Reopening Notice u/s 148 by JAO (Central Circle) Quashed as Mandatory Faceless Scheme Applicable

Reopening Notice u/s 148 by JAO (Central Circle) Quashed as Mandatory Faceless Scheme Applicable

Issue

1. Whether a notice for reopening assessment under Section 148 issued by a Jurisdictional Assessing Officer (JAO) (specifically a Central Circle officer) on 29-12-2023 is valid, or if it is void ab initio for violating the mandatory Faceless Assessment Scheme notified under Section 151A on 29-03-2022.

2. Whether cases under Central Charges and International Taxation are exempt from the mandatory faceless mechanism for the issuance of Section 148 notices.

Facts

• Assessment Year: 2021-22.

• Background: Search action was conducted on the assessee-group on 04-11-2022. The case was centralized under Section 127.

• The Notice: A notice under Section 148 was issued on 29-12-2023.

• Issuing Authority: The notice was issued by the DCIT/ACIT (Central), Shimla, who is the Jurisdictional Assessing Officer (JAO).

• Assessee’s Challenge: The assessee argued that post the notification dated 29-03-2022, the JAO (including Central Circle) has been divested of the power to issue notices under Section 148. The power is exclusively vested in the Faceless Assessing Officer (FAO).

• Revenue’s Defense: The CIT-DR contended that the Faceless Scheme does not apply to Central Charges and International Taxation matters, which are traditionally handled manually.

Decision

• The ITAT Delhi Bench allowed the appeal and quashed the assessment order.

• Mandatory Faceless Jurisdiction: Relying on the binding judgments of the Punjab & Haryana High Court (Jatinder Singh Bhangu, Om Satya Overseas) and the Bombay High Court (Abhin Anilkumar Shah/Hexaware), the Tribunal held that the scheme notified under Section 151A is mandatory. Any notice issued by a JAO after 29.03.2022 is without jurisdiction.

• No Exception for Central/International Charges: The Tribunal explicitly rejected the Revenue’s plea. It held that the notification dated 29-03-2022 does not exclude Central or International Taxation charges from the faceless mechanism for the specific purpose of issuance of notice under Section 148. While the assessment might be face-to-face for Central charges, the initiation (notice issuance) must be faceless.

• Outcome: Since the notice was issued by the JAO (who lacked jurisdiction), the notice and the subsequent assessment order were quashed. The additions made (Rs. 16.21 Lacs and Rs. 10.95 Lacs) were deleted without going into merits.

Key Takeaways

• Central Circle Limitation: Even in search cases centralized with Central Circles, the initial notice under Section 148 must be generated by the Faceless unit. The Central AO cannot bypass this system.

• Supremacy of Notification 18/2022: The notification issued under Section 151A overrides general administrative circulars or office memorandums. Unless an exception is carved out in the gazetted scheme itself, the faceless procedure applies to all.

• Jurisdictional Defect: A notice issued by the wrong officer (JAO instead of FAO) is a fatal, incurable defect that vitiates the entire proceeding.