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Facts
The assessee's appeal is against an order of the CIT(A) for AY 2013-14. The reassessment proceedings were initiated by the Jurisdictional Assessing Officer (JAO) by issuing notices under Section 148A and 148 of the Income Tax Act. The assessee's primary contention is that these notices were not issued in compliance with the faceless mechanism introduced by the government, making them invalid.
Held
The Tribunal held that the notices issued by the JAO were not in compliance with Section 151A of the Act, following judicial precedents. Consequently, the reassessment proceedings and the order passed under Section 147 were deemed invalid.
Key Issues
Whether notices issued by the Jurisdictional Assessing Officer for reassessment are invalid due to non-compliance with the mandatory faceless mechanism provisions and Section 151A of the Income Tax Act.
Sections Cited
250, 148, 148A, 69A, 151, 151A, 144B, 147
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: JUSTICE (RETD.) C V BHADANG&
(Assessment Year: 2013-14) Suresh Kumar Mahavir Prasad Assessment Unit, NFAC, Beswal, Maharashtra. House No. 385, F.No. 13, Shreedevi Vs. Apartment, Gokul Nagar, Bhiwandi, Maharashtra-421302. PAN: AAQPA7792R Appellant) : Respondent) Appellant /Assessee by : Shri Piyush Chhajed, CA Revenue / Respondent by : Shri Swapnil Choudhary, Sr. DR : 19.08.2025 Date of Hearing : 28.08.2025 Date of Pronouncement O R D E R
Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 31.07.2024 for Assessment Year (AY) 2013-14. The assessee has raised the following the grounds of appeal: “
The Grounds mentioned hereunder are without prejudice to one another:-
1. The Jurisdictional Assessing Officer erred in issuing notice under section 148 dated 10.07.2022, as the notice was not issued in compliance with the Notification 2 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal No. 18/2022 dated 29/03/2022, the issuance of notice under Section 148 after 29/03/2022 should only be done by the Faceless Assessing Officer (FAO) from the National Faceless Assessment Centre (NFAC). Therefore, the issuance of the notice by the Jurisdictional Assessing Officer is without jurisdiction and should be quashed.
The Learned Jurisdictional Assessing officer failed to issue the Approval of the Specified Authority under section 151 of new law in faceless manner. Furthermore, the approval issued to the assessee did not have a Document Identification Number (DIN), which is a mandatory requirement as per the CBDT guidelines vide Circular No. 19/2019 dated 14/08/2019. Therefore, the approval is invalid, and the reassessment proceedings should be quashed.
3. The Learned Assessing Officer erred in not issuing the information and material relied upon to the assessee pursuant to the Supreme Court Directions and CBDT circular No. 01/2022 dated 11/05/2022
4. The Learned Commissioner of Income Tax (Appeals), NFAC erred in upholding an addition of Rs. 50,00,000/- under Section 69A without appreciating that complete details in respect of genuineness of the said loan were submitted during the course of assessment as well as appellate proceedings.
5. The Learned Commissioner of Income Tax (Appeals), NFAC erred in confirming an addition of Rs. 20,00,000/- u/s 69A.
6. The Learned Commissioner of Income Tax (Appeals), NFAC erred in confirming the addition of Rs. 29,05,664/- in respect of amounts deposited in the bank account without appreciating the detailed summary of source of said deposit which was explained during the course of assessment as well as appellate proceedings.”
2. The assessee is an Individual deriving income from house property and business income as proprietor of M/s Modern Battery Works. The Jurisdictional Assessing Officer (JAO) received information that the assessee has purchased immovable property and has deposited cash during the year under consideration. Since the assessee has not filed the return of income the AO reopened the assessment by issue of notice under section 148 of the Act dated 22.04.2021. As per the directions of the Hon'ble Supreme Court in the case of Union of India vs Ashish Agrawal (Civil appeal No.3005/2022) the JAO issued a notice under 3 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal section 148A(b) of the Act dated 22.05.2022, calling on the assessee to furnish details. The assessee in response filed a letter stating that he is unable to understand the issue mentioned in the letter and sought more clarity. The JAO held that the assessee has not filed any response and subsequently passed the order under section 148A(d) on 10.07.2022 stating the at this a fit case for issue of notice under section 148. The JAO also issued notice under section 148 of the Act on 10.07.2022. The assessee filed a reply dated 23.07.2022 furnishing the copy of the return filed on the said date along with details pertaining to the purchase of immovable property and other relevant details. The assessment under section 147 was completed by the Faceless AO (FAO) vide order dated 24.05.2023 where he has made addition under section 69A of the Act towards purchase of immovable property and cash deposit for the reason that the assessee has not furnished complete details / insufficient documentary evidences. It is relevant to mention here that the FAO while completing the assessment did not consider the details filed by the assessee on 23.07.2022 before JAO. Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) dismissed the appeal in limine for the reason that the assessee has not responded to the various notices sent by the assessee. The assessee is in appeal before the Tribunal against the order of the CIT(A).
The primary contention of the ld AR through revised grounds of appeal is that the notice issued under section 148 by JAO on 10.07.2022 is not in compliance with notification No.18/2022 dated 29.03.2022 whereby the Central Government introduced faceless mechanism. Accordingly the ld AR argued that the notice should have been issued by the FAO and not JAO and therefore the assessment order is liable to be quashed.
4 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal 4. The ld DR on the other hand submitted that the revenue's appeal on the identical issue is pending before the Hon'ble Supreme Court and therefore the issue has not reached finality. The ld DR accordingly submitted that the notice issued by JAO is valid.
We heard the parties and perused the material on record. We notice that the impugned issue of validity of notices issued by JAO post introduction of faceless assessment from 29.03.2022 has been considered by the Hon'ble Jurisdictional High Court in various cases and the Hon'ble High Court has been consistently holding that the notice issued by JAO is invalid and the lead case in this matter being Hexaware Technologies Ltd )[2024] 162 taxmann.com 225 (Bom). Further we notice that the Hon'ble Supreme Court in a recent order dated 12.08.2025 in the case of ITO vs Prakash Pandurang Patil (SLP No.39689/2025) while considering a similar issue has dismissed the Special Leave Petition on the ground of delay as well as merits. The SLP in the said case is filed by the revenue against the order of the Hon'ble Bombay High Court (Writ Petition No. 10749 of 2024) dated 12.08.2024 where it has been held that – 2. This Writ Petition under Article 226 of the Constitution of India is filed challenging notice dated 5 April, 2022 issued by respondent no.1 to the Petitioner under Section 148 of the Income Tax Act, 1961 ("the Act"), and also a prior notice issued under Section 148A(b) and an order dated 5April, 2022 passed under Section 148(A)(d) of the Act. The Assessment Year in question is AY 2018-19. 3. It is apparent that the impugned notice dated 5 April, 2022 issued under Section 148 of the Act and the order of the same date under Section 148A(d) of the Act are issued by the Jurisdictional Assessing Officer ("JAO") and not under the mandatory faceless mechanism as per the provisions of Section 151A of the Act. For a notice to be validly issued under Section 148 of the Act, the Respondent No.2 would be required to comply with the provisions of Section 151A of the Act, so as to adhere to the faceless mechanism, as notified by the Central Government by notification dated 29 March 2022. A Division Bench of this Court in the case of Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax & 4 Ors. 1 had considered the effect and 5 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal interpretation of the said provision. The relevant extract of the said decision reads thus:- 35. Further, in our view, there is no question of concurrent jurisdiction of the JAO and the FAO 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 JAO or the FAO in the Scheme dated 29 th March, 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 Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under Section 148 of the Act. The Scheme dated 29th March 2022 in paragraph 3 clearly provides that the issuance of notice "shall be through automated allocation " which means that the same is mandatory and is required to be followed by the Department and does not give any discretion to the Department to choose whether to follow it or not. That automated allocation is defined in paragraph 2(b) of the Scheme to mean 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. Therefore, it means that the case can be allocated randomly to any officer who would then have jurisdiction to issue the notice under Section 148 of the Act. It is not the case of respondent no.1 that respondent no.1 was the random officer who had been allocated jurisdiction.
With respect to the arguments of the Revenue, i.e., the notification dated 29th March 2022 provides that the Scheme so framed is applicable only 'to the extent' provided in Section 144B of the Act and Section 144B of the Act does not refer to issuance of notice under Section 148 of the Act and hence, the notice cannot be issued by the FAO as per the said Scheme, we express our view as follows:- Section 151A of the Act itself contemplates formulation of Scheme for both assessment, reassessment or recomputation under Section 147 as well as for issuance of notice under Section 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under Section 148 of the Act being assessment, reassessment or recomputation under Section 147 of the Act and inapplicable to the issuance of notice under Section 148 of the Act. The Scheme is clearly applicable for issuance of notice under Section 148 of the Act and accordingly, it is only the FAO which can issue the notice under Section 6 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal 148 of the Act and not the JAO. The argument advanced by respondent would render clause 3(b) of the Scheme otiose and to be ignored or contravened, as according to respondent, even though the Scheme specifically provides for issuance of notice under Section 148 of the Act in a faceless manner, no notice is required to be issued under Section 148 of 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. Respondents, being an authority subordinate to the CBDT, cannot argue that the Scheme framed by the CBDT, and which has been laid before both House of Parliament is partly otiose and inapplicable. ........"
When an authority acts contrary to law, the said act of the Authority is required to be quashed and set aside as invalid and bad in law and the person seeking to quash such an action is not required to establish prejudice from the said Act. An act which is done by an authority contrary to the provisions of the statue, itself causes prejudice to assessee. All assessees are entitled to be assessed as per law and by following the procedure prescribed by law. Therefore, when the Income Tax Authority proposes to take action against an assessee without following the due process of law, the said action itself results in a prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice. [Emphasis Supplied] 4. It is hence apparent that in the present case, the impugned order and the notices issued by respondent no.1 are not in compliance with the Scheme notified by the Central Government implementing the provisions of Section 151A of the Act. The Scheme, as tabled before the Parliament as per the requirements of the said provision, is in the nature of a subordinate legislation, which governs the conduct of proceedings under Section 148A as well as Section 148 of the Act. Thus, in view of the explicit declaration of the law in Hexaware Technologies Limited (supra), the grievance of the petitioner- assessee insofar as it relates to an invalid issuance of the impugned order and the notice is required to be accepted.
5. Learned Counsel for the parties agree that in this view of the matter, the proceedings initiated under Section 148 of the Act would not be sustainable and are rendered invalid in view of the judgment rendered in Hexaware Technologies Limited (supra).
6. Apart from the petitioner's contention that the proceedings would stand covered by the decision of this Court in Hexaware Technologies Limited (supra), another contention as raised by the petitioner is in regard to the impugned notice also being contrary to the decision of this Court in Siemens Financial Services Pvt. Ltd. vs. Deputy Commissioner of Income Tax, Circle 8(2)(1), Mumbai & Ors.2. for the reason that the proceedings were initiated well after the expiry of 7 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal three years from the end of the relevant assessment year. If this be so, the contention as urged on behalf of the petitioner is that the sanction for initiating the reassessment ought to have been granted by the authorities of the rank referred to in Section 151(ii) of the Act and not by the authorities of the relatively lower rank under Section 151(i) of the Act. It is submitted that the issue in this regard is no more res integra in view of the pronouncement of this Court in Siemens Financial Services Pvt. Ltd. (supra) as relied on behalf of the petitioner.
7. In Siemens Financial Services Pvt. Ltd., this Court held that the sanction as granted by the authority would be rendered invalid in the case it is not issued by the authorities specified in Clause (ii) in the event reassessment proceedings were initiated well after the expiry of three years from the end of the relevant assessment year. The following observations as made in Siemens Financial Services Pvt. Ltd. are required to be noted, which reads thus: "24. As per section 151 of the Act, the 'specified authority' who has to grant his sanction for the purposes of section 148 and section 148A is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General if more than three years have elapsed from the end of the relevant assessment year. The present petition relates to the AY 2016-17, and as the impugned order and impugned notice are issued beyond the period of three years which elapsed on 31 st March, 2020 the approval as contemplated in section 151(ii) of the Act would have to be obtained which has not been done by the Assessing Officer. The impugned notice mentions that the prior approval has been taken of the 'Principal Commissioner of Income-tax - 8' ('PCIT-8') which is bad in law as the approval should have been obtained in terms of section 151(ii) and not section 151(i) of the Act and the PCIT-8 cannot be the specified authority as per section 151 of the Act. Further, even in the affidavit-in-reply, the department has accepted that the approval obtained is of the 'Principal Commissioner of Income- tax - 8' and, hence, such an approval would be bad in law.
TOLA, enacted on 29th September 2020 and came into force on 31st March 2020. It inter alia, provided for a relaxation of certain provisions of the Income-tax Act, 1961. Where any time limit for completion or compliance of an action such as completion of any proceedings or passing of any order or issuance of any notice fell between the period 20th March 2020 to 31st December 2020, the time limit for completion of such action stood extended to 31st March 2021. Thus, TOLA only seeks to extend the period of limitation and does not affect the scope of section 151.
The Assessing Officer cannot rely on the provisions of TOLA and the notifications issued thereunder as section 151 has been amended by Finance Act, 2021 and the provisions of the amended section would have to be 8 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal complied with by the Assessing Officer, w.e.f., 1st April 2021. Hence, the Assessing Officer cannot seek to take the shelter of TOLA as a subordinate legislation cannot override any statute enacted by the Parliament. Further, the notification extending the dates from 31 st March 2021 till 30th June 2021 cannot apply once the Finance Act, 2021 is in existence. The sanction of the specified authority has to be obtained in accordance with the law existing when the sanction is obtained and, therefore, the sanction is required to be obtained by applying the amended section 151(ii) of the Act and since the sanction has been obtained in terms of section 151(i) of the Act, the impugned order and impugned notice are bad in law and should be quashed and set aside."
The decision in Siemens Financial Services Pvt. Ltd. (supra) was subsequently followed in Vodafone Idea Ltd. vs. Deputy Commissioner of Income Tax, Circle- 5(2)(1), Mumbai & Ors. 3 where the Court made the following observations: "3. The impugned order and the impugned notice both dated 7 th April, 2022 state that the Authority has accorded the sanction is the PCIT, Mumbai-5, The matter pertains to Assessment Year (AY) 2018-19 and since the impugned order as well as the notice are issued on 7 th April, 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCIT as provided under Section 151(ii) of the Act. The proviso to Section 151 has been inserted only with effect from 1st April, 2023 and therefore, shall not be applicable to the matter at hand.
In this circumstances, as held by this Court in Siemens Financial Services Private Ltd. vs. Deputy Commissioner of Income Tax & Ors., the sanctino is invalid and consequently, the impugned order and impugned notice both dated 7th April, 2022 under section 148A(d) and 148 of the Act are hereby quashed and set aside."
In the light of the above discussion, and when there is no dispute that the Jurisdictional Assessing Officer (JAO) had no jurisdiction to issue the impugned order and the impugned notices, the writ petition is required to be allowed….."
In assessee's case it is an undisputed fact that the notice under section 148A(b) dated 22.05.2022, the order under section 148A(d) dated 10.07.2022 and the notice under section 148 dated 10.07.2022 are all are issued by the JAO and only the final assessment order dated 24.05.2023 is passed by the FAO. From the perusal of these facts, it is clear that the facts are similar to the facts in the above case. Therefore respectfully following the judicial precedence we hold that the notices issued by the JAO are not in compliance with the provisions of section 9 ITA 5156/Mum/2024 Suresh Kumar Mahavir Prasad Beswal 151A of the Act and are invalid. Consequently the order passed under section 147 also fails. Since we have allowed the appeal on the legal issue raised in Ground No.1, the other legal contentions and the grounds on merits have become academic.
In result the appeal of the assessee is allowed.