Reopening Notice u/s 148 by JAO instead of Faceless AO Quashed

Reopening Notice u/s 148 by JAO instead of Faceless AO Quashed

Issue

Whether a notice for reopening assessment under Section 148 of the Income Tax Act, 1961, issued by the Jurisdictional Assessing Officer (JAO) on or after 29-03-2022, is valid in law, considering the mandatory provisions of Section 151A and the CBDT Notification No. 18/2022 which mandate issuance by the Faceless Assessing Officer (FAO).

Facts

• Assessment Year: 2018-19.

• Cross-Appeals: Both the assessee and the Revenue appealed against the order of the CIT(A), NFAC. The CIT(A) had estimated an addition of 9% on alleged bogus purchases of Rs. 29.69 Crores, which was originally added in full by the AO.

• The Notice: The notice under Section 148 for reopening the assessment was issued on 07-04-2022.

• Issuing Authority: The notice was issued by Shri Jatin Abbi, Circle-1, Ludhiana, who is the Jurisdictional Assessing Officer (JAO).

• Legal Ground: The assessee challenged the validity of the notice, arguing that under the Faceless Assessment Scheme (notified on 29-03-2022), only a Faceless Assessing Officer (FAO) has the jurisdiction to issue such notices.

Decision

• The Income Tax Appellate Tribunal (ITAT) quashed the assessment order.

• Jurisdictional Defect: The Tribunal held that the issuance of notice under Section 148 by the JAO instead of the FAO was a fatal jurisdictional error.

• Reliance on Precedent: The Tribunal relied on the binding judgment of the Punjab & Haryana High Court in the case of Jatinder Singh Bhangu (165 Taxmann.com 115) and Om Satya Overseas, which definitively held that:

  • The scheme of faceless assessment applies from the stage of show-cause notice under Section 148/148A.

  • Departmental circulars or office memorandums allowing JAOs to issue notices cannot override the statutory notification dated 29.03.2022 issued under Section 151A.

• Outcome: Since the foundational notice was quashed, the entire assessment proceedings became void. The Tribunal allowed the assessee’s appeal on this legal ground alone without adjudicating the merits of the bogus purchase addition. The Revenue’s appeal was dismissed as infructuous.

Key Takeaways

• Mandatory Faceless Jurisdiction: Post 29-03-2022, notices under Section 148 must be issued through the automated allocation system by a Faceless Assessing Officer. Notices issued by local JAOs are legally unsustainable in jurisdictions covered by favorable High Court rulings.

• Statute Overrides Circulars: Internal instructions or OMs from the CBDT directing JAOs to issue notices cannot supplant the statutory notification issued by the Central Government.

• Jurisdictional Challenge: Taxpayers can successfully challenge reopening notices on purely technical/jurisdictional grounds if the prescribed procedure for faceless assessment is violated.

IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, CHANDIGARH
ACIT-Circle-1
Aaykar Bhawan, Rishi Nagar
Ludhiana – 141001
Vs.
Sharmanji Yarns Pvt. Ltd.
Village Lakhowal Road
Kohara, Jandiali
Ludhiana – 141112