PESHURAM LILARAM MULCHANDANI,VERAVAL vs. THE INCOME TAX OFFICER, VERAVAL

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ITA 229/RJT/2026Status: DisposedITAT Rajkot08 June 2026AY 2016-1712 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assumption of jurisdiction by NFAC prior to the notification date of Section 151A was invalid. Consequently, the assessment order passed was without jurisdiction and quashed. As the assessment was quashed, the penalty imposed was also deleted.

What were the facts?

The assessee's appeals pertained to assessment year 2016-17. The primary issue was the validity of jurisdiction assumed by the National Faceless Appeal Centre (NFAC) for issuing notices and passing assessment orders. The assessee argued that NFAC's jurisdiction was notified later than when it assumed jurisdiction.

What were the issues?

Whether the assumption of jurisdiction by NFAC for assessment proceedings was valid given the notification dates of Section 151A. Whether the penalty under Section 271(1)(c) is sustainable if the underlying assessment order is quashed.

Which sections of the Income-tax Act were involved?

Section 151A,Section 147,Section 144B,Section 142(1),Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

Hearing: 12/03/2026Pronounced: 08/06/2026

आयकर अपीलीय अिधकरण,राजकोट �ायपीठ, राजकोट। In The Income Tax Appellate Tribunal, “SMC” Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member आयकर अपील सं./ ITA No.229 & 230/RJT/2026 �नधा�रण वष�/Assessment Year :2019-2020 Peshuram Lilaram Mulchandani The ITO, 2nd Floor Tower Chowk Verval बनाम/ Ward-4 Junagadh Vs Birla Sun Life Insurance Company Ltd. Sadguru Arcade, Veraval Gujarat-362265 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AOUPM6150R (अपीलाथ�/Appellant) (��यथ�/Respondent) �नधा�रती क� ओर से/Assessee by : Shri R.B. Shah, Ld. AR राज�व क� ओर से/Revenue by : Shri Anadi Dixit, Ld. Sr-DR सुनवाई क� तार�ख/Date of Hearing : 12/03/2026 घोषणा क� तार�ख/Date of Pronouncement : 08/06/2026 आदेश/ORDER Per, Dr. Arjun Lal Saini, A.M: Captioned two appeals filed by the assessee, pertaining to Assessment Year 2016-17, are directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), which in turn arise out of an assessment order passed by Assessing Officer u/s. 147 r.ws. 144B of the Act and a penalty order passed u/s 271(1)(c) of the Act.

2.

First, I shall adjudicate assessee’s appeal, in quantum proceedings, in ITA No. 229/Rjt/2026 for Asst. Year 2016-17, wherein the solitary grievance of the assessee is that since the jurisdiction of NFAC prescribed u/s 151A had been notified w.e.f. 29.03.2022 and accordingly, the assumption of jurisdiction made by NFAC since 01.12.2021 for issuing notices u/s 142(1) is invalid, and

therefore, the order passed u/s 147 r.w.s 144B of the Act, dated 31.3.2022 should be quashed.

3.

When this appeal was called out for hearing, learned Counsel for the assessee invited my attention to the order dated 08.12.2025, passed by the Division Bench of this Tribunal in the case of Gopal Snacks Pvt Ltd, in ITA No.498 & 499/RJT/2025 for the Assessment Years 2015-16 & 2020-21 whereby the “issue relating to jurisdiction of NFAC prescribed u/s 151A of the Act, which had been notified w.e.f. 29.03.2022 and therefore, the assumption of jurisdiction made by NFAC since 01.12.2021 for issuing notices u/s 142(1) was invalid,” had been decided in favour of the assessee. Learned counsel for the assessee submitted that the present appeal is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench.

4.

On the other hand, Learned Departmental Representative, nevertheless, relied upon the orders of the authorities below.

5.

I have heard both the parties. I see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in the case of Gopal Snacks Pvt Ltd, in ITA No.498 & 499/RJT/2025 for the Assessment Years 2015-16 & 2020-21(supra). In this order, the Tribunal has inter alia observed as follows: “22. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. Learned Counsel for the assessee argued on the additional legal ground stating that re-assessment proceedings initiated by the assessing officer is grossly bad in law, since the jurisdiction of the NFAC prescribed it u/s.151A of the Act notified the date from 29.03.2022 and accordingly assumption of jurisdiction made by the NFAC since 21st December, 2021 is invalid, therefore order passed by the assessing officer on this legal ground should be quashed, for that, we rely on the judgment of the Co- ordinate Bench of ITAT, Kolkata in the case of Nabiul Industrial Metal Pvt. Ltd. vs. ITO in ITA No.1328/Kol/2024, order dated 15.10.2024, wherein it was held as follows:

“1.2. The ld. Counsel for the assessee challenges the impugned order by taking several grounds but he, in course of hearing, took an additional ground being the legal ground and he pressed only legal ground which are as follows: "That the National Faceless Assessment Centre erred in having assumed jurisdiction u/s 151A r.w.s 144B of the Act from 29.11.2021 when they were not empowered under any notification about the applicability of the faceless scheme for making assessment in faceless manner 'prior to 29.03.2022. 1.3. Ld. Counsel for the assessee submitted that the provisions of Section 151A of the Act came in the statute on 01.11.2021 but it was notified with effect from 29.03.2022. But in the present case, assessment proceedings to the NFAC started on 29.11.2021 which is evident from the notice u/s 142(1) of the Act. Ld. Counsel for the assessee further submits that the show cause notice has also been issued and the date has been mentioned as 28.03.2022 that is prior to 29.03.2022. Ld. Counsel for the assessee further submits that the assumption of jurisdiction by the NFAC was without jurisdiction. Consequently, the whole assessment is without jurisdiction and unsustainable in law. Ld. Counsel for the assessee further drew the attention of this Bench on the issuance of show cause notice and submitted that it was served on 29.03.2022 and asked the assessee to furnish explanation on or before 29.03.2022, it means without giving the assessee any opportunity before framing of the assessment order. Ld. Counsel for the assessee has filed the following papers: a) Notification of Ministry of Finance dated 29.03.2022. b) Notice issued u/s 142(1) of the Act. c) Show cause notice dated 28.03.2022. 1.4. Ld. D/R though supports the impugned order but did not raise any objection on the legal ground. 2. We have perused the records and the papers filed by the assessee. It appears that Notification with respect to Section 151A of the Act has been made with effect from 29.03.2022 which is as under: "S.O. 1466(E). 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:- 1. Short title and commencement-(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. 2. Definitions (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 optimise the use of resources. (2) Words and expressions used herein and not defined, 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) assessment, reassessment or re-computation under section 147 of the Act, (b) issuance of notice under section 148 of the Act, shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of notice, and in a faceless manner, to the extent provided in section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee." 2.1. We have also gone through the notice u/s 142(1) of the Act dated 29.11.2021 which is as follows:

2.2. We further find the show cause notice issued that also reflects the date 28.03.2022 which is as follows:

2.3. It appears from the show cause notice issued on 28.03.2022 that at the bottom of the page it was digitally signed thereby giving date 29.03.2022 at 00:20:37 IST

2.4. We further find that in the show cause notice the assessee has been directed to furnish explanation on or before 29.03.2022. It is surprising that when it was issued on 29.03.2022 at 00:20:37 IST and directed the assessee to explain the explanation before 29.03.2022.

3.

Keeping in view the entire facts and discussions made above, we find substance in the argument of the ld. CIT(A) that assumption of jurisdiction prior to 29.03.2022 by the Id. assessing officer is to be held to be without jurisdiction. Accordingly, the assessment order, passed, is to be deemed without jurisdiction. Subsequently, all the orders passed are hereby held to be without jurisdiction.

4.

In the result, the appeal filed by the assessee is allowed.”

23.

We also note that the issue under consideration is also covered in favour of assessee by the judgment of the Co-ordinate Bench of ITAT, Kolkata in the case of Md. Mahimud SK vs. ITO in ITA Nos. 2230 & 2229/Kol/2024, order dated 04.03.2025, wherein it was held as follows:

“011. We have perused the section of Section 151A of the Act, which deals with the faceless assessment of Income escaping assessment and was brought on the statute book by taxation and other law (realization and amendment of certain provisions) Act, 2020, with effect from 01.11.2020 which was notified on 29.03.2022) vide notification no.18/2022/F. No. 370142/16/2022-TPL(Part)]. Therefore, the assessment proceedings were taken by the National Faceless Assessment Centre, Delhi by issuing notice u/s 142(1) dated 09.02.2022 and thereafter the assessment was framed accordingly after issuing show cause notice which in our opinion is without jurisdiction. The provision of Section 151A of the Act were brought on the statute book with effect from 01.11.2020. However, the same were made effective and applicable with effect from 29.03.2022 vide notification no. when the CBDT notified the new scheme for assessment of income escaping assessment scheme, 2022. In our considered view the assessment framed is without jurisdiction and cannot be sustained. The case of the assessee find force from the decision of Nabiul Industrial Metal Pvt. Ltd., Paschim Medinipur VS. 1.T.O., in ITA no. 1328/KOL/2024 for A.Y. 2017-18, the order dated 15.10.2024, wherein a similar issue has been decided in favor of the assessee. For the sake of ready reference, the notice issued u/s 142(1) dated 09.02.2022 and show cause notice dated 17.03.2022, are extracted below:-

12.

Considering the above facts and legal position, we are of the considered opinion that the order passed by the NFAC, Delhi is without Jurisdiction and is hereby quashed. The appeal of the assessee is allowed.” 24. Therefore, respectfully following the binding judgments of the Co-ordinate Bench (supra) on identical and similar issue, we allow the appeal of the assessee.”

6.

I note that since the jurisdiction of the NFAC which is prescribed u/s. 151A has been notified with effect from29-03-2022 and accordingly the assumption of jurisdiction by the NFAC since 01-12-2021, by way of issuance of notice u/s. 142(1) is invalid and therefore the order passed by the assessing officer u/s. 147 of the Act dated 31-03-2022 should be quashed. Therefore, respectfully following the binding decision of the jurisdictional, ITAT Rajkot in the case of Gopal Snacks Pvt Ltd (supra), I quash the reassessment order framed by the assessing officer under section 147 read with section 144B of the Act, dated 31.03.2022.

7.

As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

8.

In the result, appeal of the assessee, in ITA No.229/RJT/2026, is allowed.

9.

Now I shall take assessee’s appeal in ITA No. 230/Rjt/2026 for A.Y. 2016- 17 wherein the assessee has raised the following grounds of appeal:

1.

That on the facts and in law, the learned CIT(A) has erred in confirming the penalty of Rs.9,98,386/- levied u/s 271(1)(c) of the Income-tax Act, 1961. which is bad in law and liable to be deleted. 2. That the learned CIT(A) has erred in dismissing the appeal ex-parte without adjudicating the grounds on merits, thereby violating the principles of natural justice. 3. That the penalty proceedings are invalid as the notice issued u/s 274 read with section 271(1)(c) of the Income-tax Act, 1961 is vague and does not specify the exact charge, namely whether the penalty is for concealment of income or for furnishing inaccurate particulars of income. 4. That the appellant craves leave to add, amend, alter or withdraw any of the above grounds of appeal at or before the time of hearing. 10. I have heard, both the parties and noted that since the assessment order framed by the assessing officer under section 147 read with section 144B of the Act, dated 31.03.2022 has been quashed, hence, there is no foundation to impose the penalty under section 271(1) (c ) of the Act. Once the foundation fails, the superstructure also fails that is, the penalty also is to be deleted. In this regard, I place reliance on the legal maxim “Sublato fundamento cadit opus” (meaning thereby that foundation being removed, structure /work falls). Hence the initial action of the revenue itself is not in consonance with law, then all the subsequent and consequential proceedings would fall through for the reason that illegality strikes at the root of the order. Therefore, I delete the penalty.

11.

In the combined result, both appeals filed by the assessee are allowed.

Order is pronounced in the open Court on 08/06/2026.

Sd/- [ Dr. Arjun Lal Saini ] लेखा सद�य/Accountant Member

//True Copy// राजकोट/Rajkot िदनांक/ Date: 08/06/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, RAJKOT 6. Guard File By order

Sr. Private Secretary ITAT, Rajkot

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