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2024 (7) TMI 1191 - HC - Income TaxValidity 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 - Similar issue came up for consideration before a Division Bench of Bombay High Court in Hexaware Technology Ltd.( 2024 (5) TMI 302 - BOMBAY HIGH COURT which vide judgment dated 03.05.2024 discussed the issue at length and held that notice under Section 148 after introduction of Finance Act, 2021, cannot be issued by Jurisdictional Assessing Officer. Scheme of faceless assessment is applicable from the stage of show cause notice u/s 148 as well as 148A. Clause 3 (b) of notification dated 29.03.2022 issued u/s 151A clearly provides that scheme would be applicable to notice u/s 148. Even otherwise, it is a settled proposition of law that assessment proceedings commence from the stage of issuance of show cause notice. The object of introduction of faceless assessment would be defeated if show cause notice u/s 148 is issued by Jurisdictional AO. The respondents are heavily placing reliance upon office memorandum and letter issued by departmental authorities. It is axiomatic in tax jurisprudence that circulars, instructions and letters issued by Board or any other authority cannot override statutory provisions. The circulars are binding upon authorities and Courts are not bound by circulars. The mandate of Section 144B, 151A readwith notification dated 29.03.2022 issued thereunder is quite lucid. There is no ambiguity in the language of statutory provisions, thus, office memorandum or any other instruction issued by Board or any other authority cannot be relied upon. Instructions/circulars can supplement but cannot supplant statutory provisions. The notices issued by Jurisdictional Assessing Officer under Section 148 are hereby quashed with liberty to respondent to proceed in accordance with procedure prescribed by law.
Issues Involved:
1. Validity of the Notice under Section 148 issued by the Jurisdictional Assessing Officer (JAO) after the introduction of the Faceless Assessment Scheme. 2. Validity of the Approval under Section 151 of the Income Tax Act. 3. Compliance with the procedure prescribed under Section 144B of the Income Tax Act. 4. Applicability and interpretation of the Finance Act, 2021 and related notifications. Issue-wise Detailed Analysis: 1. Validity of the Notice under Section 148 issued by the Jurisdictional Assessing Officer (JAO) after the introduction of the Faceless Assessment Scheme: The petitioner challenged the notice dated 28.03.2024 issued under Section 148 by the JAO, arguing it was in contravention of the notification dated 29.03.2022 and Section 151A of the Income Tax Act, which introduced the concept of Faceless Assessment. Citing judgments from the Telangana, Bombay, and Gauhati High Courts, the petitioner contended that the notice should have been issued by a Faceless Assessing Officer (FAO) rather than the JAO. The respondent countered by referencing an office memorandum dated 20.02.2023 issued by the CBDT, which they argued allowed the JAO to issue such notices. The court reviewed the relevant legal provisions and precedents, including the Finance Act, 2021, and the e-Assessment of Income Escaping Assessment Scheme, 2022. It concluded that the scheme mandates the issuance of notices under Section 148 in a faceless manner. The court found that the JAO's issuance of the notice was in direct contravention of the statutory provisions and the scheme, thereby rendering the notice invalid and unsustainable. 2. Validity of the Approval under Section 151 of the Income Tax Act: The petitioner also sought to quash the approval dated 22.03.2024 accorded by Respondent No.2 under Section 151, arguing it was issued without due application of mind and without disclosing any information to the petitioner. The court noted that the approval process under Section 151 requires careful consideration and application of mind by the approving authority. Given the procedural lapses and the invalidity of the initial notice under Section 148, the court found that the approval under Section 151 was also flawed and could not stand. 3. Compliance with the procedure prescribed under Section 144B of the Income Tax Act: The petitioner received an intimation dated 21.06.2024 indicating that the case had been selected for Faceless Assessment under Section 144B. The court emphasized that Section 144B prescribes a detailed procedure for faceless assessment, which aims to eliminate the interface between the Income Tax Authority and the assessee. The court found that the issuance of the notice by the JAO and not the FAO was a significant deviation from the prescribed procedure, thus violating the statutory requirements of Section 144B. 4. Applicability and interpretation of the Finance Act, 2021 and related notifications: The court examined the Finance Act, 2021, and the related notifications, particularly the e-Assessment of Income Escaping Assessment Scheme, 2022. It highlighted that the scheme's objective is to ensure transparency, efficiency, and accountability by conducting assessments in a faceless manner. The court referred to the judgments from the Telangana, Bombay, and Gauhati High Courts, which consistently held that notices under Section 148 must be issued by the FAO post the Finance Act, 2021. The court rejected the respondent's reliance on the office memorandum and other departmental instructions, stating that such documents cannot override statutory provisions. Conclusion: The court allowed the petitions, quashing the notices issued by the JAO under Section 148 and the subsequent approval under Section 151. It directed the respondent to proceed in accordance with the law, ensuring compliance with the faceless assessment procedures as mandated by the Finance Act, 2021, and the e-Assessment of Income Escaping Assessment Scheme, 2022.
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