2025 (7) TMI 1239 - HC - Income Tax

Validity of reopening of assessment - notice issued by JAO OR FAO - whether in cases assigned to central charges the notice issued u/s 148 could have been issued by JAO or it ought to have been as per the amendment carried out w.e.f. 01.04.2021 in a faceless manner? - HELD THAT - On and after coming into force of the Finance Act 2021 w.e.f. 01.04.2021 and with the introduction of the amendment to Section 148 of the Act wherein it was envisaged that the assessments have to be done by way of an automated faceless mechanism all proceedings of assessment drawn subsequently have to be by following the same mechanism. Following the judgment of Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT it has been emphatically held in the case of Ravindra Reddy 2023 (9) TMI 951 - TELANGANA HIGH COURT that there is no further dispute to be adjudicated so far as what is the mechanism which has to be applied for assessment / re-assessment even if it is for assessment of previous years if the proceedings have been initiated on or after 01.04.2021. It has to be only through automated faceless mechanism and no other way. A plain reading of paragraph Nos. 23 and 24 would make the picture very clear so far as the fact that even though the batch of writ petitions in the case Sri Venkataramana Reddy Patloola 2024 (9) TMI 100 - TELANGANA HIGH COURT were primarily pertaining to assessment orders in cases assigned to international tax charges but the Division Bench has also dealt with the aspect of the assessment orders in cases assigned to central charges as well holding that it would not make any difference whether it is cases assigned to central charges or cases assigned to international tax charges. What was held was that once when the statute substantially mandate having the assessment proceedings drawn through automated scheme allocation in a faceless manner subsequently there does not seem to be any exceptions carved out permitting the JAO to issue proceedings under Section 148 of the Act. In view of the said view expressed in the case of Sri Venkataramana Reddy Patloola 2024 (9) TMI 100 - TELANGANA HIGH COURT we are of the considered opinion that if at all if we accept the analogy canvassed by the Income Tax Department that by itself would be diluting the mandate of the Hon ble Supreme Court in the case of Ashish Agarwal (supra) and at the same time it would also water down the series of writ petitions where the proceedings were issued by JAO and this High Court while allowing the writ petitions had set aside those proceedings. Unless the notices in cases pertaining to central charges are issued by JAO it would be difficult to enforce the requirement as is otherwise required under Section 153D - Until and unless there is a specific exception carved out from the applicability of Section 151A every assessment proceedings initiated even if it be after a search and seizure proceedings even if it be under central charges or international tax charges the provisions of Section 151A is what has to be adhered to for the purpose of initiating a proceeding of assessment / re-assessment. Section 151A also does not anywhere say that the said provision of law shall not be applicable in a given situation or under any other provision of law. We are of the considered opinion that the present batch of writ petitions also deserve to be and are accordingly allowed quashing the impugned orders under challenge as they are in violation of the provisions enacted by way of Finance Act 2021 which came into force w.e.f. 01.04.2021. Accordingly we hold that the question of law framed as to whether in cases assigned to central charges and the notices issued therein for reassessment could be issued by the JAO or it has to be in a faceless manner stands decided in favour of the petitioners holding that it can be in a faceless manner alone and the question of law thus stands answered against the Revenue.

Summary

ISSUES:

• Whether in cases assigned to "central charges" the notice under Section 148 of the Income Tax Act, 1961 must be issued by the Faceless Assessing Officer (FAO) or can be issued by the Jurisdictional Assessing Officer (JAO).
• Whether the issuance of notices under Section 148 by the JAO in cases assigned to central charges violates the explanation to Section 151A of the Act and the e-Assessment of Income Escaping Assessment Scheme, 2022.
• Whether proceedings arising from search and seizure under Section 132 of the Act are exempt from the faceless assessment procedure mandated by Section 144B and related notifications.
• The applicability and interpretation of exceptions carved out by the Central Board of Direct Taxes (CBDT) to the faceless assessment scheme, particularly for central charges and international tax charges.
• Whether Section 153D of the Act mandates issuance of notices by the JAO in cases arising from search and seizure and if that requirement overrides the faceless assessment scheme.

RULINGS / HOLDINGS:

• The notices under Section 148 of the Act in cases assigned to central charges must be issued in a faceless manner by the FAO and not by the JAO, as mandated by the Finance Act, 2021 amendments and the e-Assessment Scheme, 2022.
• The impugned notices issued by the JAO in these cases are in "contravention to the explanation to Section 151A of the Act" and the faceless assessment scheme and are therefore quashed.
• Proceedings arising from search and seizure are not exempt from the faceless assessment procedure; the faceless mechanism applies uniformly unless specifically excluded by statute or notification.
• The CBDT's order dated 06.09.2021 and notification dated 29.03.2022 carve out exceptions only for passing of assessment orders in cases assigned to central charges and international tax charges, but not for issuance of notices under Section 148.
• Section 153D applies to assessment or reassessment orders and does not exempt issuance of notices under Section 148 from the faceless procedure; thus, reliance on Section 153D to justify notice issuance by JAO is misplaced.

RATIONALE:

• The Court applied the statutory framework introduced by the Finance Act, 2021, which amended Sections 147 to 151 of the Income Tax Act, mandating faceless assessment procedures effective from 01.04.2021.
• The Court relied on the authoritative precedent of the Division Bench ruling in Kankanala Ravindra Reddy and the Supreme Court judgment in Union of India vs. Ashish Agarwal, which held that reassessment proceedings initiated on or after 01.04.2021 must follow the faceless automated allocation system.
• The Court interpreted the CBDT's notification dated 29.03.2022 and order dated 06.09.2021 as excluding only the passing of assessment orders in central and international tax charges from the faceless scheme, but not the issuance of notices under Section 148.
• The Court rejected the contention that search and seizure proceedings under Section 132 create an exception to the faceless assessment scheme, noting that Section 153D applies only to assessment orders and not to the issuance of notices.
• The Court emphasized the principle of harmonious construction of statutory provisions and the importance of adhering to the procedural safeguards introduced by the Finance Act, 2021 to protect assessee rights and ensure transparency.
• The Court followed the principle of judicial propriety, respecting the Division Bench's decision of the same High Court over conflicting views from other High Courts, as per the Supreme Court's guidance in Commissioner of Income Tax, Bhopal vs. G.M. Mittal Stainless Steel (P) Ltd.