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2024 (9) TMI 373 - HC - Income TaxFaceless assessment of income escaping assessment - validity of notice issues by jurisdictional Assessing Officer ( JAO ) and not by a Faceless Assessing Officer ( FAO ), as is required by the provisions of Section 151A - HELD THAT - In the present case, it is apparent that the Respondent-Revenue has not complied with the Scheme notified by the Central Government pursuant to Section 151A (2) of the Act. The Scheme has also been tabled before the Parliament and is in the character of subordinate legislation, which governs the conduct of proceedings under Section 148A as well as Section 148 of the Act. In view of the explicit declaration of the law in Hexaware 2024 (5) TMI 302 - BOMBAY HIGH COURT the grievance of the Petitioner-Assessee insofar as it relates to an invalid issuance of a notice is sustainable and consequently, the very manner in which the proceedings have been initiated, vitiates the proceedings. Decided in favour of assessee.
Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 based on non-compliance with provisions of Section 151A and the faceless mechanism introduced by the Central Government. Analysis: The Writ Petition was filed to challenge a notice issued under Section 148 of the Income Tax Act, 1961, along with prior notices under Section 148A (b) and Section 148A (d) for reassessment of returns filed for the Assessment Year 2017-18. The key contention was that the notices were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) as required by Section 151A of the Act. The Central Government introduced a faceless mechanism through a Notification dated 29 March 2022, mandating adherence to Section 151A for validly issuing reassessment notices under Section 148. The judgment in Hexaware Technologies Limited case emphasized the exclusive jurisdiction of either JAO or FAO for issuing notices under Section 148, highlighting the mandatory nature of automated allocation for random case assignment. The Court reiterated that the Scheme framed under Section 151A applies to both assessment/reassessment under Section 147 and the issuance of notices under Section 148. The non-compliance with the faceless mechanism outlined in the Scheme, which governs proceedings under Section 148A and 148, rendered the notice invalid, as per the precedent set by the Hexaware case. The judgment emphasized that actions contrary to law must be quashed, causing inherent prejudice to the assessee, without the need to establish further harm. The Court clarified that all assessees are entitled to lawful assessment procedures, and any deviation from due process inherently prejudices the assessee. The Court noted the agreement between counsels that the proceedings initiated under Section 148 were unsustainable due to non-compliance with Section 151A, citing a similar decision in Nainraj Enterprises Pvt. Ltd. case. Reference was also made to the Kairos Properties Pvt. Ltd. case, where the Court upheld the applicability of the Scheme notified by the Central Government in March 2022 to the issuance of notices under Section 148A (b) and (d). Consequently, the Writ Petition was allowed based on the lack of jurisdiction of the JAO to issue the impugned notice, leading to the quashing of the notices and orders in question. The judgment clarified that the decision was based solely on non-compliance with Section 151A, refraining from addressing other issues raised in the petition. The Writ Petition was allowed in terms of quashing the impugned notices and orders, with no costs imposed.
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