2024 (8) TMI 559 - 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 - JAO would not have jurisdiction to issue the impugned notices more particularly in view of the clear provisions of Section 151A read with notification dated 29 March, 2022 issued by the Central Government. As fairly conceded on behalf of the revenue, the challenge in the proceedings would stand covered by the decision of this Court in Hexaware Technologies Ltd. ( 2024 (5) TMI 302 - BOMBAY HIGH COURT . The impugned notices would be required to be held to be illegal and invalid as and there is no dispute that the JAO had no jurisdiction to issue the impugned notice. We, accordingly, allow this petition in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Compliance with the faceless assessment Scheme under Section 151A of the Act.
3. Jurisdiction of the Jurisdictional Assessing Officer (JAO) versus the Faceless Assessing Officer (FAO).

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:

The petitioner challenged the notice dated 25 April 2024 issued under Section 148 of the Income Tax Act, 1961, pertaining to the Assessment Year 2017-18. The challenge extended to the prior notice and order issued under Sections 148A(b) and 148A(d), respectively. The court observed that the impugned notices and orders were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO), which is a requirement under Section 151A of the Act.

2. Compliance with the Faceless Assessment Scheme:

The court noted that the Central Government issued a notification on 29 March 2022, introducing a faceless mechanism for issuing notices under Section 148. This notification mandates that all such notices must be issued through automated allocation, as per the Scheme defined under Section 151A. The court referred to the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, where it was held that "there is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act." The Scheme mandates that the issuance of notices must be through automated allocation, making it a mandatory requirement.

3. Jurisdiction of the JAO versus the FAO:

The court emphasized that the Scheme under Section 151A of the Act is designed to eliminate the interface between the income-tax authority and the assessee, optimize resource utilization, and introduce a team-based assessment with dynamic jurisdiction. The court rejected the Revenue's argument that the faceless mechanism requirement applies only to Section 148 and not to Sections 148A(b) and 148A(d). The court held that the entire procedure, including the initial steps under Section 148A, falls within the ambit of the faceless assessment Scheme.

Conclusion:

The court concluded that the Respondent-Revenue did not comply with the Scheme notified by the Central Government under Section 151A(2) of the Act. The Scheme, being subordinate legislation, governs the conduct of proceedings under Sections 148A and 148. Therefore, the issuance of the notice by the JAO was invalid.

Judgment:

The court allowed the Writ Petition, quashing the initial notice dated 30 March 2024, the order dated 25 April 2024, and the notice dated 25 April 2024. The court clarified that it had not expressed any opinion on other issues raised in the petition, as the decision was solely based on non-compliance with Section 151A of the Act. The rule was made absolute with no costs.