ARKAY ENERGY (RAMESWARM) PRIVATE LIMITED,HYDERABAD vs. DCIT., CIRCLE-1(1), HYDERABAD

This appeal by the assessee is directed against the order dated 23.07.2025 of National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18.

The assessee has raised the following grounds of appeal :

The assessee has challenged the validity of notice issued u/s.148 of the Income Tax Act, 1961 (“the Act”) by the jurisdictional Assessing Officer without following the procedure as laid down in the NFAC notified by the Department is not valid and liable to be quashed. In support of his contention, he has relied upon various decisions including the decision of Tribunal in the case of ITO Vs. Meghana Enterprises in dated 12.11.2025. Thus the Learned Authorised Representative of the assessee has submitted that the notice issued u/s.148 of the Act by the jurisdictional Assessing Officer is invalid and liable to be quashed and consequently the reassessment order passed by the Assessing Officer is also liable to be quashed.

On the other hand, the Learned Department Representative has relied upon the orders of authorities below and submitted that in the case the Tribunal holds that the notice issued u/s. 148 of the Act is invalid, the department be given liberty to get this appeal revived as per the outcome of the proceedings before the Hon’ble Supreme Court in the case of CIT Vs. Kanakala Ravinde Reddy in SLP No.3574 of 2024 as well as in the case of ACIT Vs. Hexaware Technologies Ltd.

We have considered the rival contentions as well as the material available on record. At the outset, we note that in the case of assessee, notice u/s.148 of the Act was issued on 31.03.2024 by the DCIT, Circle 1(1), Hyderabad extracted as under :

Thus the notice was issued by Jurisdictional Assessing Officer without following the procedure as per the National Faceless Assessment Scheme notified by the Government. An identical issue has been considered by this Tribunal in the case of ITO Vs. Meghana Enterprises (supra) in para Nos.7 & 8 held as under : “ 7. We have considered the rival submissions as well as perused the impugned order of the learned CIT(A). The learned CIT(A) has allowed the appeal of the assessee in Paras-5 and 6 of the impugned order as under : “5.0. In the appellate proceedings, the assessee submitted that the HC of Telangana quashed the proceedings u/s 147. I am writing to inform you that a WRIT petition has been filed in the Honourable High Court of Telangana challenging the Order passed under Section 147 for the Assessment Year 2018-19 in my case. We have recently received the order copy from the High Court, vide WRIT No. 5606 OF 2024, dated 04.03.2024. The Court has ruled in our favour, acknowledging our objections regarding the proceedings not being drawn in accordance with the amended provisions of the Income Tax Act. Furthermore, the Court has provided direction that consequently, any pending miscellaneous petitions shall stand closed. In light of the above, I kindly request honourable CIT (A) to consider the same & delete the addition made as the initiation of proceedings are not valid. Enclosed herewith is a copy of the WRIT order for your reference and consideration. 6.0. I have considered the submissions. The issue is whether the JAO had the jurisdiction to issue notice u/s 148 under the newly introduced faceless regime w.e.f 1.4.2021. There is a cleavage of opinion on this matter by the High Courts. While the Bombay HC, in tune with the Telangana HC also held that the JAO is not vested with the power to initiate re-assessment, the Delhi HC and Madras HC vide their judgments in late 2024 have rendered a contrary decision.

Thereafter, the AO also passed an order u/s 148A(d) on 29.03.2023, wherein, the AO has recorded that, despite sufficient time allowed to the assessee in accordance with the provisions of section 148A(b) for compliance to the show cause notice dated 21.02.2023, there is no compliance on behalf of the assessee to the said show cause notice. The AO decided that it is a fit case for issue of notice u/s 148 of the Act and consequently notice u/s 148 was issued on 30.03.2023 as under :

Undisputedly, the show cause notice u/s 148A(b) as well as notice u/s 148 were issued by the JAO and not by the faceless Assessing Officer. At the outset, we note that the Hon’ble Jurisdictional High Court has considered an identical issue in assessee's own case for the immediate preceding assessment year i.e. 2015-16 vide judgement dated 24.04.2025 in W.P.No.344 of 2025 and has recorded the issue involved in the said petition in para 4 of the said judgement as under :

It was further noted by the Hon’ble jurisdictional High Court that this issue has been decided against the Revenue by various High Courts and the details of all the judgements of various High Courts are given in para 5 of the said judgement as under :

In light of various judgements of the Hon’ble High Courts, including the judgement of the jurisdictional High Court in the case of Kankanala Ravindra Reddy Vs. Income Tax Officer [2024] 156 taxmann.com 478 (Gauhati), the Hon’ble High Court has held in para 13 to 19 as under :

Thus, it is clear that the issue raised by the assessee in the present appeal is now covered by the decision of Hon’ble Jurisdictional High Court in the assessee’s own case for the A.Y.2016-17. As regards the contention of the Ld.DR that no such issue was raised by the assessee before the authorities below, we find from the Grounds of Appeal raised before the CIT(A) that the assessee had raised this issue in ground No.2 to 5 as under :

However, since the matter is pending adjudication before the Hon’ble Supreme Court and Hon’ble High Court has also given the liberty to the parties to move an appropriate petition, seeking revival of W.P. in light of judgement of Hon’ble Supreme Court on this very issue, we also grant liberty to the parties to get this appeal revived, if, in case the judgement of the Hon’ble Supreme Court on this issue necessitate to modify this order. 5.1. In the case in hand it is not disputed that the notice u/s. 148 of the Act was issued by the JAO and not by the Faceless Assessing Officer. By following the judgment of Hon’ble jurisdictional High Court in the case of Kotha Kanthaiah dated 24.04.2025 in Writ Petition No.344 of 2025 as well as the decision of co-ordinate bench of this Tribunal (supra), we hold that the notice issued u/s. 148A(b) of the Act as well as the decision of co-ordinate bench as well as u/s. 148 of the Act in the case of the assessee by the JAO are not valid and liable to be set aside. We order accordingly.”

Accordingly, by following the earlier decision of this Tribunal and to maintain the rule of consistency, we hold that notice issued u/s. 148 of the Act by the jurisdictional Assessing Officer without following the procedure as laid down in the NFAC notified by the department is not valid and liable to be quashed. Since the initiation of the proceedings itself is not valid therefore, it would also vitiate the consequential reassessment order passed by the Assessing Officer. Hence, we decide this issue in favour of the assessee and notice issued u/s. 148 of the Act and consequent reassessment order passed by the Assessing Officer are quashed.

Since the issue is pending adjudication before the Hon’ble Supreme Court and in view of the judgment of Hon'ble jurisdictional High Court in the case of Kotha Kanthaiah Vs. ITO in W.P. No.344 of 2025 dated 24.04.2025 as relied upon in the case of Meghana Enterprises (supra), a liberty is given to the parties to get this appeal revived if the judgment of Hon’ble Supreme Court on this issue necessitate to modify this order.