BADARIPRASAD,GUNA vs. INCOME TAX OFFICER GUNA, GUNA

3. Ground No.5 is reproduced as under:

5. The NFAC, Delhi failed to appreciate that the passing of the order under Section 148A(d) of the Act by the JAO was in complete defiance to theprescription of law/ procedure in relation there toand hence ought to have appreciated that in theabsence of valid foundation for issuance of noticeundersection 148 of the Act, the consequential re- assessment should be considered as nullity in law.

4. According to the Ld.AR, the impugned notice issued u/s.148 dated 31.03.2022, is invalid and bad in law being issued by the Jurisdictional Assessing Officer (herein after ‘JAO’) which is not in accordance with Sec. 151/151A of the Act read with the faceless Scheme notified by CBDT on 29 March 2022 for assessment, reassessment or re-computation u/s.147/issuance of notice u/s.148 of the Act or for conducting of inquiry or issuance of show cause notice or passing of order u/s.148A of the Act or sanction for issuance of notice under section 151 of the Act. Further, according to the Ld AR, in exercise of the powers conferred u/s.151A of the Act, CBDT had issued a notification dated 29.03.2022 [after laying the same before each House of Parliament] and formulated a Scheme called "the e-Assessment of Income Escaping Assessment Scheme, 2022" (herein after ‘the Scheme’). And that the Scheme provides that (a) the assessment, reassessment or re-computation u/s.147 of the Act and (b) the issuance of notice u/s.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. Therefore, according to Ld AR, since the impugned notice u/s 148 dated 31.03.2022 has been issued by JAO and not by the NFAC, there is per-se contravention of the provisions of the Act, thus violating the principles of Rule of Law, which vitiates the reopening of the assessment; and further pointed out that this legal issue raised by the assessee has been answered in favor of the assessee by the jurisdictional High Court & other Hon’ble High Courts;- Sl.No. Date Citation 1 24.06.2025 Mark Studio India (P.) Ltd. v. Income-tax Officer - High Court of Madras [DB] - WA No. 781 OF 2025, order dated 24.06.2025 2 14.09.2023 KankanalaRavindra Reddy v. Income-tax Officer High Court of Telangana - 156 taxmann.com 178 3 03.05.2024 Hexaware Technologies Ltd. v. Assistant Commissioner of Income-tax High Court of Bombay - 464 ITR 430 4 20.05.2024 Ram Narayan Sah v. Union of India - High Court of Gauhati 163 taxmann.com 478 5 02.07.2024 SushilaSureshbabuMalge v. Income-tax Officer - High Court of Bombay - 468 ITR 624 6 19.07.2024 Jatinder Singh Bhangu v. Union of India High Court of Punjab & Haryana - 466 ITR 474 7 24.07.2024 Sri Venkataramana Reddy Patloola v. Deputy Commissioner of Income Tax, Circle 1(1), Hyderabad and Others High Court of Telangana - 468 ITR 181 [W.P.No.13353, 16141 & 16877 of 2024] 8 29.07.2024 Jasjit Singh v. Union of India - High Court of Punjab & Haryana - 467 ITR 52 9 05.08.2024 Samp Furniture Pvt. Ltd. v. Income Tax Officer, Ward 3(3)-Thane & Ors High Court of Bombay - 165 taxmann.com 581 10 05.08.2024 Kairos Properties Private Limited v. ACIT, Circle-15(1)(2), Mumbai & Ors - High Court of Bombay-468 ITR 168 11 29.08.2024 W.P.No.23573/2024 in the Case of ADIT(IntTaxn), Hyderabad v. Deepanjan Roy followed the decision in W.P.No.13353 of 2024 dated 24.07.2024 [Sri Venkataramana Reddy Patloola (supra)] 12 05.02.2025 Sappahire Educational & Charitable Trust v. The ITO, Exemptions Ward, Trichy. - Income Tax Appellate Tribunal, Chennai - & 2417/CHNY/2024 13 24.04.2025 Tecumseh Products India (P.) Ltd. v. Deputy Commissioner of Income-tax High Court of Telangana - 174 taxmann.com 1203

5. Per contra, the Ld.DR supported the action of the JAO issuing notice u/s.148 of the Act and submitted that both the NFAC & JAO have got concurrent jurisdiction and therefore, notice is valid and also submitted that there was no prejudice caused to the assessee. Therefore, he asserted that the action of the JAO issuing notice is valid and doesn’t want us to interfere with the action of AO and instead, wants us to dismiss the Ground No.5 and he cited the decision of the Hon’ble Delhi High Court & Hon’ble Calcutta High Court as well as the Hon’ble Single Bench of Madras High Court in favor of the Revenue and cited the following orders: • Triton Overseas (P) Ltd. v. Union of India – Calcutta High Court – 156 Taxmann.com 318 • T.K.S. Builders (P) Ltd. v. ITO – Delhi High Court – 469 ITR 657 • Mark Studio India (P.) Ltd. v. Income-tax Officer, High Court of Madras 169 taxmann.com 542, order dated 20.12.2024 6. We have heard both the parties and perused the material available on record. The assessee is an individual whose case was reopened by the Jurisdictional Assessing Officer (hereinafter referred to as ‘JAO‘) u/s.147 of the Act on the basis of information that during the relevant AY 2018-19, the assessee [Shri Loganathan Dhandapani] had received a sum of Rs.3.70 Crs. towards sale of land; and that enquiry revealed that the above sum was used as a camouflaged, wherein the sale portion of immovable property amounting to Rs.1.44 Crs. and the remaining component of Rs.2.60 Crs. was obtained as loan. But that assessee suppressed the capital gain on sale of immovable property; and that the assessee had filed RoI for AY 2018-19 on 31.08.2018 at total income at Rs.12,61,790/- wherein the assessee didn’t report any capital gains for AY 2018-19. On the basis of this information, the JAO recorded the reasons for re-opening of assessment after taking prior approval of competent authority and thereafter, issued notices u/s.148A(b) of the Act [refer Page No.1 of the Paper Book] on 14.03.2022. Pursuant thereto, the assessee filed his reply to the said notice on 22.03.2022 [refer Page No.3 of the Paper Book] and the JAO passed the order u/s.148A(d) of the Act on 31.03.2022 [refer Page Nos.4-8 of the Paper Book] after taking prior approval; and thereafter he (JAO) issued notice on the same day u/s.148 of the Act on 31.03.2022 [refer Page No.9 of the Paper Book], and pursuant to it, reopened the assessment for AY 2018-19 u/s.147 of the Act and thereafter passed the re/assessment order on 16.03.2023. The action of JAO issuing impugned notice dated 31.03.2022 is assailed before us as bad in law on the strength of Hon’ble Jurisdictional High Court and other judicial precedents cited supra and in this regard notes that the impugned notice shows that they were all issued by JAO/Shri Punyakoti Venkatesan, Assistant Commissioner of Income Tax, Non- Corporate Circle-3(1), Chennai, thereafter, the NFAC is noted to have framed the re-assessment order on 16.03.2023 after making certain additions.

7. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A) who was pleased to confirm the action of the AO/NFAC, against which, assessee has preferred before this Tribunal.

8. Since the assessee has raised legal issue against the impugned action of the JAO issuing notice u/s.148A(b) dated 14.03.2022 followed by order passed u/s.148A(d) of the Act dated 31.03.2022; and thereafter, notice u/s.148 of the Act dated 31.03.2022 by raising Ground No.5 as noted supra, the assessee contends that notices issued by the JAO after 29.03.2022 expressing his desire to reopen the assessment is bad in law after the CBDT Faceless Scheme notified from 29.03.2022 (supra) read with section 151/151A of the Act, which legal issue we will deal first.

In exercise of the powers conferred by sub-sections (1) and (2) of Section 151A of the Act, CBDT issued a notification dated 29th March, 2022 [Notification No.18/2022/F. No.370142/16/2022-TPL and formulated a Scheme. The Scheme provides that - (a) the assessment, reassessment or recomputation under Section 147 of the Act, (b) and the 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. The impugned notice dated 27th August, 2022 has been issued by respondent no.1 (JAO) and not by the NFAC, which is not in accordance with the aforesaid Scheme. 33 The guideline dated 1st August 2022 relied upon by the Revenue is not applicable because these guidelines are internal guidelines as is clear from the endorsement on the first page of the guideline - "Confidential For Departmental Circulation Only". The said guidelines are not issued under Section 119 of the Act. Any such guideline issued by the CBDT is not binding on petitioner. Further the said guideline is also not binding on respondent no.1 as they are contrary to the provisions of the Act and the Scheme framed under Section 151A of the Act. The effect of a guideline came up for discussion in Sofitel Realty LLP vs. Income Tax Officer (TDS)13 wherein this Court has held that the guidelines which are contrary to the provisions of the Act cannot be relied upon by the Revenue to reject an application for compounding filed by an assessee. The Court held that guidelines are subordinate to the principal Act or Rules, it cannot restrict or override the application of specific provisions enacted by legislature. The guidelines cannot travel beyond the scope of the powers conferred by the Act or the Rules. The guidelines do not deal with or even refer to the Scheme dated 29th March 2022 framed by the Government under Section 151A of the Act. Section 151A(3) of the Act provides that the Scheme so framed is required to be laid before each House of the Parliament. Therefore, the Scheme dated 29th March 2022 under Section 151A of the Act, which has also been laid before the Parliament, would be binding on the Revenue and the guideline dated 1st August 2022 cannot supersede the Scheme and if it provides anything to the contrary to the said Scheme, then the same is required to be treated as invalid and bad in law.

34 As regards ITBA step-by-step Document No.2 regarding issuance of notice under Section 148 of the Act, relied upon by Revenue, an internal document cannot depart from the explicit statutory provisions of, or supersede the Scheme framed by the Government under Section 151A of the Act which Scheme is also placed before both the Houses of Parliament as per Section 151A(3) of the Act. This is specially the case when the document does not even consider or even refer to the Scheme. Further the said document is clearly intended to be a manual/guide as to how to use the Income Tax Department's portal, and does not even claim to be a statement of the Revenue's position/stand on the issue in question. Our observations with respect to the guidelines dated 1 st August 2022 relied upon by the Revenue will equally be applicable here.

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 29th 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.

36 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 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 Page | 9 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. 37 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.

2. The learned Single Judge was pleased to dismiss the petition on the ground that even if the notice has been Page | 15 issued by Jurisdictional Assessment Officer and not Faceless Assessment Officer, the notice issued under Section 148A/148 of the Income Tax Act will be valid.

3. Ms.VardhiniKarthik submitted that this Court has, in many matters, held, following the judgment of the Bombay High Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax', that notice that has to be issued by Faceless Assessment Officer has to be issued Faceless Assessment Office and if issued by Jurisdictional Assessment Officer, the same is not valid.

4. Ms.Premalatha, who takes notice for the Revenue, states that the law as proposed by Ms.VardiniKarthick is correct and therefore, the Court may quash and set aside the notices, but keep open liberty of the Revenue to re-ignite the notices in case the Apex Court interferes with the order and judgment of the Bombay High Court in Hexaware Technologies (supra).

5. Keeping open the Revenue's rights and contentions, as noted above, the impugned notices dated 15.04.2024 are quashed and set aside. The appeal is disposed of. There shall be no order as to costs. Consequently, the interim application is closed.

Order pronounced in the open court on 21/01/2026.