2024 (8) TMI 1587 - HC - Income Tax

Validity of Reopening of assessment - as argued notice u/s 148A not issued in a faceless manner - notice issued u/s 148A issued by a jurisdictional officer HELD THAT - As notice dated June 28 2024 issued by the Income Tax Department clarifies that the case of the petitioner has been assigned to assessment unit for completion of assessment in accordance with the procedure laid down in Section 148 of the Income Tax Act 1961. It has further clarified that the proceedings will be conducted electronically in e- Proceedings facility through the account of the petitioner. We find substance in the stand of the Revenue that there was no intention on its part to conduct the hearing by the jurisdictional Assessing Officer avoiding a faceless assessment. The notice u/s 148 dated March 28 2024 as impugned in this writ petition only indicates the intention of the Revenue to reopen the file of the petitioner for the purpose of a faceless reassessment procedure under Section 147 of the Income Tax Act 1961. The petitioner was not required to give his reply to the jurisdictional officer. The petitioner was asked to give his response through the online portal. It is an admitted position that the petitioner has done so. Since the stand of the Department is clear before this Court that the petitioner s reopening/reassessment will be done in a faceless manner I am not inclined to pass any order in this writ petition.

Summary

The core legal questions considered in this judgment revolve around the validity and jurisdictional competence of a notice issued under Section 148 of the Income Tax Act, 1961, specifically whether such notice must comply with the faceless assessment scheme introduced by the Revenue on March 29, 2022, pursuant to Section 151(1) of the Income Tax Act. The principal issues are:

• Whether the notice dated March 28, 2024, issued under Section 148 by the jurisdictional Assessing Officer, violates the faceless assessment scheme mandated by the Revenue under Section 151(1) and thus lacks jurisdiction.
• Whether issuance of notices under Section 148 or Section 148A must strictly follow the faceless procedure as per the scheme dated March 29, 2022.
• The effect of subsequent communications, particularly the notice dated June 28, 2024, indicating faceless reassessment proceedings under Section 144B of the Income Tax Act.
• The appropriate remedy or relief available to the petitioner in light of the above considerations.

Regarding the first issue of jurisdiction and compliance with the faceless assessment scheme, the petitioner contended that the notice dated March 28, 2024, issued by the jurisdictional Assessing Officer did not conform to the procedural requirements under the scheme dated March 29, 2022, which mandates that notices under Section 148A (and by extension Section 148) be issued in a faceless manner. The petitioner relied on multiple precedents from various High Courts, including Telangana, Bombay, Gauhati, Punjab and Haryana, and Calcutta, which held that notices under Section 148A must be issued strictly in accordance with the faceless scheme. These judgments emphasized that any deviation from the faceless procedure renders the notice invalid and without jurisdiction.

The court noted the detailed submissions by the petitioner's counsel, who argued that various coordinate benches of the Calcutta High Court had stayed notices issued by jurisdictional officers ignoring the faceless scheme. The petitioner's reliance on these precedents underscored a growing judicial consensus on the mandatory nature of the faceless procedure for notices under Section 148A and related provisions.

In response, the Revenue, through the learned Deputy Solicitor General of India, drew the court's attention to a subsequent notice dated June 28, 2024, issued by the National Faceless Assessment Centre. This notice explicitly informed the petitioner that the reassessment proceedings for the Assessment Year 2020-21 had been assigned to an assessment unit for faceless completion under Section 144B of the Income Tax Act, 1961. The notice clarified that all proceedings would be conducted electronically via the e-proceedings facility on the e-filing portal and that the petitioner was required to respond through this online platform. It further cautioned that non-responsiveness might lead to best judgment assessments and penal consequences.

The court's interpretation of this subsequent notice was pivotal. It observed that the initial notice dated March 28, 2024, under Section 148 was merely an intimation of the Revenue's intention to reopen the petitioner's assessment file for faceless reassessment under Section 147. The court emphasized that the petitioner was not obliged to respond to the jurisdictional officer directly but rather through the faceless e-proceedings system, which the petitioner had duly done. This clarified that there was no substantive violation of the faceless scheme, as the reassessment process was indeed being conducted in compliance with the faceless procedure.

The court further reasoned that the Revenue had no intention to bypass the faceless assessment mechanism by issuing the impugned notice through the jurisdictional officer. Instead, the notice was a procedural step indicating the reopening of assessment, with actual proceedings to be conducted electronically and facelessly. This interpretation aligned with the statutory scheme under Sections 147 and 148 of the Income Tax Act, read with the faceless assessment framework under Section 144B.

Regarding the application of law to facts, the court found that the petitioner's challenge to the jurisdiction of the notice dated March 28, 2024, was not sustainable in light of the clarificatory notice dated June 28, 2024. The petitioner's acknowledgment and participation in the faceless e-proceedings further weakened the contention that the notice was issued in violation of the faceless scheme. The court thus declined to interfere with the notice or stay the reassessment proceedings.

On competing arguments, the court carefully balanced the petitioner's reliance on precedents emphasizing strict adherence to the faceless scheme against the Revenue's submission supported by the subsequent notice clarifying compliance with the faceless procedure. The court gave weight to the Revenue's bona fide intention to conduct faceless reassessment and the procedural safeguards embedded in the e-proceedings system, which ensured fairness and transparency. The petitioner's failure to demonstrate any substantive prejudice or procedural irregularity in the faceless reassessment process led the court to reject the challenge.

In conclusion, the court held that the notice dated March 28, 2024, under Section 148 of the Income Tax Act, 1961, was not issued without jurisdiction or in violation of the faceless assessment scheme. The subsequent notice dated June 28, 2024, confirmed that the reassessment proceedings would be conducted in a faceless manner under Section 144B, thereby fulfilling the procedural requirements under the Income Tax Act and the faceless scheme. Consequently, the writ petition challenging the notice was dismissed.

Significant holdings from the judgment include the following:

"The notice under Section 148 dated March 28, 2024, as impugned in this writ petition only indicates the intention of the Revenue to reopen the file of the petitioner for the purpose of a faceless reassessment procedure under Section 147 of the Income Tax Act, 1961."

"Since the stand of the Department is clear before this Court that the petitioner's reopening/reassessment will be done in a faceless manner, I am not inclined to pass any order in this writ petition."

The core principles established are:

• A notice under Section 148 must comply with the faceless assessment scheme introduced by the Revenue under Section 151(1) and the procedural requirements of Section 144B.
• The issuance of a notice by the jurisdictional Assessing Officer does not per se violate the faceless scheme if the subsequent proceedings are conducted electronically and facelessly through the e-proceedings portal.
• The faceless assessment scheme ensures fairness, transparency, and efficiency by mandating electronic communication and response mechanisms, and the courts will uphold such procedures unless clear violations are demonstrated.
• Subsequent clarificatory notices and the conduct of proceedings in accordance with the faceless scheme can cure any procedural infirmities in the initial notice.

On the final determinations:

• The notice dated March 28, 2024, under Section 148 is valid and not without jurisdiction.
• The faceless reassessment procedure under Section 144B is applicable and being followed in the petitioner's case.
• The writ petition challenging the notice is dismissed for lack of merit.