2024 (8) TMI 560 - 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:
Challenge to notice under Section 148 of the Income Tax Act, 1961 due to non-compliance with Section 151A and faceless assessment scheme.

Detailed Analysis:

1. Validity of Notice under Section 148:
The Writ Petition was filed to challenge a notice dated 06 April, 2023, issued under Section 148 of the Income Tax Act, 1961, for reassessment of returns filed by the Petitioner for the Assessment Year 2019-20. The notice and underlying order were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) as required by Section 151A of the Act. The court noted that compliance with Section 151A is necessary for a valid notice under Section 148.

2. Interpretation of Section 151A and Faceless Assessment Scheme:
The Division Bench of the High Court, in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, clarified that the Scheme dated 29th March 2022 mandates automated allocation of cases to either the JAO or FAO for issuance of notices under Section 148. The Scheme covers both assessment/reassessment under Section 147 and notice issuance under Section 148. The court emphasized that only the FAO can issue notices under Section 148 in a faceless manner, and non-compliance renders the notice invalid.

3. Prejudice and Compliance with Due Process:
The court highlighted that any action by the Income Tax Authority contrary to law must be quashed as invalid and bad in law, causing prejudice to the assessee. The Petitioner was not required to establish further prejudice when challenging the invalidity of the notice. Compliance with due process and adherence to statutory provisions are essential in assessing taxpayers, and any deviation results in prejudice to the assessee.

4. Court's Decision and Disposition of the Writ Petition:
Considering the non-compliance with Section 151A and the faceless assessment scheme, the court allowed the Writ Petition, quashing the impugned notice and order. Consequential demand or penalty notices were also set aside. The court clarified that its decision was based on non-compliance with Section 151A and did not address other issues raised in the petition. The Writ Petition was disposed of without costs, emphasizing the importance of procedural compliance in tax assessments.