Bombay HC Quashes Jurisdictional AO’s Exercise U/S 148A Conducted Outside Faceless Mechanism

Observing that the scheme shown by the Central Government does not envisage exclusion of provision of section 148A since the process shown within the mentioned provisions is inextricably associated with Section 148, the Bombay High Court has quashed the whole exercise that the jurisdiction AO has performed under section 148A outside the faceless procedure.

Section 148A of the Income Tax Act cited that the assessing officer should follow some new guidelines in this section before issuing any notices and obligates that the Assessing Officer (AO) furnishes the related assessee a chance to be heard. It proposes a step before issuing the notices to assist the assessee with clarity on the income suspected to have escaped assessment. 

The Division Bench comprising Justice G.S. Kulkarni and Justice Somasekhar Sundaresan marked 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 the 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

 U/S 148 and order u/s 148A(b) and Section 148A(d) the taxpayer company was issued the notice via the Jurisdictional AO and not a faceless assessing officer (FAQ) as needed by the provisions of section 151A. Therefore the taxpayer has approached the HC contesting the notice issued under Section 148 and underlying prior notice and order under Section 148(b)  and Section 148A(d) of the Income Tax Act.

Observations of the Bombay High Court

It was marked by the Bench that to give effect to the provisions of section 151A Central Government, CBDT issued notification no.18/2022 on March 29, 2022, notifying E-Assessment of Income Escaping Assessment Scheme whereby the Revenue resorting to procedure specified under section 148A was needed to comply with the provisions outlined in Section 151A for issuance of notice u/s 148.

The Bench on the perusal of the notification and pertinent provisions mentioned that the proceedings envisaged under clauses (b) and (d) of Section 148A do not fall outside the scope of the E-Assessment Scheme.

The Bench expressed that clause 3(b) of the notification/scheme covers the issuance of notice under section 148 and requires automated allocation and issuance of such notice facelessly.

It was marked by the Bench that Section 151A(1) furnishes that the Central Government might make a scheme for the purposes of assessment under section 147 to eliminate the interface between tax authorities and the taxpayer and facilitate reassessment, re-computation, or issuance of notice with dynamic jurisdiction.

It was viewed by the Bench that it is not easy to fathom that the scheme shall not take the provisions of section 148A with its ambit when clause 3(a) of the Scheme furnishes for ‘assessment, reassessment or re-computation u/s 147, and clause 3(b) provides for issuance of notice u/s 148.

According to Bench, the provisions of Section 148A propose a process that is inextricably associated with Section 148, and exclusion of applicability of Section 148A would result in silliness.

The HC while marking that it is not feasible to accept the reading of the provisions of section 144B de hors section 151A(1), permitted the taxpayer’s petition and set aside the notice issued under section 148 along with the notice under section 148A(b).