The court held that any action taken by an authority contrary to the law must be quashed and set aside as invalid. It stated that such actions cause prejudice to the assessee, and there is no requirement for the petitioner to prove further prejudice before challenging the invalidity of the notice.

5. Based on the non-compliance with Section 151A and the Scheme, the court found the notice issued to be invalid, vitiating the entire proceedings. Consequently, the court allowed the petition and quashed the impugned notices and orders issued by the Respondents.

6. The court clarified that its decision was based on the non-compliance with Section 151A and did not address other issues raised in the petition. The court made the rule absolute in favor of the petitioner and disposed of the writ petition without costs.