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Facts
The assessee's appeal for AY 2020-21 was filed with a delay, which was condoned by the Tribunal. The primary contention raised by the assessee was against the assumption of jurisdiction under Section 147 of the Income Tax Act and the validity of the assessment order passed by the NFAC.
Held
The Tribunal held that a legal ground challenging the assumption of jurisdiction can be raised at any stage. Following the decision of the Hon'ble High Court of Madras in TVS Credit Services Limited v. DCIT, the assessment order passed by the NFAC was quashed as bad in law.
Key Issues
Validity of assessment order passed by NFAC when notice under Section 148 was issued by Jurisdictional AO but assessment concluded by NFAC; admissibility of a legal ground challenging jurisdiction at any stage.
Sections Cited
147, 148, 148A, 144B
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Before: Shri Inturi Rama Rao & Shri S.S. Viswanethra Ravi
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order dated 04.08.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2020-21.
We find that this appeal is filed with a delay of 28 days. The assessee filed an affidavit for condonation of delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, in the interest of justice, we condone the delay and admit the appeal for adjudication.
When the appeal was taken up for hearing, the ld. AR Shri A. Tamilamudhan, CA drew our attention to ground No. 3 raised in the grounds of appeal and submits that the assessee challenged assumption of jurisdiction under section 147 of the Income Tax Act, 1961 [“Act” in short] and the assessment order passed under section 147 r.w.s. 144B of the Act by the Assessing Officer NFAC is not in accordance with the provisions of law, which goes to the root of the case, raised for the first time before the Tribunal. He argued that the said legal ground can be raised at any stage of the proceedings including this Tribunal and placed reliance on the decision of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Reported in 223 ITR 383 (SC). He prayed to adjudicate the legal ground as preliminary ground.
The ld. DR Shri SBR Kumar Laghimsetti, Addl. CIT submits that having participated before the Assessing Officer and the ld. CIT(A) the assessee did not raise the same before the said authorities. He argued that it requires examination of the facts and prayed to dismiss the said ground.
Having heard both the parties, we note that the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. (supra) was pleased to hold that the legal ground can be raised at any stage of the proceedings including this Tribunal. The ld. DR did not dispute the decision of the Hon’ble Supreme Court and we find no new facts are required to be examined and therefore, we proceed to admit ground for adjudication.
As per information available with the revenue, the Assessing Officer noted that the assessee made cash deposits of ₹.1,11,24,233/- during the FY 2017-18. We note that the Jurisdictional Assessing Officer issued notice under section 148 of the Income Tax Act, 1961 [“Act” in short] and order under section 148A(d) of the Act both dated 11.04.2022. As per para 4.3 of the assessment order, the assessee filed his return of income under section 148 of the Act declaring NIL income after claiming deduction under section 80P(2)(d) of the Act at ₹.13,75,594/-. Against the show-cause notice dated 06.03.2024, the assessee filed his response dated 11.03.2024 and the submissions of the assessee are reproduced at page 5 of the assessment order. After considering the submissions of the assessee, the Assessing Officer, NFAC completed the assessment under section 147 r.w.s. 144B of the Act dated 15.03.2024, inter alia, made addition towards disallowance of deduction claimed under section 80P of the Act at ₹.13,75,594/-. The ld. CIT(A) confirmed the order of the Assessing Officer.
The ld. AR drew our attention to page 2 of the assessment order that the notice dated 11.04.2022 issued by the jurisdiction Assessing Officer under section 148 of the Act. The ld. AR vehemently argued that the assessment order passed by the Faceless mechanism [Assessing Officer] is bad in law in terms of the decision of the Hon’ble High Court of Madras in the case of TVS Credit Services Limited v. DCIT in WP No. 22402 of 2024 dated 24.06.2025 and prayed to quash the assessment order passed by the NFAC without issuing notice under section 148A(d) of the Act.
The ld. DR supported the order passed by the Assessing Officer.
Heard both the parties and perused the material on record. In the present case, we note that the notice under section 148 of the Act was issued by the Jurisdictional Assessing Officer i.e., ITO, Ward-2, Namakkal and the assessment is concluded by the FAU. On perusal of the decision of the Hon’ble High Court of Madras in the case of TVS Credit Services Limited v. DCIT (supra), we note that the Hon’ble High Court was pleased to hold that the assessment made by the assessment unit of NFAC is not valid if the order and notice under section 148A(d)/148 of the Act issued by the Jurisdictional Assessing Officer, but, however, liberty was given to the Revenue to re-ignite the notice in case the Hon’ble Supreme Court interferes with the order of the Hon’ble High Court of Bombay in the case of Hexaware Technologies Ltd. V. ACIT 464 ITR 430 (Bombay). Accordingly, we hold that the assessment order dated 15.03.2024 passed by the assessment unit of NFAC is bad in law and it is quashed. The ld. AR prayed to keep open grounds of appeal filed along with Form 36 for the assessee in case the Hon’ble Supreme Court interferes with the decision of the Hon’ble High Court of Bombay in the case of Hexaware Technologies Ltd. V. ACIT (supra). Accordingly, the ground No. 3 raised by the assessee on assumption jurisdiction is allowed and other grounds raised under Form 36 are kept open.
In the result, the appeal filed by the assessee is allowed. Order pronounced on 02nd February, 2026 at Chennai.
Sd/- Sd/- (INTURI RAMA RAO) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 02.02.2026