2024 (9) TMI 1279 - 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 recenet case 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. 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, 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. Learned Counsel for both the parties agree that the proceedings initiated under Section 148 of the Act would not be sustainable in view of the judgment rendered in Hexaware supra - Thus, the sanction granted by the authority would be rendered invalid since it is not issued by the authorities specified in Section 151 (ii) in the event reassessment proceedings - Decided in favour of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1966.
2. Compliance with Section 151A of the Income Tax Act, 1966.
3. Jurisdiction of the Jurisdictional Assessing Officer (JAO) versus the Faceless Assessing Officer (FAO).
4. Validity of the sanction for reassessment after the expiry of three years from the relevant assessment year.

Issue-Wise Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1966:

The petitioner challenged the notice dated 06 April 2023 issued under Section 148 of the Income Tax Act, 1966, along with the prior notice under Section 148A(b) and the order under Section 148A(d). The reassessment was initiated for the Assessment Year 2019-20. The court observed that the notices and orders were issued by the Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO), as mandated by Section 151A of the Act. This non-compliance with Section 151A rendered the notices invalid.

2. Compliance with Section 151A of the Income Tax Act, 1966:

Section 151A requires that reassessment notices be issued through a faceless mechanism, as stipulated by a Central Government Notification dated 29 March 2022. The court cited the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax, which clarified that the issuance of notices under Section 148 must adhere to the faceless scheme. The court emphasized that there is no concurrent jurisdiction between JAO and FAO, and the automated allocation of cases is mandatory. The court held that the Respondent-Revenue's failure to comply with this scheme invalidated the proceedings.

3. Jurisdiction of the Jurisdictional Assessing Officer (JAO) versus the Faceless Assessing Officer (FAO):

The court reiterated that the faceless scheme introduced by the Central Government mandates that notices under Section 148 be issued by an FAO. This was supported by the court's decision in Hexaware Technologies Limited, which stated that the scheme's automated allocation process must be followed without discretion. The court found that the JAO had no jurisdiction to issue the impugned notices, and any action contrary to this scheme is invalid.

4. Validity of the Sanction for Reassessment after the Expiry of Three Years from the Relevant Assessment Year:

The petitioner also argued that the sanction for reassessment was invalid as it was granted by an authority of a lower rank than required under Section 151(ii) of the Act. The court referred to its decision in Siemens Financial Services Pvt. Ltd., which held that for reassessment initiated after three years from the end of the relevant assessment year, the sanction must be from the Principal Chief Commissioner or Principal Director General. In this case, the sanction was obtained from the Principal Commissioner of Income-tax, which is not compliant with Section 151(ii). This non-compliance further invalidated the reassessment proceedings.

Conclusion:

The court allowed the writ petition, declaring the notices and orders issued under Sections 148 and 148A as invalid due to non-compliance with Section 151A and improper jurisdiction. The court did not address other issues raised in the petition, as it was unnecessary given the invalidity of the notices. The rule was made absolute, and no costs were awarded.

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