05 August 2024 Income Tax >> Tax Laws  

In a recent judicial proceeding of Kairos Properties Private Limited, Mumbai v/s Assistant Commissioner of Income-tax, Mumbai & Others, a Writ Petition was filed under Article 226 of the Constitution of India challenging a notice issued to a petitioner under Section 148 of the Income Tax Act, 1961. This notice pertained to returns filed for the Assessment Year 2017-18 and was initiated following an earlier notice and order under Section 148A of the Act. The case underscores the importance of adhering to prescribed procedural frameworks in tax assessments, particularly in light of the faceless assessment mechanism introduced by the Central Government.

Background:

The controversy began with the issuance of a notice dated April 25, 2024, under Section 148, which was preceded by a notice and order under Section 148A on March 30, 2024. Crucially, it was determined that these notices were issued by the Jurisdictional Assessing Officer (JAO), rather than the designated Faceless Assessing Officer (FAO) as mandated by Section 151A of the Act. This procedural misstep raised significant legal questions regarding the validity of the notices.

Legal Framework:

To implement the faceless assessment system, a notification was issued by the Central Government on March 29, 2022. This notification outlines that all notices under Section 148 must be issued in a faceless manner through automated allocation, eliminating the discretion of individual officers. The provisions of Section 151A emphasize that the assignment of jurisdiction is exclusive to either the JAO or the FAO, ensuring a streamlined and transparent process.

In the landmark case Hexaware Technologies Limited vs. Assistant Commissioner of Income Tax, the court clarified that the concurrent jurisdiction of JAO and FAO does not exist when it comes to issuing notices under Section 148. This ruling reinforced that any notice issued outside the framework of the established scheme is invalid.

Judicial Findings:

The court scrutinized the actions of the Revenue and concluded that the issuance of the impugned notices failed to comply with the requirements of the faceless assessment mechanism. It was established that the JAO lacked the authority to issue the notices in question, and therefore, the notices were quashed.

The court emphasized that any authority acting contrary to the law results in invalid action, and the petitioner does not need to demonstrate prejudice caused by this action. The very act of not following due process inherently prejudices the rights of the assessee.

Implications of the Ruling:

This ruling not only quashes the notices issued under Sections 148A and 148 but also sets a precedent regarding the strict compliance required under the faceless assessment framework. The decision highlights the judiciary’s commitment to uphold legal standards and procedural integrity in tax assessments.

Furthermore, the court made it clear that while the notices under Section 148 were invalidated, it did not express any opinion on the validity of the prior orders under Section 148A, leaving those questions unresolved for future deliberation.

Conclusion:

The case serves as a crucial reminder of the importance of following statutory protocols in tax assessments. With the ongoing emphasis on transparency and efficiency in tax administration, the judiciary's insistence on compliance with procedural norms will likely shape the future landscape of income tax assessments in India. This decision, reinforcing the necessity of adherence to the faceless assessment mechanism, ensures that all taxpayers are treated fairly and justly under the law.

  Income Tax Act, 1961