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TMI Blog2024 (10) TMI 1586X X X X Extracts X X X X X X X X Extracts X X X X ..... SSC with Mr. Shivendra Singh & Mr. Yojit Pareek, JSCs for IT Deptt. TABLE OF CONTENTS A. FACTUAL BACKGROUND 4 B. ARGUMENTS ADVANCED BY RESPECTIVE SIDES 11 C. STATUTORY PROVISIONS RELEVANT TO THE FACELESS SCHEME OF ASSESSMENT 41 D. NOTIFICATIONS AND INSTRUCTIONS PERTAINING TO THE FACELESS SCHEME OF ASSESSMENT 58 E. RATIONALE AND LEGISLATIVE INTENT UNDERLYING THE FACELESS SCHEME OF ASSESSMENT 69 F. RMS AND OTHER MODES OF SELECTION OF CASES 76 G. "INFORMATION" RELEVANT FOR ASSESSMENTS 80 H. THE CONCURRENT CONFERRAL OF JURISDICTION 84 I. ASSESSMENT AND RE-ASSESSMENT ACTION IN LIGHT OF THE FACELESS ASSESSMENT REGIME 86 J. DISPOSITION 106 JUDGMENT YASHWANT VARMA, J. A. FACTUAL BACKGROUND 1. This batch of writ petitions assail the validity of reassessment action initiated under Section 148 of the Income Tax Act, 1961 [Act]. Although that action is impugned on various grounds, learned counsels for the writ petitioners have confined their submissions to the issue of whether a notice issued by the Jurisdictional Assessing Officer [AO] would be valid and compliant with the Faceless Scheme of Assessment which had come to be adopted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter. 25.2. The requirement of conducting any enquiry with the prior approval of the specified authority under Section 148-A (a) be dispensed with as a one-time measure vis-a-vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. 25.3. The assessing officers shall thereafter pass an order in terms of Section 148-A (d) after following the due procedure as required under Section 148-A (b) in respect of each of the assessees concerned. 25.4. All the defences which may be available to the assessee under Section 149 and/or which may be available under the Finance Act, 2021 and in law and whatever rights are available to the Assessing Officer under the Finance Act, 2021 are kept open and/or shall continue to be available. 25.5. The present order shall substitute/modify respective judgments and orders passed by the respective High Courts quashing the similar notices issued under unamended Section 148 of the IT Act irrespective of whether they have been assailed before this Court or not. 26. There is a broad consensus on the aforesaid aspects amongst the learned ASG ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-time measure vis-a-vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts. 28.3. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the assessing officers concerned to hold any enquiry, if required. 28.4. The assessing officers shall thereafter pass orders in terms of Section 148-A (d) in respect of each of the assessees concerned; Thereafter after following the procedure as required under Section 148-A may issue notice under Section 148 (as substituted). 28.5. All defences which may be available to the assessees including those available under Section 149 of the IT Act and all rights and contentions which may be available to the assessees concerned and Revenue under the Finance Act, 2021 and in law shall continue to be available. 29. The present order shall be applicable PAN INDIA and all judgments and orders passed by the different High Courts on the issue and under which similar notices which were issued after 1-4-2021 issued under Section 148 of the Act are set aside and shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held to bear the date on which the said Notices were digitally signed and not 31st March 2021. The said petitions are disposed of with the direction that the said Notices are to be considered as show-cause-notices under Section 148A (b) of the Act as per the directions of the apex Court in the Ashish Agarwal (Supra) judgment. 211. Category 'B' : The Notices falling under category 'B' which were sent through the registered e-mail ID of the respective JAOs, though not digitally signed are held to be valid. The said petitions are disposed of with the direction to the JAOs to verify and determine the date and time of its despatch as recorded in the ITBA portal in accordance with the law laid down in this judgment as the date of issuance. If the date and time of despatch recorded is on or after 1 of April, 2021, the Notices are to be considered as show-cause-notices under Section 148A (b) as per the directions of the apex Court in the Ashish Agarwal (Supra) judgment. 212. Category 'C : The petitions challenging Notices falling under category 'C which were digitally signed on 31st of March 2021, are disposed of with the direction to the JAOs to verify and determine the date and time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 217. We are conscious that the time granted by the Supreme Court in Ashish Agarwal to the Department has since expired on 3rd June, 2022 however, the proceedings in the present writ petitions were stayed on 24th March, 2022 until the pronouncement of this judgment. Therefore, we grant the JAOs in the first instance eight (8) weeks time from today to determine the date of issuance of the Notices as per the law laid down in this judgment. 218. The Notices which in accordance with the law laid down in this judgment has been verified by the JAOs to have been issued on or after 01st April 2021 and until 30th June, 2021 shall be deemed to have been issued under Section 148A of the Act of 1961 as substituted by the Finance Act, 2021 and construed to be show-cause notices in terms of Section 148A (b) as per the judgment of the apex Court in Ashish Agarwal (Supra) and the JAOs shall thereafter follow the procedure set down by the Supreme Court in the said judgment which reads as follows: xxxx xxxx xxxx 219. With the aforesaid directions, present writ petitions and pending applications stand disposed of." 7. It would appear that taking a cue from the aforesaid decision, yet another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been followed. 11. Dealing with this issue, the Telangana High Court in Kankanala Ravindra Reddy had observed as follows: - "25. A plain reading of the aforesaid two notifications issued by the Central Board of Direct Taxes dated 28-3-2022 and 29-3-2022, it would clearly indicate that the Central Board of Direct Taxes was very clear in its mind when it framed the aforesaid two schemes with respect to the proceedings to be drawn under section 148A, that is to have it in a faceless manner. There were two mandatory conditions which were required to be adhered to by the Department, firstly, the allocation being made through the automated allocation system in accordance with the risk management strategy formulated by the Board under section 148 of the Act. Secondly, the re-assessment has to be done in a faceless manner to the extent provided under section 144B of the Act. 26. After the introduction of the above two schemes, it becomes mandatory for the Revenue to conduct/initiate proceedings pertaining to reassessment under section 147, 148 & 148A of the Act in a faceless manner. Proceedings under section 147 and section 148 of the Act would now have to be taken as per the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion could be that issuance of notice under Section 148 of the Act is squarely covered under the scheme, and for the purpose of issuance of notice, the faceless procedure must be followed. The expression 'to the extent provided in Section 144B of the Act' in our judgment does not deal with 'issuance of notice' under Section 148. The said expression is applicable with reference to 'assessment' and 'reassessment'. Sub-section (2) of Section 144B relates to "assessment" and does not deal with issuance of notice under Section 148 of the Act. xxxx xxxx xxxx 22. A careful reading of the scheme points out that law makers consciously provided two different sub clauses (a) and (b). Clause 3 '(a)' specifically deals with assessment, reassessment and recomputation whereas sub-clause '(b)' deals with notice under Section 148 of the Act and gives reference of Section 144B for providing 'extent' for the purpose of 'assessment' and 'reassessment'. Putting it differently, sub-clause (b) of Clause 3 of the scheme, before use of word 'and' is complete in itself and makes it obligatory to issue notice under Section 148 as per automated allocation procedure envisaged in clause 2 (b) of the scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 144B of the Act." (Emphasis Supplied) 13. By the time the Telangana High Court came to pronounce its verdict in Venkataramana Reddy Patloola, it also had the benefit of considering a detailed decision which had come to be pronounced by the Bombay High Court in Hexaware Technologies Ltd. v. Assistant Commissioner of Income Tax 2024 SCC OnLine Bom 1249. In Hexaware Technologies, the Bombay High Court, apart from the various other questions which were formulated, also had an occasion to examine the issue of whether a notice under Section 148, if issued by the JAO, would sustain in light of the scheme formulated in accordance with Section 151A of the Act. Since most of the High Courts have thereafter followed the opinion expressed in Hexaware Technologies, we deem it apposite to extract the following passages from that decision: - "33. The guideline dated August 1, 2022 relied upon by the Revenue is not applicable because these guidelines are internal guidelines as is clear from the endorsement on the first page of the guideline "Confidential For Departmental Circulation Only". The said guidelines are not issued under section 119 of the Act. Any such guideline issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, in our view, there is no question of concurrent jurisdiction of the jurisdictional Assessing Officer and the Faceless Assessing Officer 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 jurisdictional Assessing Officer or the Faceless Assessing Officer in the Scheme dated March 29, 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 the Revenue is to be accepted, then even when notices are issued by the Faceless Assessing Officer, it would be open to an assessee to make submission before the jurisdictional Assessing Officer and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both Faceless Assessing Officer or the jurisdictional Assessing Officer with respect to the issuance of notice under section 148 of the Act. The Scheme dated March 29, 2022 ((2022) 442 ITR (Stat) 198) in paragraph 3 clearly provides that the issuance of notice "shall be through a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in a faceless manner. In such a situation, not only clause 3(b) but also the first two lines below clause 3(b) would be otiose, as it deals with the aspect of issuance of notice under section 148 of the Act. The respondents, being an authority subordinate to the Central Board of Direct Taxes, cannot argue that the Scheme framed by the Central Board of Direct Taxes, and which has been laid before both Houses of Parliament is partly otiose and inapplicable. The argument advanced by the respondent expressly makes clause 3(b) otiose and impliedly makes the whole Scheme otiose. If clause 3(b) of the Scheme is not applicable, then only clause 3(a) of the Scheme remains. What is covered in clause 3(a) of the Scheme is already provided in section 144B (1) of the Act, which section provides for faceless assessment, and covers assessment, reassessment or recomputation under section 147 of the Act. Therefore, if the Revenue's arguments are to be accepted, there is no purpose of framing a Scheme only for clause 3(a) which is in any event already covered under faceless assessment regime in section 144B of the Act. The argument of the respondent, therefore, renders the whole Scheme r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes pertinent to clarify here that the document dated 20 February 2023, and which has been described to be an "Office Memorandum", was actually instructions provided to counsels for the Revenue in connection with the batch of writ petitions which were pending before that High Court. They were thus rightly construed as not being statutory instructions which the Central Board of Direct Taxes [CBDT] is otherwise, and undoubtedly, empowered to issue under the Act. 15. However, those instructions were duly examined and dealt with by the Bombay High Court in the following terms: - "38. With respect to the Office Memorandum dated February 20, 2023, the said Office Memorandum merely contains the comments of the Revenue issued with the approval of Member (L&S) Central Board of Direct Taxes and the said Office Memorandum is not in the nature of a guideline or instruction issued under section 119 of the Act so as to have any binding effect on the Revenue. Moreover, the arguments advanced by the Revenue on the said Office Memorandum dated February 20, 2023 is clearly contrary to the provisions of the Act as well as the Scheme dated March 29, 2022 and the same are dealt with as under- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid Scheme in the definition of "automated allocation"."Automated allocation" is defined in the said clause to mean "an algorithm for randomised allocation of cases....". The term "random", in our view, has been used in the context of assigning the case to a random Assessing Officer, i.e., an Assessing Officer would be randomly chosen by the system to handle a particular case. The term "random" is not used for selection of case for issuance of notice under section 148 as has been alleged by the Revenue in the Office Memorandum. Further, in paragraph 3.2 of the Office Memorandum, with respect to the reassessment proceedings, the reference to "random allocation" has correctly been made as random allocation of cases to the Assessment Units by the National Faceless Assessment Centre. When random allocation is with reference to officer for reassessment then the same would equally apply for issuance of notice under section 148 of the Act. (iii) The conclusion at the bottom of page 2 in paragraph 3 of the Office Memorandum that "Therefore, as provided in the Scheme the notice under section 148 of the Act is issued on automated allocation of cases to the Assessing Officer based on the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Centre should issue such notice is decided by administration keeping in mind the end result of natural justice to the assessees as well as completion of required procedure in a reasonable time". In our opinion, there is no such power given to the administration under either section 151A of the Act or under the said Scheme. The Scheme is clear and categorical that notice under section 148 of the Act shall be issued through automated allocation and in a faceless manner. Therefore, the argument of the Revenue is clearly contrary to the provisions of the Scheme. (vi) In paragraph 3.3 of the Office Memorandum, it is again erroneously stated that "Here it is pertinent to note that the said notification does not state whether the notices to be issued by the National Faceless Assessment Centre or the jurisdictional Assessing Officer ("JAO")... It states that issuance of notice under section 148 of the Act shall be through automated allocation in accordance with the risk management strategy and that the assessment shall be in a faceless manner to the extent provided in section 144B of the Act. The Scheme is categoric as stated aforesaid that the notice under section 148 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in Hexaware Technologies then came to be adopted by the High Court of Gauhati in Ram Narayan Sah v. Union of India and Others 2024 SCC OnLine Gau 1424. This becomes apparent from the following passages of that judgment: - "8. A careful perusal of the scheme reveals that the scope of the scheme is for the purpose of the assessment, reassessment, recomputation under section 147 of the Act and issuance of notices under section 148 of the Act and the same shall be by a process through automated allocation in accordance with the risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of the notice and in a faceless manner and to the extent provided under section 144B of the Act with reference to making the assessment or reassessment of total income or loss of the assessee. 9. A perusal of section 151A along with the scheme reveals that the statute in order to obviate prejudice and bias has resorted to issuance of notices by automated allocation through the risk management strategy. The judgments referred to by the learned counsel for the petitioner supports the contention raised by the writ petition and hold that the notices are req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defeated if show-cause notice under section 148 is issued by the jurisdictional Assessing Officer. The respondents are heavily placing reliance upon the office memorandum and letter issued by the Departmental authorities. It is axiomatic in tax jurisprudence that circulars, instructions and letters issued by the Board or any other authority cannot override statutory provisions. The circulars are binding upon the authorities and the courts are not bound by such circulars. The mandate of sections 144B, 151A read with notification dated March 29, 2022 ((2022) 442 ITR (Stat) 198) issued thereunder is quite lucid. There is no ambiguity in the language of statutory provisions, thus, the office memorandum or any other instruction issued by the Board or any other authority cannot be relied upon. Instructions/circulars can supplement but cannot supplant statutory provisions. 16. In the wake of the above discussion and findings, we find it appropriate to subscribe the view expressed by the Bombay, Telangana and Gauhati High Courts. The instant petitions deserve to be allowed and accordingly allowed. 17. The notices issued by the jurisdictional Assessing Officer under section 148 are her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 3 of the Scheme provides for issuance of notice under Section 148 of the Act, it would not take within its ambit the provisions of Section 148A which are the initial steps, which in a given case are required to be taken in issuance of notice under Section 148 of the Act. Section 148A provides for "Conducting inquiry, providing opportunity before issue of notice under section 148". Thus, this provision postulates a procedure inextricably linked to Section 148 which would apply to all cases of reassessment with a proviso stipulating exceptions to the rule. In other words, Section 148A in its object, intent and purpose is inextricably connected with the assessment, re-assessment or recomputation, for which a notice under Section 148 may be issued. Any other view would mean that the requirement to adopt the faceless procedure under the Scheme is a mere ministerial requirement for issuance of the notice. Such a reading would not be in conformity with the objectives spelt out in clauses (a), (b) and (c) of Section 151A (1). 14. Thus, to accept a contention that merely because the notification does not explicitly refer to the provisions of Section 148A, the scope of the Schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified authority, determines which of these cases are fit for proceedings under the Section 147 of the Act as per the procedure provided in Section 148A of the Act. This involves conducting an enquiry, if needed and giving the assessee an opportunity of hearing. 7. That the procedure outlined under Section 148A of the Act is a mandatory process (for cases other than search cases) and initiation of proceedings under Section 148A is based on risk assessment strategy and randomness. The notice under Section 148A issued thereafter is naturally based on risk management strategy and automated allocation. 8. That the scheme provides for randomized allocation of cases. The intent behind is to ensure fair and reasonableness in the selection of cases. In the procedure for issuance of notice under Section 148 of the Act this is ensured as cases selected prior to issuance of the said notice are decided on the basis of an algorithm as per the Risk Management Strategy and are, therefore, randomly selected. 9. That such cases are flagged to the JAO by the Directorate of Systems and the JAO does not have any control over the process. 10. That the cases are selected on the basis of risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of scale and functional specialisation; (c) introducing a team-based assessment, reassessment, re-computation or issuance or sanction of notice with dynamic jurisdiction. Therefore, the parent Section takes in to account that procedures may be modified under the Act or laid down taking into account their technological feasibility at the time. Further, instead of laying down specifics of the procedure, the Section clarifies that the scheme so notified should make optimal utilisation of resources through economies of scale and functional specialisation. 17. That reading the Section 151A of the Act in tandem with the scheme as given in Notification S.O. 1466(E) dated 29.03.2022, it is quite clear that neither the Section nor the scheme speak about the detailed specifics of the procedure to be followed therein. They lay down the general principles that should be followed so as to impart greater efficiency, transparency and accountability to the procedures contained therein. The said scheme lays down that the issuance of notice under Section 148 of the Act shall be through automated allocation in accordance with the risk management strategy and that the assessment shall be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e JAO has no way of predicting or determining beforehand which case would come to be flagged by the Directorate of Systems. 23. It is then submitted that the cases so flagged by the Directorate of Systems are then forwarded to the JAO, who remains in seisen of proceedings till the issuance of a notice under Section 148 and whereafter the assessment is randomly allocated to an Assessment Unit by the National Faceless Assessment Center [NFAC] in accordance with Section 144B of the Act. 24. The respondents further assert and seek to emphasize that the Act proceeds on the premise of both the JAO as well as Assessment Units under NFAC being empowered to exercise concurrent jurisdiction. It was their contention that the Act creates no distinction nor does it distinguish between a JAO or the NFAC with respect to a particular case. They take the stand that merely because Assessment Units conduct assessment proceedings in a specific case in a particular Assessment Year, the same cannot be construed as amounting to the JAO being deprived of jurisdiction over a particular assessee. The respondents further drew our attention to sub-sections (7) and (8) of Section 144B and which contemplates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Act/CBDT Notification S.O 3264 (E) S.O 2745 (E) TOLA, 2020 Finance Act, 2022 3. Applicability Regular assessment u/s 143 (3) of the Income Tax, 1961 ("the Act"), selected on pilot basis (i) All assessment specified (except non-residents and search cases) All assessments Section 143 (3), 144, 147 of the Act except 142A of the Act cases 4. Excluded Other than selected Search and non-residents cases Search cases and other relocated cases Search, 142 (2A) of the Act and other relocated cases 5. National Faceless Assessment Centre (NaFC) To facilitate the conduct of make an e-asst. in centralized manner To facilitate the conduct of and make faceless assessment in centralized manner To facilitate the conduct of and make faceless assessment in centralized manner. To facilitate the conduct of and convey assessments 6. Regional E-Faceless Assessment Centres To facilitate the conduct of and make e-assessment To facilitate the conduct of and make e-assessment To facilitate the conduct of and make e-assessment - 7. Assessment Unit Conduct and perform function to make assessment as includes identifying points or issues for Determining any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er technical matters Technical assistance on audit, legal, accounting, forensic, information technology, valuation, Transfer pricing, data analytics, management or other technical matters. Technical assistance on audit, legal, accounting, forensic, information technology, valuation, Transfer pricing, data analytics, management or other technical matters 10. Verification Unit Facilitate conduct of e-assessment, perform function of verification, including inquiry, cross verification, books of witnesses, examination of recording of statements, and other required in verification Facilitate conduct of faceless assessment, perform function of verification, including conduct of verification, inquiry, cross examination of books of witnesses, recording of statements, and other required verification assessment, function of verification, including faceless examination inquiry, cross verification, of books of witnesses, recording of statements, and other required in verification Facilitate conduct of faceless assessment, perform function of verification, including inquiry, cross books of verification, examination of witnesses, recording of statements, and other required in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt of DRP directions. 16. Response Time Assessee was required to file his response to draft assessment order, on or before the date and time specified in the notice Scheme suggests provision for extension of time. Scheme suggests provision for extension of time. Scheme suggests provision for extension of time. 17. Transfer of records to Jurisdictional AO NeAC was required, after completion of the assessment, to transfer all the electronic records of the case to the jurisdictional AO AO shall take such action as may be required under the Act. Provision for transfer of the electronic records of the penalty proceedings also, on completion of the same. AO shall take such action as may be required under the Act. Transfer all electronic records of the case to jurisdictional AO for further required action under the Act 18. Power to transfer Assessment cases to the Jurisdictional Assessing Officer Power to transfer assessment cases to the jurisdictional assessing officers, lies with the National e-Assessment Centre (NeAC). Principal Chief Commissioner or Principal Director General, NeAC, is authorised to transfer certain assessment cases to the jurisdictional asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Units affixing digital signature. An electronic be record shall be authenticate d by--- the NFAC by way of an electronic communication, Units by affixing its digital signature; 22. Power to specify format, mode, procedure and processes Principal Chief Commissioner or the Principal Director General, were vested with the power to specify format, mode, procedure and processes under the Scheme. Pr.CC or the Pr. DG are authorised to specify format, mode, procedure and processes only with the prior approval of CBDT. Pr.CC or the Pr. DG are authorised to specify format, mode, procedure and processes with the prior approval of the Board Pr.CC or the Pr. DG, are authorised to specify format, mode, procedure and processes with the prior approval of the Board (CBDT). 29. Mr. Chawla also, and for our convenience, placed on the record a table which depicts the various faceless schemes as envisioned under the Act by referring to the following illustrations:- Faceless Jurisdiction of Income Tax Authorities [Section 130 of the Income Tax Act, 1961 ("the Act")] Faceless Collection of Information [Section 135A of the Act] Faceless Inquiry or Valuation [Section 142B of the Act] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waiver of the amount of interest paid or payable by an assessee under Section 220 (2A) of the Act, OR * Extending the time for payment or allowing payment by instalment under Section 220(3) of the Act, OR * Treating the assessee as not being in default under Section 220(6) or (7) of the Act, OR * Levy of penalty under Section 221 of the Act, OR * Drawing of certificate by the Tax Recovery Officer under Section 222 of the Act, OR * Jurisdiction of Tax Recovery Officer under Section 223 of the Act, OR * Stay of proceedings in pursuance of certificate and amendment or cancellation thereof by the Tax Recovery Officer under Section 225 of the Act, or other modes of recovery under Section 226 of the Act, OR * Issuance of tax clearance certificate under Section 230 of the Act Faceless Revision of Orders [Section 264A of the Act] Faceless Effect of orders [Section 264B of the Act] Faceless Approval or Registration [Section 293D of the Act] Purpose of Schemes Revision of orders under Section 263 of the Act or under Section 264 of the Act Giving effect to an order under Section 250, 254, 260, 262, 263, or 264 of the Act Granting approval or registration by the Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Provisions) Act, 2020 [TOLA] with effect from 01 April 2021. As the provision originally existed, the non obstante clause in Section 144B initially covered assessments under Sections 143 (3) and 144(2) only. The provision came to be amended thereafter by way of Finance Act, 2022 and the class of assessments to which it was ordained to extend came to be expanded to cover assessment as well as reassessment as contemplated under Sections 143 (3), 144 and 147 of the Act. 33. That provision, as it exists presently, is reproduced hereinbelow:- "144B. [(1) Notwithstanding anything to the contrary contained in any other provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:- (i) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit through an automated allocation system; (ii) the National Faceless Assessment Centre shall intimate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to in clause (vi) to the concerned assessment unit; (viii) where the assessee fails to comply with the notice served under clause (v) or notice issued under sub-section (1) of section 142 or the terms of notice issued under sub-section (2) of section 143, the National Faceless Assessment Centre shall intimate such failure to the assessment unit; (ix) the assessment unit shall serve upon such assessee, as referred to in clause (viii), a notice, through the National Faceless Assessment Centre, under section 144, giving him an opportunity to show-cause on a date and time as specified in such notice as to why the assessment in his case should not be completed to the best of its judgment; (x) the assessee shall, within the time specified in the notice referred to in clause (ix) or such time as may be extended on the basis of an application in this regard, file his response to the National Faceless Assessment Centre which shall forward the same to the assessment unit; (xi) where the assessee fails to file response to the notice served under clause (ix) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -clause (b) of clause (xvi), whereupon it shall prepare a review report and send the same to the National Faceless Assessment Centre; (xviii) the National Faceless Assessment Centre shall, upon receiving the review report under clause (xvii), forward the same to the assessment unit which had proposed the income or loss determination proposal; (xix) the assessment unit shall, after considering such review report, accept or reject some or all of the modifications proposed therein and after recording reasons in case of rejection of such modifications, prepare a draft order; (xx) the assessment unit shall send such draft order prepared under sub-clause (a) of clause (xvi) or under clause (xix) to the National Faceless Assessment Centre; (xxi) in case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of such assessee, as mentioned in sub-section (1) under Section 144-C, the National Faceless Assessment Centre shall serve the draft order referred to in clause (xx) on the assessee; (xxii) in any case other than that referred to in clause (xxi), the National Faceless Assessment Centre shall convey to the assessment unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sub-section (13) of Section 144-C and initiate penalty proceedings, if any, and send a copy of the assessment order to the National Faceless Assessment Centre; (xxx) the National Faceless Assessment Centre shall, upon receipt of the assessment order referred to in clause (xxvi) or clause (xxix), as the case may be, serve a copy of such order and notice for initiating penalty proceedings, if any, on the assessee, along with the demand notice, specifying the sum payable by, or the amount of refund due to, the assessee on the basis of such assessment; (xxxi) the National Faceless Assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the provisions of this Act; (xxxii) if at any stage of the proceedings before it, the assessment unit having regard to the nature and complexity of the accounts, volume of the accounts, doubts about the correctness of accounts, multiplicity of transactions in the accounts or specialised nature of business activity of the assessee, and the interests of the revenue, is of the opinion that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e conduct of faceless assessment, to perform the function of providing technical assistance which includes any assistance or advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or any other technical matter under this Act or an agreement entered into under section 90 or 90A, which may be required in a particular case or a class of cases, under this section and the term "technical unit", wherever used in this section, shall refer to an Assessing Officer having powers so assigned by the Board; (v) such review units, as it may deem necessary to facilitate the conduct of faceless assessment, to perform the function of review of the income determination proposal assigned under sub-clause (b) of clause (xvi) of sub-section (1), which includes checking whether the relevant and material evidence has been brought on record, relevant points of fact and law have been duly incorporated, the issues requiring addition or disallowance have been incorporated and such other functions as may be required for the purposes of review and the term "review unit", wherever used in this section, shall refer to an Assessing Officer having p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other electronic communication shall be delivered to the addressee, being any other person, by sending an authenticated copy thereof to the registered email address of such person, followed by a real time alert; (iv) the assessee shall file his response to any notice or order or any other electronic communication, through his registered account, and once an acknowledgement is sent by the National Faceless Assessment Centre containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated; (v) the time and place of dispatch and receipt of electronic record shall be determined in accordance with the provisions of section 13 of the Information Technology Act, 2000 (21 of 2000); (vi) a person shall not be required to appear either personally or through authorised representative in connection with any proceedings before any unit set up under this section; (vii) in a case where a variation is proposed in the income or loss determination proposal or the draft order, and an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Board in this regard, if he considers appropriate that the provisions of sub-section (2A) of section 142 may be invoked in the case,- (i) forward the reference received from an assessment unit under clause (xxxii) of sub-section (1) to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner having jurisdiction over such case, and inform the assessment unit accordingly; (ii) transfer the case to the Assessing Officer having jurisdiction over such case in accordance sub-section (8); (b) where a reference has been received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner under sub-clause (i) of clause (a), he shall direct the Assessing Officer, having jurisdiction over the case, to invoke the provisions of sub-section (2A) of section 142; (c) where a reference has not been forwarded to the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, having jurisdiction over the case, in a case referred to in sub-clause (i) of clause (a), the assessment unit shall proceed to complete the assessment in accordance with the procedure laid down in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... signed to it in clause (a) of sub-section (15) of Section 144-C; (k) "faceless assessment" means the assessment proceedings conducted electronically in 'e-Proceeding' facility through assessee's registered account in designated portal; (l) "electronic record" shall have the same meaning as assigned to it in clause (t) of sub-section (1) of Section 2 of the Information Technology Act, 2000 (21 of 2000); [(la) "electronic verification code" means a code generated for the purpose of electronic verification as per the data structure and standards specified by the Principal Director General or Director General, as the case may be, in charge of information technology;] (m) "eligible assessee" shall have the same meaning as assigned to in clause (b) of sub-section (15) of Section 144-C; (n) "email" or "electronic mail" and "electronic mail message" means a message or information created or transmitted or received on a computer, computer system, computer resource or communication device including attachments in text, image, audio, video and any other electronic record, which may be transmitted with the message; (o) "hash function" and "hash result" shall have the same meani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained in any other provision of this Act, assessment made under sub-section (3) of section 143 or under section 144 in the cases referred to in sub-section (2) [other than the cases transferred under sub-section (8)] on or after the 1st day of April, 2021, shall be non est if such assessment is not made in accordance with the procedure laid down under this section." Sub-section (9) ultimately came to be deleted by Finance Act, 2022 with retrospective effect from 01 April 2021. The reasons which appear to have weighed upon the Legislature to delete sub-section (9) from Section 144B can be gleaned from Circular No. 23/2022 dated 03 November 2022 and relevant parts whereof are reproduced hereinbelow: - "(II) Sub-section (9) of erstwhile section 144B of the Act provided that the assessment proceedings shall be void if the procedure mentioned in the section was not followed. The said sub-section refers to violation of the procedure laid down by the law whereas a large number of disputes have been raised under the sub-section involving technical issues arising due to use of information technology, leading to unnecessary litigation, It is, therefore, omitted for its date of inception." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmulated by the Board from time to time; or ii. any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or iii. any information received under an agreement referred to in section 90 or section 90A of the Act; or iv. any information made available to the Assessing Officer under the scheme notified under section 135A; or v. any information which requires action in consequence of the order of a Tribunal or a Court.] Explanation 2.-For the purposes of this section, where,- i. a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or ii. a survey is conducted under section 133A, other than under sub-section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or iii. the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid before each House of Parliament.]" D. NOTIFICATIONS AND INSTRUCTIONS PERTAINING TO THE FACELESS SCHEME OF ASSESSMENT 36. The Faceless Re-Assessment Scheme, 2022 came to be promulgated on 29 March 2022 and the same is reproduced in its entirety hereunder: - "E-ASSESSMENT OF INCOME ESCAPING ASSESSMENT SCHEME, 2022 NOTIFICATION S.O. 1466(E) [NO. 18/2022/F. NO. 370142/16/2022-TPL(PART1], DATED 29-3-2022" In exercise of the powers conferred by sub-sections (1) and (2) of section 151A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following Scheme, namely:- Short title and commencement 1. (1) This Scheme may be called the e-Assessment of Income Escaping Assessment Scheme, 2022. (2) It shall come into force with effect from the date of its publication in the Official Gazette. Definitions 2. (1) In this Scheme, unless the context otherwise requires, -- (a) "Act" means the Income-tax Act, 1961 (43 of 1961); (b) "automated allocation" means an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimize the use of resources. (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment to aid it in the discharge of its functions. 40. For instance, the instruction of 26 September 2014 deals with the selection of cases for scrutiny under CASS. Similar explanatory instructions appear in the communication of the CBDT dated 29 December 2015 and which was followed by yet another direction pertaining to cases of limited scrutiny on 14 July 2016. Of equal significance is the response of the Hon'ble Minister of State for Finance in the Rajya Sabha, who on 07 December 2021 disclosed the manner in which random scrutiny of taxpayers is undertaken. The extracts of the proceedings of the Rajya Sabha are reproduced hereunder: - "GOVERNMENT OF INDIA MINISTRY OF FINANCE RAJYA SABHA UNSTARRED QUESTION NO-1018 ANSWERED ON - 07/12/2021 RANDOM SCRUTINY OF TAX PAYERS 1018. SHRI NARANBHAI J. RATHWA Will the Minister of FINANCE be pleased to state: (a) whether Government has issued guidelines prescribing framework for random selection of scrutiny cases for financial year 2021-2022 through Computer Aided Scrutiny Selection (CASS); (b) if so, the percentage of cases fixed for random scrutiny for this year; (c) whether generally small tax payers get notices, wherea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BY ORDER F. NO. 187/3/2020-ITA-1, DATED 22-9-2021 1. The Faceless Assessment Scheme, 2019 (the Scheme) has been incorporated in the Act vide the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Section 144B of the Act pertaining to Faceless Assessment has been inserted by the said amendment w.e.f. 1-4-2021. 2. The Central Board of Direct Taxes vide Order F.No. 187/3/2020-ITA-I dated 13th August, 2020 (the Order) read with order under section 119 of the Act regarding mutatis mutandis application of Orders, Circulars etc. issued in order to implement the Scheme to Faceless Assessment under section 144B of the Act, F.No. 187/3/2020-ITA-I dated 31st March, 2021 directed that all the Assessment Orders shall be passed by the National Faceless Assessment Centre (NaFAC) under section 144B of the Act except as under:- i. Assessment orders in cases assigned to Central Charges. ii. Assessment orders in cases assigned to International Tax Charges. iii. assessment order in cases where pendancy could not be created on ITBA portal because of technical reasons or cases not having a PAN, as the case may be. iv. Assessment orders in cases (a) set asi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... high-risk Non-filer cases for relevant assessment year(s) as approved by the Board have been made visible to the Jurisdictional Assessing Officers on Verification module of the Insight Portal with following case type - 'RMS - Non filing of Return PAN cases'. The cases can be accessed on INSIGHT portal using following path- Insight Portal - Verification -Taxpayer - Verification - Case type - RMS -Non filing of Return PAN cases' For detailed description of Case View and underlying Info, User may refer to the Annexure "A" enclosed. 5. Underlying information including various third-party data/information related to PAN of assigned cases may also be accessed on Profile Views of Insight Portal. Profile Views shows various information related to taxpayer including: a. Comparative ITR information under Return Profile (TRP) b. Comparative key values, financial ratios etc. under Financial Profile (TFP) c. Details of various address, email, mobile numbers under, Master Profile (TMP) d. list of accounts, immovable assets etc under Asset Details (TAD) e. list of key persons, shareholders etc uncle, Relationship (TRL) f. Third Party Information, Aggregated TDS Payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 120 of the Act dated 13 August 2020 and which designates the authorities charged with the conduct of faceless assessment in respect of various territorial areas and the relevant parts of the said notification are reproduced hereunder:- "NOTIFICATION New Delhi, the 13th August, 2020 (INCOME TAX) S.O. 2756(E).-In pursuance of the powers conferred by sub-sections (1 ), (2) and (5) of section 120 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the said Act), the Central Board of Direct Taxes hereby directs that the Income-tax Authorities of the National e-Assessment Centre (hereinafter referred to as the NeAC) specified in Column (2) of the Schedule below, having its headquarters at the place mentioned in column (3) of the said Schedule, shall exercise the powers and functions of Assessing Officer concurrently, to facilitate the conduct of Faceless Assessment proceedings in respect of territorial areas mentioned in the column (4), persons or classes of persons mentioned in the column (5) and cases or classes of cases mentioned in the column (6) of the Schedule-I of the notification No. 50 of 2014 in S.O. 2752 (E) dated the 22nd October, 2014 pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments prevalent at that time, involved a high degree of direct interface and interaction between taxpayers and the officers of the Department, which in her view could plausibly lead to "certain undesirable practices on the part of tax officials" and thus undermine the transparency and integrity of the assessment process. To address and eliminate these concerns, the FM expressed the intent of the government to launch, in a phased manner, an electronic scheme of faceless assessment "involving no human interface" which, to begin with, would involve such assessments being carried out in select cases "requiring verification of certain specified transactions or discrepancies" with the purported aim being for the centralised body initiating faceless assessment to be the singular point of contact between the taxpayer and the Department. The relevant extracts of the Budget Speech dated 05 July 2019 are accordingly reproduced hereinbelow: "Faceless e-assessment 124. The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, aiming to preserve transparency and efficiency while ensuring that complex issues receive appropriate attention from a qualified and experienced assessing officer. 50. For instance, the Notification of 12 September 2019 mandated that NFAC, after the completion of assessment, would transfer all electronic records of the case to the JAO in the following circumstances: "6. Procedure for assessment. -- xxxx xxxx xxxx (xx) The National e-assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over such case., for - (a) imposition of penalty; (b) collection and recovery of demand; (c) rectification of mistake; (d) giving effect to appellate orders; (e) submission of remand report, or any other report to be furnished, or any representation to be made, or any record to be produced before the Commissioner (Appeals), Appellate Tribunal or Courts, as the case may be; (f) proposal seeking sanction for launch of prosecution and filing of complaint before the Court;" 51. Similarly, the Notification dated 13 August 2020, which had introduced amendments to the previous Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orily adopted undisputedly while Section 144B had already come to be inserted in the Act. The reassessment provisions made no specific reference to the faceless scheme of assessment at this stage since the subject of reassessment undisputedly was brought within the ambit of Section 144B only in 2022. It is also relevant to note that the family of provisions dealing with reassessment continued to use the expression "Assessing Officer" throughout. 54. Alongside the introduction of Section 144B by TOLA, Section 151A also came to be inserted in the Act. This provision empowered the Union Government to formulate a scheme for the purposes of assessment, reassessment or recomputation, as the case may be, under Section 147 as well as the issuance of notices under Section 148. As is manifest from the plain language of that provision, the underlying objective of such a scheme was to meet the legislative objective of eliminating the interface between an income tax authority and the assessee, optimal utilization of resources through economies of scale and functional specializations, the introduction of team based assessment, reassessment, recomputation as well as issuance or sanction of notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents as per the material placed for our consideration by Mr. Chawla, first stood mirrored in a system titled CASS and which finds mention in a communication of the CBDT dated 26 September 2014. The aforesaid system of scrutiny, and where cases came to be selected with the aid of information and data analytical tools, was aided by the creation of AIR, CIB and 26AS data collected by the respondents. Instructions for purposes of scrutiny with the aid of CASS were also issued by the CBDT in terms of its communications dated 29 December 2015 and 14 July 2016. 58. Of equal significance is the response made by the Minister of State in the Ministry of Finance in the Rajya Sabha on 07 December 2021. The Hon'ble Minister stated that for the purposes of scrutiny, cases are selected randomly through the CASS process and "in an identity blind manner". It would thus appear that by this time the Income Tax Department clearly had in place a selection criteria which took into consideration various risk parameters and which would operate as red flags enabling and assisting the respondents to assess or reassess as well as to scrutinize in a more effective and efficient manner. This process uses data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t account and (d) information with respect to immovable property transactions and other relevant details. This feature allows JAOs to verify if a taxpayer's information is complete and consistent with the data gathered by the system, making it easier to catch any missing links or inaccurate information. 61. What we seek to emphasise and highlight is that the extensive framework of information which is collected, structured and made available on the Insight Portal represents data which is made visible solely to the JAO. This entire spectrum of data, information and comprehensive insight is not digitally pushed to the NFAC in the first instance. From the additional affidavit which has been filed by the respondents and which explains the working and the implementation of RMS, the following position emerges. 62. The deponent discloses that the Directorate of Income Tax (Systems) is accorded the ability to randomly select cases which may have been cross referenced on the basis of the criteria and factors on which the RMS is founded. Upon such cases coming to be randomly selected and flagged, the cases so identified are then forwarded to the concerned JAO. What the respondents seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which broadly identify sources from which information may be gathered by an AO for the purposes of assessment. An AO, by virtue of Section 133, stands empowered to require any firm or person to furnish information and which may be used in aid of its statutory obligation to discharge the various functions entrusted to it. In terms of Section 133A, an income tax authority, is conferred with the power to survey any place or premises at which a business, profession or activity for charitable purposes is carried out. Section 133A also empowers the income tax authority to inspect books of account, check or verify cash, stock or other valuable articles as well as require the surveyed entity to furnish such information as may be warranted. Similar powers for the purposes of collection of information stand conferred on an income tax authority in terms of Sections 133B and 133C of the Act. 67. Section 135A enables the Union Government to frame a scheme for the purposes of calling for information in terms contemplated under Sections 133, 133B and 133C. Such a scheme has in fact come to be formulated and published on 13 December 2021. It would be relevant for our purposes to take note of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation made available to it for initial e-verification. (4) The initial e-verification by the Commissioner of Income-tax (e-verification) shall be through an automated issuance of communication to the source from where the information is received and the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, shall enable such automated communication. (5) In cases where the mismatch between the amount accepted by the assessee and the amount reported by the reporting entity persists, the information after such initial e-verification shall be run through a risk management strategy laid down by the Board and the information found to be no or low risk on such risk criteria, where no further action is required, shall be processed for closure. (6) The remaining information shall be transferred electronically by the Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as the case may be, to the Prescribed Authority through a process of automated allocation system. (7) The verification of the information so allocated, shall be completed by the Prescribed Authority in the manner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined, but defined in the Act, shall have the meaning respectively assigned to them in the Act. 3. Scope of the Scheme.-- For the purpose of this Scheme, -- (a) issuing notice under sub-section (1) of section 142 of the Act, (b) making inquiry before assessment under sub-section (2) of section 142 of the Act, (c) directing the assessee to get his accounts audited under sub-section (2A) of section 142 of the Act, (d) estimating the value of any asset, property or investment by a Valuation Officer under section142A of the Act, shall be in a faceless manner, through automated allocation, in accordance with and to the extent provided in section 144B of the Act with reference to making faceless assessment of total income or loss of assessee." H. THE CONCURRENT CONFERRAL OF JURISDICTION 69. We then take note of the elaborate provisions which the Act incorporates for the purposes of delineating jurisdictional boundaries and conferment of powers amongst income tax authorities. This becomes evident from a reading of Section 120 which enables the CBDT to issue directions specifying the territorial area, persons or classes of persons, incomes or classes of income, as well as ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessment proceedings shall be void if the procedure mentioned in the section was not followed. The said sub-section refers to violation of the procedure laid down by the law whereas a large number of disputes have been raised under this sub-section involving technical issues arising due to use of information technology, leading to unnecessary litigation. It is, therefore, proposed to omit this sub-section i.e., sub-section (9) of section 144B from its date of inception. This amendment will take effect retrospectively from 1st April, 2021." Overall, this section captures the legislative intent to create an effective, fair, and flexible tax assessment process that balances structured jurisdictional roles with the adaptability needed for centralized, faceless assessments. Notably, among the various factors that influenced this decision, what is not lost is the delicate balance sought to be struck by the Legislature between procedural adherence and practical efficiency. The Legislature recognised that while strict procedural compliance is fundamental to maintaining fairness and transparency in the assessment process, an inflexible adherence to procedure-especially in a digi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to regulate the commencement of reassessment action as contemplated under Sections 147, 148 and 148A of the Act. The provision is conspicuously silent with respect to commencement of action under Section 147. Of equal importance is the fact that although Section 144B describes the various steps to be taken in the course of assessment and assigns roles to different constituents of the NFAC, it does not, at least explicitly, incorporate any machinery provisions which may be read as intended to regulate the pre-issuance stages of a notice under Section 148. While it is true that Section 144B does specifically refer to reassessment, the significance of that insertion would perhaps have to adjudged bearing in mind the interpretation of the scheme for reassessment which has been advocated for our consideration by the respondents and which not only appeals to reason but may also be the more sustainable view to adopt if one were to harmoniously interpret the provisions of the Act alongside the schemes for faceless assessment coupled with the underlying objectives of reducing human interface.// While it is indeed acknowledged that Section 144B expressly includes a reference to reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the JAO directly or is otherwise made available with or without the aid of the RMS. It would, therefore, in our considered opinion, be erroneous to view Section 144B as constituting the solitary basis for initiation of reassessment. We also, in this regard, bear in consideration the indubitable fact that Section 144B is primarily procedural and is principally concerned with prescribing the manner in which a faceless assessment may be conducted as opposed to constituting a source of power to assess or reassess in itself. 77. Consequently, to ascribe substantive value to Section 144B as the primary basis for reassessment would be to misinterpret its intended meaning. Section 144B is not intended to establish a substantive basis for the exercise of reassessment powers; rather, it is inherently procedural. Its function is confined to outlining the processes through which faceless assessments are to be conducted, ensuring efficiency and consistency in the manner of assessment rather than determining the substantive grounds upon which reassessment is founded. Therefore, Section 144B must be rightly and necessarily conceived as procedural, forming part of the broader legislative frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upporting the overarching objective of minimizing direct human interaction in the assessment process. 81. Additionally, provisions within sub-sections (7) and (8) of Section 144B authorize the Principal Chief Commissioner or the Principal Director General to transfer cases back to the Jurisdictional Assessing Officer (JAO) when appropriate. This flexibility further emphasises that Section 144B cannot be viewed as the exclusive basis for all assessment and reassessment procedures. The randomised allocation, reinforced by tools such as artificial intelligence and machine learning, is intended to reduce direct human interface for reasons of integrity and to prevent individual arbitrariness. Nevertheless, it would be incorrect to interpret Section 144B as the sole pathway envisioned by the Act for conducting assessments or initiating reassessments. Instead, it should be recognized as one component within a broader statutory framework that provides multiple avenues for the lawful assessment and reassessment of returns. 82. As was noticed by us hereinbefore, the conferred jurisdiction upon authorities for the purposes of faceless assessment itself uses the expression "concurrently". Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said, our Court held:- "48. This Court is of the view that though in the year 2019, the concept of e-assessment and in 2020, the concept of faceless assessment were introduced, yet the jurisdictional assessing officer continues to exercise concurrent jurisdiction with faceless assessing officer. In fact, pursuant to exercise of power under Section 120(5) of the Act which empowers CBDT to confer concurrent jurisdiction on two or more assessing officers for proper management of the work, the CBDT has vide Notification No. 64/2020 dated 13-8-2020 conferred power upon the income tax authorities of the National e-Assessment Centre to exercise the power and function of assessment "concurrently" while the original jurisdiction continues with the jurisdictional assessing officer. The relevant portion of the said notification is reproduced hereinbelow: "S.O. 2756(E).-In pursuance of the powers conferred by subsections (1), (2) and (5) of Section 120 of the Income Tax Act, 1961 (43 of 1961) (hereinafter referred to as "the said Act"), the CBDT hereby directs that the Income Tax Authorities of the National e-Assessment Centre (hereinafter referred to as "the NeAC") specified in column (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme subject to the following exceptions, modifications and adaptations " Clause (2) of the Notification Nos. 60 and 61 of 2020 dated 13-8-2020 enable the Principal Chief Commissioner or Principal Director General in charge of National e-Assessment Centre, at any stage of the assessment i.e. during assessment, to send back the case to the assessing officer having jurisdiction over such case, with prior approval of the Board. Clause (2) of the Scheme only authorises a transfer back to the jurisdictional assessing officer holding original jurisdiction, which he never loses as it is only the function of assessment that is to be carried out by the faceless assessing officer having concurrent jurisdiction. Consequently, clause (2) of the Scheme only retransfers the function of assessment to the jurisdictional assessing officer holding concurrent jurisdiction. Further, the said clause confers power of transfer upon Principal Chief Commissioner or Principal Director General of National e-Assessment Centre and not upon any other Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner." As is evident from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O's powers should be understood as integral and not in conflict with faceless assessment. Rather, it represents a foundational jurisdictional safeguard, enabling the JAO to initiate reassessment based on independent, credible sources of information. This concurrent authority of the JAO reinforces the integrity and adaptability of the faceless system, ensuring that both centralized and jurisdictional assessments operate cohesively within the larger statutory framework. 89. Regard must also be had to the fact that an Assessing Unit of the NFAC derives no authority or jurisdiction till such time as a case is randomly allocated to it and which triggers the assessment process in accordance with the procedure prescribed by Section 144B. The evaluation of data and information would indubitably precede the actual process of assessment. If the interpretation which is advocated by the writ petitioners were to be countenanced, the appraisal and analysis of information and data functions which the Act entrusts upon the JAO would be rendered wholly unworkable and clearly be contrary to the purpose and intent of the assessment power as constructed under the Act. 90. The notion of entirely oust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had the advantage of a principled stand of the respondents having been placed on the record of those proceedings. 93. In Hexaware Technologies, the Bombay High Court ultimately came to conclude that there could be no question of a concurrent jurisdiction of the JAO and the FAO for issuance of notice under Section 148. From a reading of the record, it is unclear whether the notifications conferring jurisdiction on authorities of the NFAC for the purposes of conducting faceless assessment was placed before the High Court. At least the decision makes no reference to the notification of 13 August 2020 which has been produced in these proceedings and which in clear and unambiguous terms declares that the officers empowered to conduct faceless assessment were being conferred concurrent powers and functions of the AO. We, with respect, also find ourselves unable to concur with Hexaware Technologies bearing in mind the various sources of information and material which may assist a JAO in forming an opinion as to whether income had escaped assessment and have been noticed herein above. Those aspects clearly do not appear to have been either taken into consideration or engaged with by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears to be in tune with the conclusions which we have reached. We thus deem it apposite to refer to the decision of that High Court in Talati and Talati LLP v. Office of Assistant Commissioner of Income Tax, Circle 4(1)(1), Ahmedabad 2024: GUJHC: 54567-DB. 97. The solitary question which arose for consideration in the aforesaid matter was whether the Section 148 notice was rendered invalid on the ground of having been issued by the JAO. In a judgment penned by the learned Chief Justice of that High Court in Talati and Talati LLP, it was held as follows:- "(22) From a further reading of Explanation 1 and Explanation 2 attached to Section 148, it is clear that the provisions under Section 148 for issuance of notice before making assessment, re-assessment or re-computation under Section 147 operate in two different ways. For the purpose of Section 148, where Section 148A is applicable, Explanation 1 provides: xxxx xxxx xxxx (23) The provisions contained in Explanation 1 shows that the information with the Assessing Officer for the purpose of Section 148, which suggests that the income chargeable to tax has escaped assessment under the Explanation would mean: (i) any informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and seizure operation under Section 132 of the Income Tax Act' 1961, requires application of human mind, inasmuch as, reasons affirmed on the part of the Satisfaction Note may also become subject matter of scrutiny by the Court in a case of challenge, where the Court in exercise of power of judicial review may examine as to whether they are actuated by mala fides or passed on extraneous or irrelevant considerations. (27) The decision of the Division Bench of the Bombay High Court in the case of Hexaware Technologies Ltd. (supra) has been rendered in a case, which falls within the arena of Explanation 1 to Section 148 and not where Explanation 2 to Section 148 of the Income Tax Act' 1961, would be attracted. (28) From the above, by reading all the relevant provisions of the Income Tax Act' 1961 as also the notification dated 29.03.2022 issued by the Central Government framing scheme for "E-Assessment of Income Escaping Assessment" under sub-sections (1) and (2) of Section 151 A of the Act' 1961, we reach at an irresistible conclusion that the challenge to the notice under Section 148 dated 22.03.2024 for A.Y. 2021 - 2022 on the sole premise that the said notice coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Yet another comma appears after the phrase "for issuance of notice". It thus appears to have been the clear intent of the author to separate and segregate the phases of initiation of action in accordance with RMS, the formation of opinion whether circumstances warrant action under Section 148 of the Act being undertaken by issuance of notice and the actual undertaking of assessment itself. 100. Beyond the specific use of punctuation within Clause 3, a comprehensive reading of the Faceless Reassessment Scheme 2022, supported by the extensive material presented by the respondents, bolsters the clear intent underlying each phase of the faceless assessment process// 101. As we had noticed in the preceding parts of this decision, the RMS and the Insight Portal pushes information to the JAO and is principally not concerned with faceless assessment at all. The RMS essentially enables the JAO to firstly examine the veracity of disclosures made and examine the return against various parameters and information which has been collated by the Directorate of Systems. It thus provides the JAO with an insight in respect of various transactions to which the assessee may be connected as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne defined process followed by actual assessment in a faceless manner. It thus divides the process of reassessment into two stages and when viewed in that light it is manifest that it strikes a just balance between the obligation of the JAO to scrutinise information and the conduct of assessment itself through a faceless allocation. The distribution of functions between the JAO and NFAC is complimentary and concurrent as contemplated under the various schemes and the statutory provisions. This balanced distribution underscores the legislative intent to create a seamless integration of traditional and faceless assessment mechanisms within a unified statutory framework. This we so hold and observe since we have, principally, been unable to countenance a situation where the JAO stands completely deprived of the jurisdiction to evaluate data and material that may be placed in its hands. J. DISPOSITION 104. We, accordingly and for all the aforesaid reasons find ourselves unable to sustain the challenge as addressed. The contention that the impugned notices are liable be quashed merely on the ground of the same having been issued by the JAO is thus negated. 105. Accordingly, while we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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