Reopening Quashed: Notice u/s 148 by JAO Invalid; Faceless Scheme Applies to Central Charges

Reopening Quashed: Notice u/s 148 by JAO Invalid; Faceless Scheme Applies to Central Charges

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 in law, considering the mandate of Section 151A and the Faceless Assessment Scheme notification dated 29-03-2022.

2. Whether the Faceless Assessment Scheme applies to Central Charges and International Taxation charges, or if they are excluded from its purview.

Facts

• Assessee: An individual subject to search and seizure operations.

• Assessment Year: 2021-22.

• 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).

• Legal Challenge: The assessee challenged the validity of the notice, arguing that post the notification dated 29-03-2022, only a Faceless Assessing Officer (FAO) has the jurisdiction to issue notices under Section 148.

• Revenue’s Defense: The CIT-DR argued that the matter is pending before the Supreme Court and, more importantly, that the Faceless Scheme does not apply to Central Charges and International Taxation matters (which are traditionally handled manually due to complexity).

Decision

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

• Mandatory Faceless Jurisdiction: Relying on the binding judgment of the Punjab & Haryana High Court in Jatinder Singh Bhangu, the Tribunal held that the scheme of faceless assessment under Section 151A is mandatory for the issuance of Section 148 notices. A notice issued by a JAO after 29.03.2022 is void.

• Central Charges Included: The Tribunal explicitly rejected the Revenue’s argument that Central Charges are exempt. It relied on the Bombay High Court judgment in Abhin Anilkumar Shah v. ITO (and Hexaware Technologies), which clarified that the notification dated 29-03-2022 does not exclude Central or International Taxation charges from the faceless mechanism for the issuance of notice.

• Outcome: Since the foundational notice was issued by an authority (JAO/Central Circle) lacking jurisdiction under the faceless scheme, the entire assessment proceedings were vitiated and quashed.

Key Takeaways

• No Exception for Central Circles: This is a significant ruling. Even in search cases centralized with Central Circles, the initial notice under Section 148 must be issued by the Faceless unit. The manual jurisdiction of the Central AO triggers only at a later stage (for assessment), not for notice issuance.

• High Court Consensus: Multiple High Courts (Bombay, Telangana, P&H) have now converged on the view that Section 151A overrides internal circulars or exclusions unless explicitly provided in the gazetted scheme.

• Jurisdictional Defect: Issuing a notice through the wrong officer is a fatal defect that cannot be cured.