2024 (8) TMI 567 - 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. Legality 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. Service of notices and orders to the petitioner.
4. Validity of reassessment proceedings and the demand raised.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued Under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the notice dated 29 March, 2023 issued under Section 148 of the Act, arguing it was illegal and invalid as it did not comply with Section 151A. The Court observed that the notice was issued outside the faceless mechanism required by Section 151A and the notification dated 29 March, 2022. The Court referenced the decision in Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, which established that notices under Section 148 must be issued through a faceless mechanism. Consequently, the Court held the notice invalid.

2. Compliance with the Faceless Assessment Scheme Under Section 151A of the Act:
The petitioner contended that the Jurisdictional Assessing Officer (JAO) lacked authority to issue the notice under Section 148 due to the faceless mechanism mandated by Section 151A and the notification. The Court agreed, emphasizing that the faceless scheme applies to both the issuance of notices under Section 148 and the assessment proceedings under Section 147. The Court rejected the respondents' argument that the order dated 31 March, 2021 from the Central Board of Direct Taxes (CBDT) excluded the case from the faceless mechanism, affirming that the faceless scheme is applicable.

3. Service of Notices and Orders to the Petitioner:
The petitioner argued that the notices under Sections 148A(a) and (b) and the order under Section 148A(d) were not served. The Court noted that the petitioner became aware of these through a consultant and not through proper service. The Court found that the lack of proper service violated procedural requirements, further invalidating the notices and orders.

4. Validity of Reassessment Proceedings and the Demand Raised:
The petitioner challenged the reassessment proceedings, arguing that no income was earned for the assessment year in question, as the petitioner had merely invested in Compulsory Convertible Preference Shares (CCPS). The Court noted that the reassessment order added Rs. 34,99,78,225/- to the petitioner's income, despite the petitioner not earning or receiving this amount. The Court found the reassessment proceedings and the resulting demand of Rs. 26,41,70,100/- to be unlawful, as they were based on invalid notices and orders.

Conclusion:
The Court allowed the petition, quashing the impugned notices and orders under Sections 148, 148A, 144C, 147, and 156 of the Act. The Court ruled that the proceedings were not conducted in accordance with the law and the faceless scheme, making them illegal. The rule was made absolute, and no costs were awarded.