Reassessment Notice Issued by Jurisdictional AO Instead of Faceless AO is Legally Void

Reassessment Notice Issued by Jurisdictional AO Instead of Faceless AO is Legally Void

The Issue

Whether a reassessment notice issued under Section 148 of the Income Tax Act by a Jurisdictional Assessing Officer (JAO) is valid if it was issued after the notification of the Faceless Assessment Scheme on March 29, 2022.

The Facts

• The Notice: The Assessing Officer issued a notice under Section 148 to the assessee on March 31, 2022, for Assessment Year 2018-19.

• The Legal Context: Just two days prior, on March 29, 2022, the Ministry of Finance had issued a notification mandating that all such notices must be issued in a faceless manner through the National Faceless Assessment Centre (NaFAC) using automated allocation.

• The Precedent: The assessee relied on the Punjab & Haryana High Court judgments in Jatinder Singh Bhangu v. Union of India and Jasjit Singh v. Union of India, which held that notices issued by a physical JAO after the faceless regime’s commencement are jurisdictionally flawed.

The Decision

The ITAT Chandigarh Bench (Vice President Raj Pal Yadav) quashed the reassessment order, emphasizing the following:

1. Mandatory Faceless Procedure: Following the March 29, 2022 notification, the authority to initiate reassessment proceedings was shifted exclusively to the Faceless Assessing Officer (FAO). The object of the faceless scheme is to eliminate the physical interface, and allowing a JAO to issue these notices defeats this purpose.

2. Jurisdictional Defect: A notice issued by an officer who no longer holds the specific statutory authority to do so is “bad in the eyes of law.” This is a fundamental jurisdictional error that cannot be cured.

3. Judicial Discipline: The Tribunal noted that the Jurisdictional High Court (Punjab & Haryana) had already settled this issue in favor of taxpayers. As a sub-ordinate authority, the ITAT is bound to follow the High Court’s interpretation.

4. Outcome: The Section 148 notice and the resulting reassessment order were quashed. The appeal of the assessee was allowed. In favour of assessee.

Key Takeaways for Taxpayers

• Date of Notice is Critical: If your reassessment notice was issued on or after March 29, 2022, check the signature. If it was issued by your local Ward/Circle officer (JAO) instead of “NaFAC,” it may be legally invalid.

• High Court Divergence: While the Punjab & Haryana, Bombay, and Telangana High Courts have quashed JAO notices, some other courts (like Delhi and Madras) have recently suggested “concurrent jurisdiction.” However, for taxpayers in Punjab, Haryana, and Chandigarh, the Jatinder Singh Bhangu precedent remains the binding law.

• Immediate Challenge: If you receive a JAO-issued notice under the new regime, you can challenge it via a Writ Petition in the High Court or raise a jurisdictional objection at the very first stage of the assessment.