Reassessment Notices & Order Passed Contrary To Notified Mandatory Faceless Procedure U/s 151A Are Liable To Be Quashed: Bombay HC

Section 148A of the Income Tax Act states that the assessing officer must follow certain new procedures outlined in this section before issuing any such notices, and mandates that the AO provide the concerned taxpayer an opportunity to be heard. It offers a step prior to issuing of notices to help the taxpayer clarity on the income suspected to have escape assessment.

The Division Bench comprising Justice G.S. Kulkarni and Justice Somasekhar Sundaresan observed that “Section 148A in its object, intent and purpose is inextricably connected with the assessment, re-assessment or re-computation, for which a notice u/s 148 may be issued. Any other view would mean that the requirement to adopt the faceless procedure under the Scheme is a mere ministerial requirement for issuance of the notice. Such a reading would not be in conformity with the objectives spelt out in clauses (a), (b) and (c) of Section 151A(1)”. (Para 13)

Facts of the case:

The Assessee company was issued notice u/s 148 and order u/s 148A(b) and Section 148A(d) by the Jurisdictional AO and not a Faceless Assessing Officer (FAO) as required by provisions of Section 151A. Hence, the Assessee approached the High Court challenging the notice issued u/s 148 and also underlying prior notice and order u/s 148A(b) and Section 148A(d) of the Income tax Act.

Observations of the High Court:

The Bench observed that to give effect to the provisions of Section 151A, Central Government, CBDT issued notification no.18/2022 dated March 29, 2022, notifying E-Assessment of Income Escaping Assessment Scheme whereby the Revenue resorting to procedure prescribed u/s 148A was required to comply with the provisions drawn in Section 151A for issuance of notice u/s 148.

On perusal of the notification and relevant provisions, the Bench outlined that proceedings envisaged under clauses (b) and (d) of Section 148A do not fall outside the scope of E-Assessment Scheme.

The Bench also stated that clause 3(b) of notification/scheme squarely covers issuance of notice u/s 148 and further mandates automated allocation and issuance of such notice in a faceless manner.

Further, the Bench noted that Section 151A(1) provides that the Central Government may make a scheme for purposes of assessment u/s 147 with the objective of eliminating interface between tax authorities and Assessee and streamlining reassessment, re-computation or issuance of notice with dynamic jurisdiction.

The Bench also opined that it is difficult to fathom that the Scheme would not take provisions of Section 148A with its ambit when clause 3(a) of the Scheme explicitly provides for 'assessment, reassessment or re-computation u/s 147, and clause 3(b) provides for issuance of notice u/s 148.

The Bench enunciated that provisions of Section 148A postulate a procedure that is inextricably linked to Section 148, and exclusion of applicability of Section 148A would result in absurdity.

Hence, observing that it is not possible to accept reading the provisions of Section 144B de hors Section 151A(1), the High Court allowed Assessee's petition and set aside notice issued u/s 148 as well as notice u/s 148A(b).

Counsel for Assessee/ Petitioner: Advocates Madhur Agrawal and Atul K. Jasani

Counsel for Revenue/ Respondent: Advocate Akhileshwar Sharma

Case Title: Kairos Properties Private Limited Vs Assistant Commissioner of Income-tax

Case Number: W.P (LODG.) NO. 22686 OF 2024

Citation: 2024 LiveLaw (Bom) 423

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