Object Of Introduction Of Faceless Assessment Stands Defeated If Show Cause Notice U/s 148 Is Issued By Jurisdictional AO: Punjab & Haryana HC

Since the Revenue Department had issued show-cause notice u/s 148 relying on the Board's Memorandum and Instructions, the High Court clarified that circulars, instructions and letters issued by Board or any other authority cannot override statutory provisions.

As per Section 148 of Income tax Act, before making the assessment, reassessment or re-computation 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.

Further, as per Section 151A of Income tax Act, 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 u/s 148 or conducting of enquiries or issuance of show-cause notice or passing of order u/s 148A or sanction for issue of such notice u/s 151, so as to impart greater efficiency, transparency and accountability by eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible.

The Bench of Chief Justice Sheel Nagu and Justice Jagmohan Bansal observed that “assessment proceedings commence from the stage of issuance of show cause notice. The object of introduction of faceless assessment would be defeated if show cause notice under Section 148 is issued by Jurisdictional Assessing Officer”. (Para 15)

Facts of the case:

The assessee, a farmer, had received compensation on account of acquisition of his land. He received a notice u/s 148 wherein it was mentioned that department has received information of escaping tax. He has further received intimation to the effect that his case has been selected for the purpose of Faceless Assessment and proceedings would be conducted in a faceless manner.

Hence, the assessee assailed the notice issued u/s 148 and intimation for assessment in accordance with the procedure prescribed u/s 144B, contending that notice issued u/s 148 is in contravention of notification dated Mar 29, 2022 as well as Section 151A whereby concept of Faceless Assessment was introduced.

Observation of the Tribunal:

The Bench accepted that the petitioner has filed his return within stipulated time, and the JAO has issued notice u/s 148 after obtaining prior approval from Principal Commissioner of Income Tax.

The Bench also noted that the respondent has intimated the petitioner that his assessment would be completed in accordance with procedure prescribed u/s 144B.

A Division Bench of Telangana High Court in case of Kankanala Ravindra Reddy has held that notice u/s 148 cannot be issued by Jurisdictional AO, added the Bench.

Referring to the decision of Bombay High Court in Hexaware Technology Ltd. Vs. Assistant Commissioner of Income Tax, (2024) 464 ITR 430 (Bombay), to reiterate that notice u/s 148 after introduction of Finance Act, 2021, cannot be issued by Jurisdictional Assessing Officer.

The Bench went on to explain that every assessee has to file annual return disclosing its total taxable income and tax liability, and in case AO disagrees with the disclosed income, he has right to re-assess tax liability of the assessee.

Going further, the Bench observed that re-assessment cannot be made without granting opportunity to the assessee, by way of issuing notice followed by personal hearing.

Explaining about Section 151A, the Bench observed that the object of faceless assessment is to eliminate interface between the Income Tax Authority and assessee to the extent feasible.

Hence, the High Court allowed Assessee's petition and quashed the notices issued by Jurisdictional Assessing Officer u/s 148.

Counsel for Appellant/ Assessee: Sandeep Goyal, Rishab Singla, Peyush Pruthi, Aakriti, Nitish Bansal and Nazuk Singhal

Counsel for Respondent/ Revenue: Amanpreet Singh

Case Title: Jatinder Singh Bhangu verses Union of India and others

Citation: 2024 LiveLaw (PH) 165

Case Number: CWP-15745-2024

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