2024 (9) TMI 222 - HC - Income Tax

Faceless assessment of income escaping assessment - validity of notice issued by the JAO as not in accordance w/sec 151A - not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A - HELD THAT - As decided in recent decision of this Court in Nainraj Enterprises Pvt. Ltd. 2024 (7) TMI 511 - BOMBAY HIGH COURT relying on Hexaware Technology Ltd. 2024 (5) TMI 302 - BOMBAY HIGH COURT provisions of Section 151A of the IT Act had clearly brought a regime of faceless assessment. The Court held that it was not permissible for the Jurisdictional Assessing Officer to issue a notice under Section 148, as the same would amount to breach of the provisions of section 151A of the IT Act. There is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148. When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reassessment for the Assessment Year 2017-18 due to non-compliance with Section 151A and the faceless mechanism introduced by the Central Government.

Detailed Analysis:

1. The Writ Petition was filed to challenge a notice issued under Section 148 of the Income Tax Act, 1961. The notice, along with prior notices, was 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, mandating compliance with Section 151A for valid issuance of notices for reassessment under Section 148.

2. The Division Bench of the High Court in a previous case, Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, interpreted Section 151A and the faceless mechanism. It clarified that there is no concurrent jurisdiction of JAO and FAO for issuing notices under Section 148. The Scheme framed by CBDT applies to both assessment and issuance of notices under Section 148, making it mandatory for FAO to issue such notices, not JAO.

3. Acting contrary to the law, as in this case, requires quashing of the action without the need for the petitioner to establish prejudice. The non-compliance with the Scheme notified by the Central Government under Section 151A renders the notice invalid, vitiating the proceedings initiated under Section 148 for reassessment.

4. The judgment in Nainraj Enterprises Pvt. Ltd. case and Kairos Properties Pvt. Ltd. case supported the interpretation of Section 151A and the requirement for FAO to issue notices under Section 148. Considering these precedents and the non-compliance in the present case, the Writ Petition was allowed, quashing the impugned notices issued by the JAO.

5. The Court clarified that the decision was based on non-compliance with Section 151A and did not address other issues raised in the petition. The Rule was made absolute in favor of the petitioner, and no costs were awarded.