CHIRAG KIRPAL,DELHI vs. ASSISTANT COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, GURGAON

5. Further we find that the Hon‘ble Telengana High Court in the case of Sri Venkataramana Reddy vs DCIT reported in 468 ITR 181 (Tel) in Writ Petition Nos. 13353, 16141 and 16877 of 2024 dated 24-7-2024 ( which is a case of assessee in International Taxation) had categorically observed that in respect of international taxation charges, notices under section 148 were required to be issued in a faceless manner applying provisions of section 144B and as effected under provisions of section 151A read with scheme notified by Central Government vide CBDT Notification dated 29-3-2022. The relevant observations of Hon‘ble Telengana High Court in the case of Sri Venkataramana Reddy vs DCIT reported in 468 ITR 181 (Tel) are reproduced below:-

“23. It is noteworthy that the order of CBDT dated 06.09.2021 deals with "assessment orders". The said order is passed in exercise of power under Section 144B of the Act. The order of CBDT is clear that direction was issued about passing of "assessment orders" by the National Faceless Assessment Centre under Section 144B of the Act except in two situations, one of which is passing of assessment orders in cases assigned to International Tax Charges.

7. The Learned DR apart from relying on the decision of Hon‘ble Calcutta High Court in the case of Triton Overseas P Ltd vs Union of India reported in 156 Taxmann.com 318 (Cal HC) , which had already been considered by the Hon‘ble Punjab & Haryana High Court (being the Jurisdictional High Court) , also placed reliance on the decision of Hon‘ble Delhi High Court in the case of T K S Builders P Ltd vs ITO reported in 469 ITR 657 (Del), wherein it was held that Section 144B of the Act cannot be viewed as exclusive basis for all assessment and reassessment procedures and Jurisdictional Assessing Officer (JAO) cannot be completely deprived of power to assess or reassess merely because section 144B and Faceless Reassessment Scheme 2022 have been introduced. The Learned DR also placed reliance on the decision of Hon‘ble Madras High Court in the case of Mark Studio India (P) Ltd vs ITO reported in 169 taxmann.com 542 (Mad HC), wherein it was observed that National Faceless Assessment Centre (NaFAC) would not have any power of issuance of notice under section 148 or 148A of the Act and would assume jurisdiction for assessment, reassessment or recomputation in cases of income escaping assessment only from stage of issuing notice under section 142(1) or 143(2) of the Act.

8. We find that the Hon‘ble Jurisdictional High Court being the Punjab and Haryana High Court has decided the issue in favour of the assessee and the Page | 5 Hon‘ble Delhi High Court, Hon‘ble Madras High Court and Hon‘ble Calcutta High Court had decided(being the non-Jurisdictional High Courts) had decided the issue against the assessee. As stated Supra, the Hon‘ble Telangana High Court and Hon‘ble Bombay High Court had decided the issue in favour of the assessee. When there is a decision of Hon‘ble Jurisdictional High Court, the same would become a binding precedent for the Tribunal and accordingly we proceed to follow the decision of Hon‘ble Punjab and Haryana High Court reported in 466 ITR 474. For the sake of convenience, the entire order is reproduced below:-

―By this common order, the civil writ petitions 15745-2024 & 15791-2024 are disposed of as issues involved and prayer sought therein are common. For the sake of brevity and convenience, facts are borrowed from CWP-15745-2024.

4. The petitioner is assailing notice dated 28.03.2024 issued under Section 148 and intimation dated 21.06.2024 for assessment in accordance with the procedure prescribed under Section 144B of 1961 Act.

4. Considering the facts and circumstances of the case and submissions of the parties and in view of the aforesaid circular of the Board, I find no merit in the writ petition being WPO 1566 of 2023 and accordingly the same is dismissed."

11. Similar issue came up for consideration before a Division Bench of Bombay High Court in Hexaware Technology Ltd. (supra)which vide judgment dated 03.05.2024 discussed the issue at length and held that notice under Section 148 after introduction of Finance Act, 2021, cannot be issued by Jurisdictional Assessing Officer. It is apt to mention here that Bombay High Court noticed order dated 13.09.2023 passed by Calcutta High Court as well as office memorandum issued by CBDT. The relevant extracts of judgment passed by Bombay High Court are reproduced as below:- "20. After hearing all the counsels, the following issues came up for consideration: (1) (2) and (3) xxx xxx xxx (4) Whether the impugned notice dated 27th August 2022 is invalid and bad in law being issued by the J AO as the same was not in accordance with Section 151A of the Act? 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 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 Page | 10

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. 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 automatedallocation, 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 prejudice to assessee. Therefore, there is no question of petitioner having to prove further prejudice before arguing the invalidity of the notice. 38 With respect to the Office Memorandum dated 20thFebruary 2023, the said Office Memorandum merely contains the comments of the Revenue issued with the approval of Member (L&S) CBDT and the said Office Memorandum is not in the nature of a guideline or instruction issued under Section 119 of the Act so as to have any binding effect on the Revenue. Moreover, the arguments advanced by the Revenue on the said Office Memorandum dated 20th February 2023 is clearly contrary to the provisions of the Act as well as the Scheme dated 29 March 2022....... 39 With reference to the decision of the Hon'ble Calcutta High Court in Triton Overseas Private Limited (supra), the Hon'ble Calcutta High Court has passed the order without considering the Scheme dated 29th March 2022 as the said Scheme is not referred to in the order. Therefore, the said judgment cannot be treated as a precedent or relied upon to decide the jurisdiction of the Assessing Officer to issue notice under Section 148 of the Act. The Hon'ble Calcutta High Court has referred to an Office Memorandum dated 20th February 2023 being F No.370153/7/2023 TPL which has been dealt with above. Therefore, no reliance can be placed on the said Office Memorandum to justify that the JAO has jurisdiction to issue notice under Section 148 of the Act. Further the Hon'ble Telangana High Court in the case of Kankanala Ravindra Reddy v. Income Tax Officer" has held that in view of the provisions of Section 151A of the Act read with the Scheme dated 29th March 2022 the notices issued by the JAOs are invalid and bad in law. We are also of the same view.

"148. Issue of notice 'where income has escaped assessment. Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice: Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section. Explanation 1. —For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,— (i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court. Explanation 2. —For the purposes of this section, where,— (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub- section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing Officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee [where] the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted in the case of the assessee or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. Explanation 3. —For the purposes of this section, specified authority means the specified authority referred to in section 151.

151A. Faceless assessment of income escaping assessment. (1) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of assessment, reassessment or re- computation under section 147 or issuance of notice under section 148 or conducting of enquiries or issuance of show-cause notice or passing of order under section 148A or sanction for issue of such notice under section 151, so as to impart greater efficiency, transparency and accountability by— (a) eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a team-based assessment, reassessment, recomputation or issuance or sanction of notice with dynamic jurisdiction. (2) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (1), by notification in the Official Page | 14 Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification: Provided that no direction shall be issued after the 31st day of March, 2022. (3) Every notification issued under sub-section (1) and subsection (2) shall, as soon as may be after the notification is issued, be laid before each House of Parliament. "

3. For the purpose of this Scheme,— (a) assessment, reassessment or recomputation under section 147 of the Act, (b) 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. "