2025 (3) TMI 1229 - HC - Income Tax

Validity of reassessment proceedings - concurrent jurisdiction of JAO and the Faceless Assessing Officer (FAO) for issuance of the notices - whether the notices issued by Jurisdictional Assessing Officer (JAO) are to be declared invalid bad in law being in contravention of Section 151A read with Notification dated 29.03.2022? - HELD THAT - FAO has been assigned specific jurisdiction and the Scheme dated 29.03.2022 also clearly indicates that the FAO has to be the jurisdictional authority. The opening of will not only lead to confusion but will also result into a failure on the part of the Revenue to give a concrete opportunity to the assessee. The concurrent jurisdiction of FAO and the JAO if accepted would defeat the very purpose of statutory provisions i.e. Sections 151A 144B of the Act of 1961. The words carefully chosen by CBDT include automated allocation and the baseline for the same being algorithm for randomized allocation clearly show that the technology was supposed to be used for the purpose of allocating jurisdiction to a random officer. This Court is of the opinion that Section 151A of the Act of 1961 deals with the assessment reassessment and re-computation provided in Sections 147 148 of the Act of 1961 and therefore the same has to be faceless and the FAO has to have an exclusive jurisdiction to issue the notices. The Scheme to the extent of Section 144B of the Act of 1961 for issuance of notice cannot be said to be relevant for the purpose of issuing notices under Section 147 148 of the Act of 1961. Sections 147 148 have been kept separately. The restrictions provided for the purpose of Section 144B shall be relevant The legislative intention legislative vision and legislative wisdom has to be given full meaning in terms of technology and progressiveness and thus once an effective and strong step has been taken towards faceless regime then maintaining the strings of local control to the prejudice of a common man would not only undermine the legislative wisdom but the gains in terms of such a progressive and pragmatic step would stand to reduce. Once the gear of progress has been applied in a democratic set up the same has to be strongly supported and sustained. The CBDT Circular read with Section 151A of the Act of 1961 has to be given full meaning and any ways means to defeat the technology or to manually try to control the same would go against the legislative purpose. Thus this Court holds that the mandate of Section 151A of the Act of 1961 has to be strictly followed as there cannot be a way out of doing the same. This Court also holds that the JAO shall not have the jurisdiction to issue notices under Section 148 of the Act of 1961 as it would not only render Section 151A weak but may also lead to its diminishing activation. For the purpose of assessment and reassessment under Sections 147 148 148A and in light of the sanction under Section 151A adherence has to be made to algorithm based random assessing system and therefore the impugned notices deserve to be quashed. Consequently the present writ petitions are allowed. Accordingly the impugned Notices are quashed and set aside as far as the jurisdiction of JAOs for the purpose of Sections 148 148A of the Act of 1961 to issue the same is concerned. The question raised herein stands answered in the terms indicated above with liberty to the respondents to issue fresh notices in compliance of the CBDT Notification dated 29.03.2022 by keeping the FAO as assessing officer.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal question considered in this judgment is whether the notices for assessment and reassessment issued by the Jurisdictional Assessing Officers (JAOs) are valid and lawful, or if they suffer from fundamental jurisdictional errors when considered in conjunction with Sections 151A, 144B, 147, and 148 of the Income Tax Act, 1961, and the Central Board of Direct Taxes (CBDT) Scheme notified on 29.03.2022.

2. ISSUE-WISE DETAILED ANALYSIS

The primary issue revolves around the validity of notices issued by JAOs under Sections 147 and 148 of the Income Tax Act, 1961, in light of the CBDT's "e-Assessment of Income Escaping Assessment Scheme, 2022". The relevant legal framework includes Sections 144B and 151A of the Income Tax Act, which outline the procedure for faceless assessment and the powers of the CBDT to notify a scheme for assessment, reassessment, or recomputation of income.

Relevant Legal Framework and Precedents:

The legal framework is based on the provisions of Sections 144B and 151A of the Income Tax Act, 1961, which mandate faceless assessment and the issuance of notices through automated allocation. The CBDT Notification dated 29.03.2022, which introduced the "e-Assessment of Income Escaping Assessment Scheme, 2022", requires that notices under Sections 147 and 148 be issued in a faceless manner.

Court's Interpretation and Reasoning:

The Court interpreted that the legislative intent behind the faceless assessment scheme was to eliminate the interface between the income tax authorities and the assessee, optimize resource utilization, and create a transparent and efficient system. The Court emphasized that the CBDT's scheme and the provisions of Sections 144B and 151A must be strictly followed to ensure the integrity of the faceless assessment process.

Key Evidence and Findings:

The Court found that the notices issued by the JAOs were not in compliance with the faceless assessment scheme as they were not issued through automated allocation by the National Faceless Assessment Centre (NFAC). The Court noted that the scheme requires the issuance of notices in a faceless manner, which was not adhered to in the present case.

Application of Law to Facts:

The Court applied the provisions of Sections 144B and 151A of the Income Tax Act and the CBDT Notification to the facts of the case, concluding that the notices issued by the JAOs were invalid as they contravened the mandatory requirements of the faceless assessment scheme.

Treatment of Competing Arguments:

The Court considered the respondents' argument that the JAOs retained concurrent jurisdiction and could issue notices to ensure the efficiency and accountability of the assessment process. However, the Court rejected this argument, emphasizing that the legislative intent was to conduct assessments in a faceless manner to eliminate discretion and ensure transparency.

Conclusions:

The Court concluded that the impugned notices issued by the JAOs were invalid and suffered from jurisdictional errors as they were not issued in compliance with the faceless assessment scheme. The Court held that the FAO should have exclusive jurisdiction to issue notices under Sections 147 and 148.

3. SIGNIFICANT HOLDINGS

The Court held that the mandate of Section 151A of the Income Tax Act, 1961, must be strictly followed, and the JAO does not have the jurisdiction to issue notices under Sections 147 and 148. The Court emphasized the importance of adhering to the algorithm-based random assessing system for issuing notices.

Verbatim Quotes:

"This Court holds that the mandate of Section 151A of the Act of 1961 has to be strictly followed as there cannot be a way out of doing the same."

"The impugned notices deserve to be quashed."

Core Principles Established:

The judgment establishes that the faceless assessment scheme must be strictly adhered to, and any deviation from the prescribed procedure renders the notices invalid. The scheme aims to eliminate discretion and ensure transparency and efficiency in the assessment process.

Final Determinations on Each Issue:

The Court quashed the impugned notices issued by the JAOs, holding that they were invalid due to non-compliance with the faceless assessment scheme. The Court granted liberty to the respondents to issue fresh notices in compliance with the CBDT Notification, with the FAO as the assessing officer.