ARHAM ANMOL PROJECTS PRIVATE LIMITED,VILLAGE VALSHIND, BHIWANDI vs. CIRCLE 1 KALYAN, KALYAN, THANE

The CIT(A) recorded that the assessee was a non-filer initially. The reopening was based on information regarding multiple financial transactions. The assessee failed to furnish any explanation either during assessment or appellate proceedings. No evidence was produced to rebut the additions made by the Assessing Officer. The burden of proof was not discharged. On merits, the CIT(A) agreed with the findings of the Assessing Officer and sustained the additions in entirety. The appeal was dismissed.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds of appeal:

The appellant craves leave to add, alter or delete all or modify any or all the above grounds of appeal as and when advised as per law.

The learned AR submitted that the assessee company was formed and registered by Mr. Vinod Malde and Mr. Sushil Bothra, who were promoter-directors of the company. It was stated that on the representation of Mr. Sushil Bothra, certain land was acquired in the name of the assessee company and warehouses were constructed thereon. Sale proceeds from the warehouses were deposited in the bank account of the assessee company. It was further submitted that disputes arose between the directors.

The learned AR submitted that the assessee company and its director were entangled in multiple civil, criminal and regulatory proceedings during the relevant period. It was stated that search proceedings were conducted by the Sales Tax authorities, demolition notices were issued by MIDC, and a Writ Petition was filed before the Hon’ble Bombay High Court wherein interim relief was granted. Various complaints and proceedings were initiated before the police authorities, the Economic Offences Wing, the Company Law Board and the National Company Law Tribunal. It was further submitted that bank accounts of the company and its director were frozen and anticipatory bail proceedings were also undertaken. According to the learned AR, these circumstances caused severe financial and administrative hardship, preventing the assessee from properly responding to assessment and appellate notices.

It was contended that the non-compliance before the Assessing Officer and the learned CIT(A) was not deliberate but was due to circumstances beyond the control of the assessee. It was also submitted that the assessment order contains reference to section 144 though framed under section 147, which according to the assessee reflects procedural irregularity. The learned AR Arham Anmol Projects Private Limited further prayed for admission of additional evidences, which could not be filed before the lower authorities, in the interest of justice and for proper adjudication of the appeal.

On the legal issue, the learned AR submitted that although the assessment has ultimately been completed by the Assessment Unit under section 147 read with section 144B, the mandatory notice under section 143(2) was not issued by the authority which framed the assessment. It was contended that issuance of notice under section 143(2) is a sine qua non for assuming jurisdiction to proceed with scrutiny assessment and such notice must be validly issued by the Assessing Officer competent to carry the assessment to its logical conclusion.

The learned AR submitted that in the present case, the notice under section 143(2) was issued by the Jurisdictional Assessing Officer, whereas the assessment was completed by the Assessment Unit under the faceless scheme. According to the learned Authorised Representative, such bifurcation of functions renders the proceedings defective if the officer completing the assessment has not himself issued the mandatory notice. It was argued that the assumption of jurisdiction by the Assessment Unit must be founded upon a valid statutory notice in conformity with law, failing which the assessment stands vitiated.

It was further submitted that section 292BB cannot cure a foundational defect relating to jurisdiction. The deeming fiction under section 292BB, according to the learned Authorised Arham Anmol Projects Private Limited Representative, applies only to defects in service of notice and not to cases where the statutory requirement of valid issuance by the competent authority is not satisfied. It was therefore contended that if the mandatory requirement of section 143(2) is not strictly complied with in the manner contemplated by law, the defect is incurable and the resultant assessment is liable to be quashed.

The learned AR accordingly prayed that the assessment framed under section 147 read with section 144B be held to be invalid in law and that the order of the learned CIT(A) confirming the same be set aside.

The learned Departmental Representative (DR) submitted written submissions opposing the legal ground raised by the assessee regarding non-issuance of notice under section 143(2). It was contended that in the present case notice under section 143(2) was duly issued and served upon the assessee by the Jurisdictional Assessing Officer, namely ACIT, Circle–1, Kalyan, and a copy thereof was placed on record. It was therefore submitted that the contention of the assessee that no notice under section 143(2) was issued is factually incorrect.

The learned DR further submitted that there exists concurrent jurisdiction between the Jurisdictional Assessing Officer and the Faceless Assessing Officer in proceedings under section 148 and subsequent assessment. Reliance was placed on judicial precedents to contend that pursuant to section 120(5) and the notifications issued by the Central Board of Direct Taxes, Arham Anmol Projects Private Limited including Notification No. 64/2020, the National Faceless Assessment Centre and its units exercise the powers and functions of an Assessing Officer concurrently with the Jurisdictional Assessing Officer. It was submitted that section 144B is procedural in nature and transfers only the function of completing the assessment to the faceless units, while the original jurisdiction over the assessee continues to vest with the Jurisdictional Assessing Officer.

It was argued that the reassessment framework contemplates a two-stage process, namely, the initial inquiry and formation of opinion under section 148A by the Jurisdictional Assessing Officer and the actual assessment by the faceless unit. Section 144B does not provide an exclusive machinery for pre- issuance stages of notice under section 148, and therefore the Jurisdictional Assessing Officer retains authority to issue such notices. It was further submitted that the retrospective deletion of sub-section (9) of section 144B indicates legislative intent to avoid invalidation of assessments on technical procedural grounds.

The learned DR also contended that the jurisdictions of the Jurisdictional Assessing Officer and the faceless units are complementary and not mutually exclusive, and that the power of transfer under section 127 further supports this position. It was submitted that once the notice under section 148 issued by the Jurisdictional Assessing Officer is valid, the consequential notice under section 143(2) cannot be treated as invalid.

The challenge of the assessee proceeds on the premise that the officer who completes the assessment must himself issue the notice under section 143(2), and that bifurcation between issuance of notice and completion of assessment renders the proceedings void. In order to examine this contention, it becomes necessary to evaluate the issue in the context of the statutory scheme governing the assessment and reassessment process, particularly for Assessment Year 2019–20 where reassessment has been completed under the faceless regime introduced by section 144B.

Under the traditional assessment regime, prior to the introduction of the faceless scheme, the law required that where a return is filed, issuance of notice under section 143(2) is mandatory if the Assessing Officer seeks to proceed with scrutiny assessment. The jurisprudence has consistently held that absence of such notice is fatal. However, there has never been a statutory requirement that the very same officer who issues the notice must necessarily complete the assessment. Assessments have routinely been upheld where notice under section 143(2) was issued by one Assessing Officer and the assessment was Arham Anmol Projects Private Limited completed by a successor officer or by another officer upon transfer of jurisdiction, provided that jurisdiction was validly vested under sections 120 and 124 of the Act. Thus, even under the conventional regime, continuity of officer was not a jurisdictional mandate.

With the introduction of the e-assessment and subsequently the statutory faceless assessment regime under section 144B, the nature of allocation of functions underwent procedural restructuring. Section 144B prescribes the manner in which assessment or reassessment shall be conducted through designated units such as the Assessment Unit, Review Unit and Technical Unit, functioning under the National Faceless Assessment Centre. However, section 144B does not divest the Jurisdictional Assessing Officer of statutory jurisdiction conferred under section 120. The notifications issued by the Central Board of Direct Taxes in exercise of powers under section 120(5) contemplate concurrent exercise of powers by the Jurisdictional Assessing Officer and the faceless units. The scheme, in our opinion, is therefore one of functional allocation rather than jurisdictional extinction.

In reassessment proceedings under the post-2021 regime, the statutory structure itself reflects segmentation of stages. The inquiry under section 148A, issuance of notice under section 148 and other foundational steps are ordinarily undertaken by the Jurisdictional Assessing Officer. Upon filing of return in response to notice under section 148, the case is thereafter processed Arham Anmol Projects Private Limited under the faceless procedure for completion of assessment in accordance with section 144B. The law does not mandate that the Assessment Unit must re-issue a notice under section 143(2) where such notice has already been validly issued by a competent Assessing Officer. Section 144B is procedural in character and regulates the manner of conducting assessment; it does not create a separate or exclusive jurisdictional class of Assessing Officer.

In the present case, it is an admitted position that notice under section 143(2) was issued by the Jurisdictional Assessing Officer. There is no material placed before us to suggest that such officer lacked territorial or functional jurisdiction, or that the notice was issued beyond the prescribed limitation period. The statutory requirement of issuance of notice under section 143(2), which is jurisdictional in nature, therefore stands satisfied. The fact that the assessment was subsequently completed by the Assessment Unit under section 144B, pursuant to the faceless scheme, does not render the foundational notice invalid. The Act nowhere provides that the officer completing the assessment must necessarily be the same officer who issued the notice under section 143(2). The bifurcation of stages between issuance of notice and completion of assessment is inherent in the statutory design of the faceless regime.

It is also relevant that the earlier sub-section (9) of section 144B, which provided for invalidation of assessment for certain non-compliances, has been retrospectively deleted. The legislative Arham Anmol Projects Private Limited intent discernible therefrom is to prevent assessments from being annulled on hyper-technical procedural grounds, particularly where foundational jurisdictional requirements are satisfied. In the present case, since the notice under section 143(2) has in fact been issued by a competent Jurisdictional Assessing Officer, the argument of complete absence of notice does not survive. The provisions of section 292BB, which cure defects in service of notice, do not even arise for consideration in a situation where the notice itself stands issued.

Evaluating the issue across different assessment regimes, whether under the traditional jurisdictional model, the transitional hybrid phase of faceless implementation, the earlier e-assessment scheme or the statutory regime under section 144B, the legal position remains consistent that issuance of notice under section 143(2) by a competent Assessing Officer satisfies the mandatory jurisdictional requirement. Completion of assessment by another officer or designated unit, pursuant to statutory allocation of functions, does not vitiate the proceedings in absence of specific statutory prohibition.

In view of the above discussion, we are of the considered opinion that the issuance of notice under section 143(2) by the Jurisdictional Assessing Officer, followed by completion of reassessment by the Assessment Unit under section 147 read with section 144B, does not suffer from any jurisdictional infirmity. The legal ground raised by the assessee on this issue is therefore rejected. The assessment cannot be held to be invalid Arham Anmol Projects Private Limited on the basis of the bifurcation between issuance of notice and completion of assessment under the faceless regime.

The learned AR has placed strong reliance upon the judgment of the Hon’ble Bombay High Court in Hexaware Technologies Ltd. v. ACIT (162taxmann.com225), wherein the Court examined the scheme framed under section 151A and the E-Assessment of Income Escaping Assessment Scheme, 2022. The Hon’ble Bombay High Court held, inter alia, that once the scheme mandates issuance of notice under section 148 through automated allocation in a faceless manner, the Jurisdictional Assessing Officer could not assume authority to issue such notice. The Court observed that there is no concept of concurrent jurisdiction between the Jurisdictional Assessing Officer and the Faceless Assessing Officer for issuance of notice under section 148. It was held that when the scheme specifically provides for issuance of notice through automated allocation, the power vests exclusively in the faceless machinery. The reasoning proceeds on strict interpretation of section 151A and the notified scheme, emphasising that any deviation from the statutory framework renders the notice invalid. The Hon’ble Bombay High Court treated the scheme as mandatory and not directory, and held that an act contrary to the statutory scheme causes inherent prejudice.

The assessee has invoked this line of reasoning to contend that where statutory allocation is prescribed, deviation affects jurisdiction and is not merely procedural. The underlying Arham Anmol Projects Private Limited principle emerging from Hexaware is that where the scheme expressly assigns authority for issuance of notice to a faceless mechanism, the Jurisdictional Assessing Officer cannot bypass it. The decision therefore turns upon the stage of issuance of notice under section 148 and the exclusivity of allocation under section 151A read with the scheme.

On the other hand, the learned DR has relied upon the decision of the Hon’ble Delhi High Court in Inder Dev Gupta v. ACIT 180 taxmann.com 805. In that case, the Hon’ble Delhi High Court examined the identical question whether the Jurisdictional Assessing Officer retains power to issue notice under section 148 after the introduction of section 151A and the 2022 Scheme. The Court referred to its earlier binding decision in TKS Builders (P.) Ltd.167 taxmann.com 759 and held that both the Jurisdictional Assessing Officer and the Faceless Assessing Officer possess concurrent jurisdiction to initiate reassessment proceedings. It rejected the contention that the scheme completely divests the Jurisdictional Assessing Officer of authority. The Hon’ble Court further clarified that dismissal of special leave petitions against contrary High Court decisions does not amount to declaration of law under Article 141 unless reasoned orders are passed. It therefore maintained the view that concurrent jurisdiction continues to operate within the statutory framework.

In T.K.S. Builders (P.) Ltd., the Hon’ble Delhi High Court undertook an elaborate analysis of sections 144B and 151A of the Arham Anmol Projects Private Limited Act and the Faceless Reassessment Scheme, 2022. The Court categorically held that section 144B is fundamentally procedural and cannot be construed as the exclusive repository of the power to assess or reassess. In paragraph 76, the Hon’ble Court observed:

The Hon’ble Delhi High Court’s approach is based on harmonized interpretation of sections 120, 144B and 151A. It treats the faceless scheme as regulating procedure rather than extinguishing statutory jurisdiction conferred under section 120. According to this view, automated allocation governs Arham Anmol Projects Private Limited administrative routing of cases but does not impliedly repeal the foundational jurisdiction of the Jurisdictional Assessing Officer.

Thus, the apparent divergence between the two Hon’ble High Courts lies in their understanding of whether the scheme under section 151A creates exclusivity or whether it operates alongside the existing jurisdictional framework. The Hon’ble Bombay High Court in Hexaware adopts an exclusivity model for issuance of notice under section 148. The Hon’ble Delhi High Court in Inder Dev Gupta adopts a concurrency model.

However, it is important to note that the controversy in Hexaware concerned issuance of notice under section 148 itself. The Hon’ble Bombay High Court was examining whether the Jurisdictional Assessing Officer could initiate reassessment contrary to the scheme which required automated allocation. The present case stands on a different footing. Here, the notice under section 148 is not under challenge. The notice under section 143(2), which is subsequent to filing of return, was issued by the Jurisdictional Assessing Officer, and the assessment was completed by the Assessment Unit under section 144B. The scheme under section 151A primarily governs issuance of notice under section 148 and pre-assessment procedures, whereas section 144B governs the procedure for completion of assessment.

The Hon’ble Delhi High Court in Inder Dev Gupta has categorically held that concurrent jurisdiction between the Arham Anmol Projects Private Limited Jurisdictional Assessing Officer and the Faceless Assessing Officer is legally sustainable, and that issuance of notice by the Jurisdictional Assessing Officer is not ipso facto void. This decision, being subsequent and directly addressing the concurrency issue, lends support to the proposition that bifurcation of functions does not necessarily vitiate proceedings.

Within the territorial jurisdiction of the Hon’ble Bombay High Court, the ratio of Hexaware would ordinarily bind this Tribunal to the extent of its factual and legal context. However, Hexaware dealt with validity of notice under section 148 in light of section 151A. The present issue concerns issuance of notice under section 143(2) and subsequent completion of assessment under section 144B. There is no finding in Hexaware that a notice validly issued by a competent Assessing Officer under section 143(2) becomes invalid merely because the assessment is completed by the Assessment Unit.

The Hon’ble Delhi High Court’s reasoning in Inder Dev Gupta, which affirms concurrent jurisdiction and recognises that both JAO and FAO may exercise statutory powers, is directly relevant in evaluating the bifurcation between issuance of notice and completion of assessment. While the divergence between Hon’ble High Courts remains pending consideration before the Supreme Court, there is no authoritative pronouncement holding that once a valid notice under section 143(2) is issued by a competent Jurisdictional Assessing Officer, the assessment

Upon harmonizing the statutory provisions and judicial precedents, we find that the ratio of Hexaware does not extend to invalidate proceedings where the mandatory notice under section 143(2) has been issued by a competent Assessing Officer and the assessment is thereafter completed under the faceless regime as contemplated by section 144B. The Hon’bleDelhi High Court’s view in Inder Dev Gupta reinforces the principle that concurrent or complementary jurisdiction survives notwithstanding the faceless scheme.

Accordingly, even after considering in detail the authorities cited by both parties, we are unable to accept the contention that the assessment stands vitiated solely on the ground that notice under section 143(2) was issued by the Jurisdictional Assessing Officer and the assessment was completed by the Assessment Unit. The legal ground raised by the assessee is therefore rejected.

We now proceed to examine the issues on merits. The assessment in the present case has been framed under section 147 read with section 144B primarily on the basis of information available on the Insight Portal and ITS data. The additions made by the Assessing Officer comprise: (i) Short Term Capital Gain of Rs. 4,54,49,186/- by treating the entire sale consideration of certain properties as income on the footing that Arham Anmol Projects Private Limited cost of acquisition was not furnished; (ii) estimation of income at 12% on contract receipts amounting to Rs. 7,68,674/-; (iii) estimation of 50% of professional receipts amounting to Rs. 2,07,865/-; and (iv) addition of rent receipts of Rs. 2,00,25,538/- as business income. These culminated in assessment of total income at Rs. 7,22,67,823/- as against returned income of Rs. 58,16,560/-.

From the assessment order as well as the order of the learned CIT(A), it emerges that the additions have been made essentially on account of non-compliance and absence of documentary substantiation during assessment proceedings. The Assessing Officer has proceeded ex parte under section 144 and adopted a mechanical approach by taking cost of acquisition at Nil in respect of property transactions and by estimating income percentages on gross receipts reflected in ITS. The learned CIT(A) has also dismissed the appeal substantially on account of non- prosecution and has confirmed the additions without detailed examination of the factual matrix or evidences.

Before us, the learned AR has explained that due to multiple litigations, freezing of bank accounts and other extraordinary circumstances, the assessee could not effectively participate before the lower authorities. It has been submitted that the additions, particularly in respect of capital gains and rental income, have been made without considering relevant documents such as purchase deeds, cost details, computation of capital Arham Anmol Projects Private Limited gains, and reconciliation of receipts with books of account. Additional evidences have been sought to be placed on record.

On perusal of the record, we find that the addition of Rs. 4,54,49,186/- towards Short Term Capital Gain has been made by treating the entire sale consideration as taxable gain without examination of cost of acquisition, indexed cost, nature of asset, period of holding or computation as per sections 45 and 48. Such an approach, though prompted by absence of details, does not constitute a proper determination of taxable capital gains in accordance with law.

Similarly, in respect of contract receipts and professional fees, the Assessing Officer has applied ad hoc percentages without rejecting books of account or conducting any verification. The addition of entire rent receipts as business income also appears to have been made solely on the basis of ITS data without examining whether such receipts were already accounted for in the return or whether any expenditure was incurred in earning such income.

At the same time, it cannot be ignored that the assessee did not furnish necessary details during assessment and appellate proceedings, resulting in the ex parte orders. The failure of the assessee to discharge the initial burden of proof has materially contributed to the additions.

Considering the totality of circumstances, we are of the view that the issues on merits require fresh factual examination. The Arham Anmol Projects Private Limited determination of capital gains cannot be sustained merely by adopting Nil cost without verifying purchase documents. Estimation of business income requires examination of books of account and reconciliation of receipts. The rental income needs to be correlated with books and nature of activity. These aspects necessitate proper verification at the assessment stage.

In the interest of justice and to afford one final opportunity to the assessee to substantiate its claims, we deem it appropriate to restore the entire matter relating to the additions on merits to the file of the Assessing Officer. The Assessing Officer shall examine afresh the issues of capital gains, contract receipts, professional income and rental receipts in accordance with law, after affording reasonable opportunity of being heard to the assessee and after considering all evidences and explanations that may be furnished.

The assessee is directed to cooperate fully and furnish complete documentary evidence in support of its contentions without seeking unwarranted adjournments. In the event of failure to comply, the Assessing Officer shall be at liberty to proceed in accordance with law on the basis of material available on record.

Accordingly, the additions on merits are set aside and restored to the file of the Assessing Officer for fresh adjudication in accordance with law. The appeal of the assessee is allowed for statistical purposes.

The appeal of the assessee is accordingly partly allowed for statistical purposes.