INCOME TAX OFFICER, WARD-1, ANAKAPALLI vs. GIRIJAN PRIMARY CO OPERATIVE MARKETING SOCIETY LIMITED G MADUGULA, VISAKHAPATNAM

From the assessment order, it is observed that the above Co-operative Marketing Society made cash deposits of Rs.7.35 crore in its current account of Union Bank of India and also the Assessee-Society has made cash withdrawals to the tune of Rs.3.93 lakhs during the relevant year under consideration. Apart from this, the assessee has received contract receipts of Rs.6.66 lakhs from A.P. State Civil Suppliers Corporation Limited and received a Commission of Rs.8.26 lakhs from A.P. State Civil Suppliers Corporation Limited. But the Assessee-Society had not filed the return of income. Hence the Ld. Assessing Officer (in short “Ld.AO”) issued a notice under section 148 of Income Tax Act, 1961 (in short “the Act”) stating that the income chargeable to tax to the extent of Rs.7.54 crores has escaped assessment. Subsequently, statutory notices under section 142(1) of the Act were issued. Since there was no response, the Ld.A.O issued a show cause notice under section 144 of the Act stating that in case there is no response from the assessee-society, the Ld.A.O would be forced to make the additions to the extent of Rs.7.54 crores as mentioned above. The assessee was also requested to file cash book, Profit and Loss Account and Balance Sheet, Sources of cash deposits made and also the Contract Receipts and the Commission Details. Since there was no response from the assessee- society, the Ld.AO completed the assessment exparte under section 147 r.w.s. 144/144B of the Act, by making an addition of Rs.7.39 crores by treating the same as unexplained money under section 69A of the Act.

Aggrieved by the order of the Ld.AO, the Assessee-Society filed an appeal before the First Appellate Authority stating that the notice issued under section 148 of the Act was not in accordance with law and liable to be quashed as illegal and hence the re-assessment proceedings are liable to be quashed as void-ab-initio. Apart from this, the Ld.AO was not justified in making the addition of Rs.7.39 crores under section 69A of the Act, it was argued. Before the Ld.CIT(A), the Assessee-Society has stated that the notice issued under section 148 of the Act is invalid because the notice is not in accordance with law as Faceless Assessment Scheme as prescribed under section 151A of the Act in respect of the reassessment came into vogue w.e.f. 29.03.2022 and all the notices thereafter should have been issued by the Faceless Assessment Unit following the provisions of section 151A of the Act. Since the assessment order was not passed following Faceless Assessment Scheme as prescribed under section 151A of the Act as prescribed, the said notice is invalid and required to be quashed. Since there is no basis for issuing this notice, all other additions should also be rendered as invalid, argued by the Ld.AR of the Appellant before the Ld.CIT(A). The appellant has also relied on the following cases law:

In view of all these judgements rendered by various Hon’ble High Courts, the notice issued under section 148 of the Act should be held as invalid, prayed before the Ld.CIT(A). After considering these decisions, Ld.CIT(A) allowed the appeal of the assessee stating that the Ld.AO did not follow the faceless assessment scheme prescribed under section 151A of the Act because this faceless assessment scheme cane into vogue w.e.f. 29.03.2022 and all the notices should have to be issued by the Faceless Assessment Unit, but not the Jurisdictional Assessing Officer.

Since, the Ld.CIT(A) has quashed the notice issued by the Ld.AO under section 148 of the Act, the Department has filed the appeal before the ITAT stating that the Ld.CIT(A) failed to appreciate that as per the provisions of section 148 r.w.s 148A of the Act, the Jurisdictional Assessing Officer is only required to issue this notice based on the information in his possession and since this Jurisdictional Assessing Officer had the information suggesting that the income chargeable to tax has escaped assessment and hence there is no infirmity in the notice issued. Hence the order of Ld.CIT(A) quashing this notice of 148 of the Act is erroneous and unsustainable. The second ground raised by the Department before the ITAT is that the Ld.CIT(A) ignored the provisions of section 124(3)(a) of the Act and section 124(3)(b) of the Act, where it was stated that the assessee ought to have raised any objection with respect to jurisdiction of the Jurisdictional Assessing Officer within the stipulated time of one month from the date of service of notice under section 143(2) or 142(1) of the Act. But in this case, the assessee has not filed any objection within the stipulated period and the Ld.CIT(A) is not justified in entertaining the belated jurisdictional objection contrary to the express mandate of section 124(3) of the Act nor invalidating a notice that was otherwise validly issued by the competent Jurisdictional Assessing Officer.

The appellant has also filed a cross objection stating that the notice issued under section 148 of the Act by Jurisdictional Assessing Officer is invalid and the Ld.CIT(A) is correct in quashing the Assessment Order passed on the basis of such invalid notice. Another ground raised by the Assessee-Society is that the Ld.CIT(A) ought to have decided the appeal on merits also.

During the hearing proceedings before the ITAT, Ld.DR has stated that this issue of issuing the notice under section 148 of the Act by Jurisdictional Assessing Officer or Faceless Assessing Officer reached the Hon’ble Supreme Court and subsequently Hon’ble Supreme Court has set-aside the matter to the various High Courts to adjudicate this issue by 31.07.2026.

Since the issue involved is same, as mentioned above, the ground raised by Assessee- Society in cross objection is also remitted back to the file of the Ld.CIT(A) to adjudicate the matter based on the decision of the Jurisdictional High Court as and when the same is rendered and pass an order in accordance with law. He is also directed to pass an order on merits too.

In the result, the appeal filed by the Department and the Cross objection filed by the assessee are allowed for statistical purposes.