2024 (9) TMI 219 - HC - Income Tax

Faceless assessment of income escaping assessment - validity of notice issued by the JAO as not in accordance w/sec 151A - Applicability of the faceless mechanism under Section 144B and Section 151A - as argued the provisions of section 151A and the scheme notified by the Central Government dated 29 March, 2022, cannot be made applicable to the present case which relates to an assessment falling under international taxation charge. HELD THAT - We are not inclined to accept the case of respondents that the provisions of Section 144B read with the provisions of Section 151A (1) would not be applicable to the case in hand. The reason being the challenge in the present proceedings is to a notice issued under section 148 of the Act and the prior proceedings as initiated against the petitioner under section 148A (a) (b). We cannot read the order to mean that it would cover the proceedings under Section 148A and Section 148 of the Act so as to fall within the ambit of the said order, as it is only the assessment proceedings which would be required to be conducted as an exception to the faceless mechanism. We have clearly observed that the order dated 31 March, 2021 cannot be read to mean that it would cover the proceedings under Section 148A and Section 148 of the Act so as to fall within the ambit of the said order, as it was only the assessment proceedings which were required to be undertaken as an exception to the faceless mechanism, under the said order. In other words, we had clearly held that the faceless mechanism would also be applicable to cases of Central Charges and International Taxation charges and it is only the assessment proceedings which would be required to be undertaken outside the faceless mechanism. We have thus reached a considered conclusion that the mandatory faceless procedure for issuance of notice under section 148 of the Act falling within the purview of the scheme notified by the Central Government dated 29 March, 2022 would not exclude the Central charges and International taxation charges from the application of the faceless mechanism as notified under section 144B read with section 151A of the Act. The result of the above discussion is to the effect that this Court not only in Hexaware 2024 (5) TMI 302 - BOMBAY HIGH COURT and thereafter in CapitalG LP 2024 (8) TMI 567 - BOMBAY HIGH COURT but also Sri Venkataramana Reddy Patloola 2024 (9) TMI 100 - TELANGANA HIGH COURT to have consistently held that in respect of central charges and international taxation charges, the proceedings under Section 148A read with Section 148 of the Act would be required to be held in a faceless manner, applying the provisions of section 144B and as effected under the provisions of section 151A read with scheme notified by the Central Government vide a Notification dated 29 March, 2022. We accordingly reject the contentions as urged by the revenue that the present case would fall outside the applicability of the said provisions and the scheme. Now coming to the facts of the case, as the notices were issued by the JAO certainly they fall outside the purview of the faceless mechanism and on that count as held in the decision of Hexaware, the same would be required to be held to be illegal and without jurisdiction. We may also observe that the proceedings would also stand covered by the decision of this Court in Kairos Properties Pvt. Ltd. 2024 (8) TMI 559 - BOMBAY HIGH COURT in which the Court has held the scheme to be applicable to the procedure to be adopted under section 148A of the Act as well. Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Jurisdictional Assessing Officer (JAO) under Section 148A and Section 148 of the Income Tax Act, 1961.
2. Applicability of the faceless mechanism under Section 144B and Section 151A of the Income Tax Act, 1961.
3. Interpretation of orders dated 31 March, 2021 and 6 September, 2021 issued by the Central Board of Direct Taxes (CBDT).
4. Validity of the impugned notice and order under Sections 148A(b), 148A(d), and 148 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Jurisdiction of the JAO under Section 148A and Section 148 of the Income Tax Act, 1961:
The petitioner challenged the jurisdiction of the JAO to issue notices under Sections 148A and 148 of the Income Tax Act, 1961, arguing that these actions were contrary to the provisions of Section 151A and Section 144B, which mandate a faceless mechanism. The Court referred to the decision in Hexaware Technologies Limited, which held that the JAO does not have concurrent jurisdiction with the Faceless Assessing Officer (FAO) for issuing notices under Section 148. The Court emphasized that the issuance of notices must be through automated allocation as per the scheme notified by the Central Government, which mandates a faceless mechanism.

2. Applicability of the Faceless Mechanism under Section 144B and Section 151A of the Income Tax Act, 1961:
The petitioner argued that the faceless mechanism under Section 144B and Section 151A should apply to their case. The Court noted that the scheme notified on 29 March, 2022, under Section 151A, mandates that both assessment/reassessment and the issuance of notices under Section 148 must be through automated allocation and in a faceless manner. The Court rejected the revenue's argument that the faceless mechanism does not apply to cases of international taxation, referring to the decision in CapitalG LP, which held that the faceless mechanism applies to all cases, including those related to international taxation.

3. Interpretation of Orders Dated 31 March, 2021 and 6 September, 2021 Issued by the CBDT:
The revenue argued that the orders dated 31 March, 2021, and 6 September, 2021, exclude cases of international taxation from the faceless mechanism. The Court examined these orders and concluded that they only apply to assessment orders and not to the issuance of notices under Sections 148A and 148. The Court emphasized that the scheme notified on 29 March, 2022, under Section 151A, does not reference or include these orders, and thus, the faceless mechanism applies to the issuance of notices in all cases, including those of international taxation.

4. Validity of the Impugned Notice and Order under Sections 148A(b), 148A(d), and 148 of the Income Tax Act, 1961:
The Court held that the notices issued by the JAO were illegal and without jurisdiction as they did not follow the mandatory faceless procedure. The Court referred to its decision in Kairos Properties Pvt. Ltd., which held that the faceless mechanism applies to the procedure under Section 148A as well. Consequently, the Court quashed and set aside the impugned notice dated 31 March, 2024, the order dated 19 April, 2024, and the reassessment notice dated 19 April, 2024, pertaining to the assessment year 2017-18.

Conclusion:
The Court concluded that the faceless mechanism under Section 144B read with Section 151A applies to the issuance of notices under Sections 148A and 148, including cases of international taxation. The impugned notices and orders issued by the JAO were quashed as they did not comply with the mandatory faceless procedure. The petition was allowed, and the rule was made absolute with no costs.