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MANICKAM CHETTIAR VELMURUGAN,CHENNAI vs ITO, NCC-19(1), CHENNAI | BharatTax

MANICKAM CHETTIAR VELMURUGAN,CHENNAI vs. ITO, NCC-19(1), CHENNAI

ITA 1165/CHNY/2025Status: DisposedITAT Chennai22 August 2025AY 2015-16Bench: SHRI ABY T. VARKEY (Judicial Member), SHRI S.R.RAGHUNATHA (Accountant Member)1 pages

AI SummaryAllowed

Facts

The assessee filed appeals against the orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2015-16 and 2016-17. The core issue was the validity of notices issued under Section 148 of the Income Tax Act, 1961.

Held

The Tribunal held that the notices issued under Section 148 of the Act by the Jurisdictional Assessing Officer (JAO) were invalid and bad in law because they were issued after the notification of the faceless assessment scheme, which mandated such notices to be issued by the Faceless Assessing Officer (NFAC). Consequently, the reopening of assessment and the assessment orders were deemed null and void.

Key Issues

Whether notices issued under Section 148 of the Income Tax Act are valid when issued by the Jurisdictional Assessing Officer post the implementation of the faceless assessment scheme.

Sections Cited

147, 148, 148A, 151, 151A, 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI S.R.RAGHUNATHA

Hearing: 11.08.2025Pronounced: 22.08.2025

आदेश / O R D E R PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as ‘Ld.CIT(A)‘), Delhi, both dated 28.02.2025 for the Assessment Year (hereinafter referred to as ‘AY‘) 2015-16 and 2016-17.

2. Since both parties agree that the legal issue raised in both the appeals are identical, we will first take up the Appeal for AY 2015-16. At the outset, the Ld.AR of the assessee drew our attention to additional & 1166/Chny/2025 (AYs 2015-16 & 2016-17) Mr. Manickam Chettiar Velmurugan :: 2 ::

1.

grounds of appeal preferred by it wherein assessee has raised a legal issue challenging the impugned notice issued u/s.148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act ‘) dated 25.07.2022 for reopening the assessment for AY 2015-16 as bad in law, since the impugned notice u/s.148 of the Act dated 25.07.2022 has been issued by Jurisdictional Assessing Officer (herein after ‘JAO’) and not by the NFAC, and hence consequent passing of the assessment order by the NFAC dated 15.05.2023 also is null in the eyes of law.

3. The assessee raised the following additional grounds in AY 2015-16:

1. Whether the Learned Assessing Officer erred in law in issuing notice under Section 148 of the Act dated 25.07.2022, despite lacking jurisdiction under the faceless reassessment regime prescribed under Section 151A, which mandates that such notices be issued only by the Faceless Assessing Officer?

2. Whether the reassessment proceedings initiated by the Jurisdictional Assessing Officer are void ab initio, having been commenced without authority of law, as held by the Hon'ble Madras High Court in TVS Credit Services Ltd. v. DCIT, W.P. No. 22402 of 2024?

3. Whether the entire reassessment proceedings stand vitiated for want of jurisdiction, the initiation itself being contrary to the statutory scheme and binding judicial precedent, rendering all consequential actions unsustainable in law?

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 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 & 1166/Chny/2025 (AYs 2015-16 & 2016-17) Mr. Manickam Chettiar Velmurugan 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. The argument advanced by 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 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 respondent, therefore, renders the whole Scheme redundant. An argument which renders the whole Scheme otiose cannot be accepted as correct interpretation of the Scheme. The phrase "to the extent provided in Section 144B of the Act" in the Scheme is with reference to only making assessment or reassessment or total income or loss of assessee. Therefore, for the purposes of making assessment or reassessment, the provisions of Section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term "to the extent provided in Section 144B of the Act" is not relevant. The Scheme provides that the notice under Section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, "to the extent provided in Section 144B of the Act" does not go with issuance of notice and is applicable only with reference to assessment or reassessment. The phrase "to the extent provided in Section 144B of the Act" would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub- section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme.

(ii) It is further erroneously stated in paragraph 3 of the Office Memorandum that "To this end, as provided in the section 148 of the Act, the Directorate of Systems randomly selects a number of cases based on the criteria of Risk Management Strategy ." The term 'randomly' is further used at numerous other places in the Office Memorandum with respect to selection of cases for consideration/issuance of notice under Section 148 of the Act. Respondent is clearly incorrect in its understanding of the said Scheme as the reference to random in the said Scheme is reference to selection of Assessing Officer at random and not selection of Section 148 cases as random. If the cases for issuance of notice under Section 148 of the Act are selected based on criteria of the risk management strategy, then, obviously, the same are not randomly selected. The term 'randomly' by definition mean something which is chosen by chance rather than according to a plan. Therefore, if the cases are chosen based on risk management strategy, they certainly cannot be said to be random. The Computer/System cannot select cases on random but selection can be based on certain well- defined criteria. Hence, the argument of respondents is clearly unsustainable. If the case of respondent is that the applicability of Section 148 of the Act is on random basis, then the provision of Section 148 itself would become contrary to Article 14 of the Constitution of India as being arbitrary and unreasonable. Randomly selecting cases for reopening without there being any basis or criteria would mean that the section is applied by the Revenue in an arbitrary and unreasonable manner. The word 'random' is used in clause 2(1)(b) of the said Scheme in the definition of "automated allocation". "Automated allocation" is defined in the said clause to mean "an algorithm for randomized 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 & 1166/Chny/2025 (AYs 2015-16 & 2016-17) Mr. Manickam Chettiar Velmurugan 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.