2024 (7) TMI 727 - HC - Income Tax

Validity of reassessment proceedings - Faceless assessment of income escaping assessment - notice u/s 148A (b) issued by JAO instead of FAO - as argued order passed by the AO u/s 148A (d) of the Act is invalid as AO has failed to deal with the objections which were filed by the petitioner - HELD THAT - We find much substance in the contention as urged on behalf of the petitioner that the Jurisdictional Assessing Officer could not have issued a notice under Section 148A (b) of the Act, outside the Faceless Assessment Scheme. In the context of the contentions as urged on behalf of the petitioner, at the outset, we may note the provisions of Section 151A of the Act, which was inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions), Act, 2020 (for short, TOLA ) with effect from 01 November, 2020 providing for faceless assessment of income escaping assessment . In pursuance of Section 151A, the Central Government by notification dated 29 March, 2022 notified a scheme in regard to faceless assessment inter alia providing that the assessment, reassessment or recomputation of income under section 147 of the Act as also the 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. Section 144B of the Act is a provision which ordains faceless assessment. Perusal of Section 144B indicates the entire procedure to be followed in undertaking assessment in a faceless manner involving the National Faceless Assessment Center. Section 144B of the Act although was inserted by the TOLA, it has been brought into effect from 01 st April, 2021. The impugned notice in the said proceedings being issued by the JAO and not as per the faceless assessment procedure, as envisaged under the scheme notified by the Central Government by notification dated 29 March 2022 was illegal and invalid. It was held that the JAO had no jurisdiction to issue such notice, as it was not issued as per the requirements of Section 151A read with Section 144B of the Act. Non considering assessee submission - Also we find substance that the order passed by the Assessing Officer requires interference as it is clear from reading of the impugned order that the submission which was made on behalf of the petitioner before the assessing officer that the petitioner was following the project completion method, has not been taken into consideration while issuing the impugned notice and in coming to a conclusion to re-open the assessment. Assessee appeal allowed.

Issues Involved:

1. Validity of the notice dated 23/03/2023 under Section 148A(b) of the Income Tax Act.
2. Validity of the approval dated 06/04/2023 granted under Section 151 of the Income Tax Act.
3. Validity of the order dated 06/04/2023 passed under Section 148A(d) of the Income Tax Act.
4. Validity of the consequent notice dated 06/04/2023 issued under Section 148 of the Income Tax Act.
5. Compliance with the Faceless Assessment Scheme under Section 151A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Validity of the notice dated 23/03/2023 under Section 148A(b):

The petitioner contended that the notice issued under Section 148A(b) was invalid as it was based on alleged "information" from the insight portal regarding the sale of flats and TDS deducted under Section 194IA, which suggested undisclosed income. The petitioner argued that the notice was issued just before the expiry of six years from the relevant assessment year and that the petitioner was following the project completion method of accounting, which had been accepted in previous assessment years by the ITAT, Mumbai. The petitioner also claimed that the details of the alleged undisclosed income were not provided.

2. Validity of the approval dated 06/04/2023 granted under Section 151:

The approval granted by the Principal Chief Commissioner of Income Tax, Pune, for the issuance of the notice under Section 148A(b) and the passing of the order under Section 148A(d) was challenged. The petitioner argued that the approval was invalid as it was not in accordance with the provisions of Section 151A of the Act, which mandates the faceless assessment scheme.

3. Validity of the order dated 06/04/2023 passed under Section 148A(d):

The petitioner contended that the order passed under Section 148A(d) was invalid as the Assessing Officer failed to address the objections raised by the petitioner. The petitioner argued that the Assessing Officer did not consider the detailed reply provided and mechanically recorded that the petitioner’s reply was evasive, insufficient, and not satisfactory. The petitioner also claimed that the documents on which the opinion was formed were not provided, contrary to CBDT guidelines and the Supreme Court's ruling in Union of India & Ors. vs. Ashish Agarwal.

4. Validity of the consequent notice dated 06/04/2023 issued under Section 148:

The petitioner argued that the notice issued under Section 148 was invalid as it was not issued in a faceless manner, as required under the faceless assessment scheme introduced by Section 151A of the Act. The petitioner cited the Division Bench decision in Hexaware Technologies Limited, which held that notices not issued as per the faceless assessment procedure are illegal and invalid.

5. Compliance with the Faceless Assessment Scheme under Section 151A:

The court found that the Jurisdictional Assessing Officer (JAO) could not issue a notice under Section 148A(b) outside the Faceless Assessment Scheme, as mandated by Section 151A of the Act. The Central Government had notified a scheme for faceless assessment, reassessment, or recomputation of income under Section 147, and the issuance of notice under Section 148 was to be done through automated allocation in a faceless manner. The court referred to the Hexaware Technologies Limited case, which held that notices issued by the JAO and not by the National Faceless Assessment Center (NFAC) were invalid.

Conclusion:

The court ruled in favor of the petitioner, declaring the consequent notice dated 06/04/2023 issued under Section 148 as invalid. The court emphasized that the faceless assessment procedure was mandatory and that the issuance of notices outside this scheme was illegal. The petition was allowed, and the rule was made absolute with no costs.

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