2024 (12) TMI 1349 - HC - Income Tax

Validity of reopening of assessment - jurisdiction of the Jurisdictional Assessment Officer (JAO) to issue notice u/s 148 - HELD THAT - As far as the issuance of notice u/s 148 of the IT Act is concerned, only the JAO will have exclusive jurisdiction. As far as the assessment, re-assessment or re-computation in terms of the provisions of Section 147 of the IT Act is concerned, both the FAO as well as the JAO will have concurrent jurisdiction. Directorate of Income Tax (Systems) shall have the power to make allotment of cases, through Automated Allocation System to allot cases for issuance of notice u/s 148A/148 in eligible cases based on the risk management strategy in terms of the provisions of the Scheme dated 29.03.2022, to the Jurisdictional Assessing Officer based on the PAN card jurisdiction. JAO shall issue notice under Section 148 of the IT Act, based on the cases allotted by the Directorate of Income Tax (Systems) in faceless manner, by virtue of signing it digitally without referring their name, to the e-mail id of the registered account of the Assessee through the ITBA Portal. In the present writ petitions, the cases were allotted by the Directorate of Income Tax (Systems) through Automated Allocation System, based on the risk management strategy formulated by the Board as referred to in Section 148 for issuance of notice to the Jurisdictional Assessing Officer, who had thereafter sent the Section 148 notice to the registered email account of the Assessee from the ITBA Portal, in faceless manner. Thus, the issuance of the impugned notice was duly in accordance with the Scheme, except the procedural lapse of mentioning the name of the JAO. The said procedural errors will not vitiate the initiation of the proceedings for issuance of notice under Section 148 of the IT Act since such errors are curable in nature. In terms of the provisions of Section 151A of the IT Act, still the JAOs shall have to obtain prior approval from the higher authority for issuance of Section 148 notice under the Scheme in faceless manner. JAO shall upload in the ITBA Portal, the relevant documents along with the reply received for Section 148 notice from the Assessee. Directorate of Income Tax (Systems) forward the Section 148 cases to NaFAC to take further action. Immediately thereupon, the NaFAC shall assume the jurisdiction in terms of Section 144B of the IT Act. Once the NaFAC assumed its jurisdiction subsequent to the receipt of the information pertaining to Section 148 cases from the Directorate of Income Tax (Systems), the NaFAC shall issue the notice under Section 143(2) or 142(1) of the IT Act calling for the further information from the Assessee. In the present case, the guidelines issued in terms of Sub-Section (2) of Section 144B of the IT Act will not amount to the directions issued by the Central Government in terms of Sub- Section (2) of Section 151A of the IT Act. The power of Central Government to issue any direction in terms of Sub-Section (2) of Section 151A of the IT Act read with its proviso, will be entirely different from the issuance of guidelines, by the Board, with the power available in terms of Sub-Section (2) of Section 144B of the IT Act. The provisions of Section 144B of the IT Act is both in the nature of substantive as well as procedural. While the FAO performing the duties of faceless assessment in faceless manner, the JAO is also equally performing his duties, in faceless manner, while issuing the notice under Section 148A/148 of the IT Act, as intended in the Scheme. WP dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The central issue in these writ petitions is the determination of the appropriate authority to issue notices under Section 148 of the Income Tax Act, 1961, following the introduction of the E-Assessment of Income Escaping Assessment Scheme, 2022, and the Faceless Jurisdiction of Income-tax Authorities Scheme, 2022. The specific legal questions include:

• Whether the Jurisdictional Assessment Officer (JAO) has the authority to issue notices under Section 148 of the IT Act after the introduction of the new Schemes.
• Whether the issuance of notices under Section 148 and 148A should be conducted in a faceless manner by the National Faceless Assessment Centre (NaFAC).
• Whether the guidelines issued by the Board on 24.05.2023 are within the powers conferred by Section 144B of the IT Act.
• Whether the procedural errors in issuing notices affect the jurisdiction and validity of the notices.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Authority to Issue Notices under Section 148

• Legal Framework and Precedents: The IT Act, specifically Section 144B and Section 151A, provides the framework for faceless assessments and the issuance of notices. The E-Assessment Scheme and the Faceless Jurisdiction Scheme are central to this issue.
• Court's Interpretation and Reasoning: The court held that the JAO retains the authority to issue notices under Section 148. The Schemes introduced do not eliminate the JAO's role but rather integrate it with the faceless assessment process.
• Key Evidence and Findings: The court found that the Directorate of Income Tax (Systems) allocates cases through an Automated Allocation System based on risk management strategies, which are then handled by the JAO.
• Application of Law to Facts: The court applied the provisions of Section 144B and the Schemes to affirm that the JAO's role in issuing notices is consistent with the legislative intent.
• Treatment of Competing Arguments: The petitioner's argument that only NaFAC should issue notices was rejected. The court emphasized the concurrent jurisdiction of the JAO and the FAO.
• Conclusions: The JAO has the exclusive jurisdiction to issue notices under Section 148, while the assessment, reassessment, or re-computation involves both the JAO and FAO.

Issue 2: Faceless Manner of Issuance

• Legal Framework and Precedents: Section 144B outlines the faceless assessment process, while the Schemes emphasize the faceless nature of issuing notices.
• Court's Interpretation and Reasoning: The court interpreted "faceless manner" as sending notices electronically through the ITBA portal, ensuring no direct interaction between the officer and the assessee.
• Key Evidence and Findings: Notices were sent electronically via the ITBA portal, complying with the faceless requirement.
• Application of Law to Facts: The court found that the notices were issued in a faceless manner, as required by the Schemes and Section 144B.
• Treatment of Competing Arguments: The petitioner's contention about procedural errors was acknowledged, but the court deemed these errors curable and non-jurisdictional.
• Conclusions: Notices were validly issued in a faceless manner, and procedural errors do not invalidate them.

Issue 3: Validity of Guidelines Issued on 24.05.2023

• Legal Framework and Precedents: The guidelines were issued under Section 144B(2), which allows the Board to specify cases for faceless assessment.
• Court's Interpretation and Reasoning: The court upheld the guidelines as within the Board's powers, distinguishing them from modifications under Section 151A.
• Key Evidence and Findings: The guidelines were found to be consistent with the Schemes and did not alter or modify the legislative framework.
• Application of Law to Facts: The guidelines were applied to the case, supporting the allocation and issuance process.
• Treatment of Competing Arguments: The petitioner's argument that the guidelines exceeded statutory authority was rejected.
• Conclusions: The guidelines are valid and do not contravene the Schemes or the IT Act.

3. SIGNIFICANT HOLDINGS

• Verbatim Quotes: "The JAO has the exclusive jurisdiction to issue notices under Section 148 of the IT Act, while the assessment, reassessment, or re-computation involves both the FAO and JAO."
• Core Principles Established: The court established that the issuance of notices under Section 148 must be conducted in a faceless manner, and the JAO retains jurisdiction to issue such notices.
• Final Determinations: The court dismissed the petitions, upholding the validity of the notices and the guidelines. It granted the petitioners 30 days to file a reply, directing the authorities to consider the reply and provide a personal hearing.