2025 (2) TMI 242 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of approvals granted Notice u/s 148 issued by the jurisdictional Assessing Officer being rendered invalid and contrary to the procedure of faceless assessment as contemplated u/s 151A and the e-Assessment of Income Escaping Assessment Scheme 2022 which mandates that such notices be issued only by an authority selected through an automated process and by the National Faceless Assessment Centre u/s 144B - HELD THAT - The distribution of functions between the jurisdictional Assessing Officer and National Faceless Assessment Centre is complimentary and concurrent as contemplated under the various schemes and the statutory provisions. This balanced distribution underscores the legislative intent to create a seamless integration of traditional and faceless assessment mechanisms within a unified statutory framework. This we so hold and observe since we have principally been unable to countenance a situation where the jurisdictional Assessing Officer stands completely deprived of the jurisdiction to evaluate data and material that may be placed in its hands. We find ourselves unable to sustain the challenge as addressed. The contention that the impugned notices are liable be quashed merely on the ground of the same having been issued by the jurisdictional Assessing Officer is thus negated Issue of approval as contemplated under Section 151 - Any approvals if granted by a Joint Commissioner of Income Tax post 01 April 2021 would not sustain. Once reassessment is triggered by a search it would be incumbent upon the respondents to proceed only in accordance with Sections 153A or 153C as the case may be and to the exclusion of Section 148 of the Act - This question too has come to be answered against the writ petitioners in light of the judgment rendered by a Division Bench of the Court in Pr. Commissioner of Income Tax-7 v. Naveen Kumar Gupta 2024 (11) TMI 1071 - DELHI HIGH COURT as held that scheme of Sections 153C of the Act indicates that the said provision was enacted to simplify the procedure while maintaining the necessary safeguards for assessment/reassessment in cases where assets belonging to the assessee or books of account or documents which contain information pertaining to the assessee are found pursuant to a search conducted under Section 132 of the Act or requisition made under Section 132A of the Act in respect of a person other than the assessee. This is subject to the same having a bearing on the determination of income of the assessee. The AO is neither require to record reasons for his belief that the income of the assessee for the concerned assessment year has escaped assessment nor does he require to seek further approvals as required under Section 148 of the Act. However he must be satisfied that the assets seized or requisitioned or the documents books of account or other material transmitted by the AO of the searched person belongs to or contains information which has a bearing on the determination of the income of the assessee. The reassessment must be predicated on material held to be incriminating and the income assessed/reassessed must be relatable to the material found as held by this Court in Commissioner of Income Tax v. Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and affirmed by the Supreme Court in Principal Commissioner of Income-tax Central-3 v. Abhisar Buildwell (P) Ltd. 2023 (4) TMI 1056 - SUPREME COURT Whether the reassessment notices could be said to be barred by the timelines as prescribed by Section 149 of the Act? - As period of limitation for issuance of a notice for reassessment would have expired on 12 July 2022 and consequently the reassessment notice dated 30 July 2022 being liable to be quashed and set aside. We dispose of this batch of writ petitions by directing the concerned AOs to evaluate the individual SCNs under Section 148 of the Act bearing in mind our judgments in T.K.S. Builders 2024 (10) TMI 1586 - DELHI HIGH COURT Abhinav Jindal 2024 (9) TMI 1282 - DELHI HIGH COURT and Naveen Kumar Gupta 2024 (11) TMI 1071 - DELHI HIGH COURT These decisions have conclusively settled issues pertaining to the accordal of sanction under Section 151 as well as the authority of the jurisdictional AO to commence and undertake reassessment. Those decisions also lay at rest the challenge which the writ petitioners had raised that an AO is bound to adhere to the procedure prescribed by Section 153C in cases emanating from a search. A similar exercise would have to be undertaken to examine the issue of surviving period in respect of each individual noticee under Section 148 and which would necessarily be guided by the judgments of Rajeev Bansal 2024 (10) TMI 264 - SUPREME COURT (LB) and Ram Balram 2025 (2) TMI 55 - DELHI HIGH COURT The concerned AOs shall consequently pass a reasoned and speaking order dealing with the impact of the judgments referred to above upon the impugned reassessment notices. That decision shall thus render a finding on whether the impugned reassessment notices would survive or be liable to be recalled. It shall be open to the writ petitioners to assail any adverse orders that may come to be passed pursuant to the above in accordance with law.

Summary

The judgment addresses several legal issues concerning the reassessment actions initiated by the Income Tax Department under the Income Tax Act, 1961. The Court considers various petitions challenging the validity of notices issued under Section 148 of the Act, particularly in light of amendments introduced by the Finance Act, 2021, and the implications of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).

Issues Presented and Considered:

The Court identifies seven principal issues for determination:

A. Legality of notices under Section 148 due to amendments in Section 149 by the Finance Act, 2021.

B. Validity of CBDT Instruction No. 01/2022 in light of Supreme Court's decision in Union of India vs. Ashish Agarwal and Section 119 of the Act.

C. Validity of notices issued by jurisdictional Assessing Officers contrary to the faceless assessment procedure under Section 151A and the E-Assessment Scheme, 2022.

D. Absence of approval under Section 151 from the prescribed authority.

E. Issuance of Section 148 notices without a Document Identification Number (DIN) as mandated by CBDT Circular No. 19/2019.

F. Scope and applicability of Explanation 1 to Section 148 and the term "information" as introduced by the Finance Act, 2021.

G. Whether reassessment following a search must adhere strictly to the procedure under Sections 153A/153C, excluding Section 148.

Issue-wise Detailed Analysis:

Issue C:

The Court examines whether jurisdictional Assessing Officers can issue reassessment notices under Section 148 despite the faceless assessment scheme. The Court refers to its prior decision in T.K.S. Builders (P) Ltd. v. Income Tax Officer, concluding that Section 144B is procedural, not substantive, and does not exclusively govern reassessment initiation. The jurisdictional Assessing Officer retains concurrent jurisdiction, allowing reassessment based on information directly obtained or through the faceless system. The Court emphasizes the complementary roles of jurisdictional and faceless assessments, ensuring procedural integrity and accountability.

Issue D:

The Court addresses the requirement of approval under Section 151, referencing its decision in Abhinav Jindal HUF v. Commissioner of Income Tax. The Court holds that approvals granted by Joint Commissioners post-01 April 2021 are unsustainable, as the amended Section 151 requires approval from higher authorities for reassessments initiated after the specified period.

Issue G:

The Court considers whether reassessment following a search must adhere to Sections 153A/153C exclusively. Citing Pr. Commissioner of Income Tax-7 v. Naveen Kumar Gupta, the Court holds that reassessment under Section 147 is permissible even when Section 153C conditions are unmet, provided all conditions for Section 147 are satisfied. The Court clarifies that the non obstante clause in Section 153C does not preclude Section 147 proceedings unless Section 153C jurisdiction is assumed.

Significant Holdings:

The Court concludes that jurisdictional Assessing Officers retain concurrent jurisdiction with the faceless system, allowing reassessment initiation based on independent information. The Court affirms that approvals under Section 151 must comply with the amended regime, requiring higher authority sanction for reassessments initiated post-amendment. The Court also clarifies that reassessment under Section 147 is viable alongside Section 153C, provided jurisdictional conditions are met.

On the issue of time limits for reassessment notices, the Court refers to the Supreme Court's decision in Rajeev Bansal, which outlines the periods to be excluded when computing limitation under Section 149, considering TOLA and subsequent judicial directions. The Court directs Assessing Officers to evaluate reassessment notices in light of these principles, allowing petitioners to challenge any adverse orders subsequently.