Reassessment Proceedings Under Sections 147, 148, and 148A Must Be Faceless;

ORDER

1. Common question that arises for consideration in this batch of writ petitions is as to whether the jurisdiction to conduct enquiry, issue notice, pass order under Section 148A of the Income Tax Act (hereinafter referred to as “the Act”) and issuance of consequential notice under Section 148 of the Act, would lie with the Faceless Assessing Officer (hereinafter referred to as “FAO”) or Jurisdictional Assessing Officer (hereinafter referred to as “JAO”).

2. Writ petitions are filed challening either notices under Section 148 and/or order under Section 147 of the Act, on the common premise that proceedings under Section 148 A of the Act was conducted by JAO and not FAO in a faceless manner. At the cost of reptition the question referred supra is common to all writ petitions. For the purpose of disposing the present batch of writ petitions, I shall deal with the facts obtaining in W.P.No.21942 of 2024.

2.1. Petitioner is an individual engaged in the business of wholesale purchase and sale rice and paddy. For the assessment year 2015-16, petitioner had a turnover of Rs.4,87,44,145/-. Net profit was declared at Rs.6,49,848/-. Petitioner’s business being primarily purchase and sale of rice and paddy with agriculturist, majority of transactions were cash transactions.

2.2. While so, petitioner was visited with a notice under Section 148A(b) of the Act dated 21.03.2022, issued by first respondent (JAO) to show cause as to why cash amounting to Rs.71,50,100/-, deposited by petitioner in his bank account during financial year 2015-16, should not be treated as escaped income within the meaning of section 147 of the Act. Petitioner filed his reply on 28.03.2022 interalia stating that the cash deposits where from sale of rice and paddy and submitted his bank details.

2.3. First respondent passed an order under Section 148A(d) of the Act and consequential notice under Section 148 of the Act came to be issued on 04.04.2022 whereby petitioner’s objection was rejected on the premise that the documentary evidence was not submitted by petitioner. In response to the notice under Section 148 of the Act, petitioner filed his return of income for the assessment year 2015-16 on 04.05.2022. Thereafter, a notice under Section 142(1) of the Act was issued by the 2^nd respondent on 14.12.2022. Petitioner submitted copies of documents called for including:

2.4. Petitioner was thereafter issued a notice under Section 142(1) of the Act on 20.01.2023, by the 2^nd Respondent. In response, petitioner duly filed his submissions dated 24.01.2023.

2.5. 2^nd respondent issued a notice under Section 143(2) of the Act on 09.02.2023. Petitioner submitted documentary evidence relating to transactions and his income on 27.12.2022 and 24.01.2023.

2.6. Petitioner was issued a notice under Section 142(1) of the Act on 02.11.2023, by 2^nd respondent.

2.7. 2^nd respondent, issued a show cause notice on 05.01.2024, almost a year after the 2^nd notice under Section 142(1) of the Act was issued. It is stated that the notice was uploaded on the Income Tax Portal, petitioner was not aware of the said notice being issued.

2.8. 2^nd respondent passed the impugned order under Section 147 read with Section 144B of the Act, on 24.01.2024, by making an addition of Rs.32,43,511/- to the income of petitioner, as Income Escaping Assessment and initiated penalty proceedings under Section 271(1)(c), 271B, 271F and 271(1)(b) of the Act, alleging that there is concealment of income, without considering the submissions filed by petitioner.

2.9. The present batch of writ petitions are filed raising a common question viz., whether the jurisdiction to conduct enquiry, issue notice, pass order under Section 148A of the Act and issuance of consequential notice under Section 148 of the Act, would lie with FAO or JAO. Here, it may also be relevant to note that in W.P.No.35385 of 2024, assessment is assigned to central charge and thus would fall within the exception to faceless assessment procedure carved out of CBDT’s order dated 06.09.2021. To answer the above issue it may be necessary to first resolve the controversy as to whether the jurisdiction to conduct enquiry, issue notice, pass order under Section 148A of the Income Tax Act (hereinafter referred to as “the Act”) and issuance of consequential notice under Section 148 of the Act, would lie with the Faceless Assessing Officer (hereinafter referred to as “FAO”) or Jurisdictional Assessing Officer (hereinafter referred to as “JAO”).

3.1. The following submissions were made on behalf of the petitioners by Mr.V.S.Jayakumar, Senior Advocate, Mr.A.S.Sriraman, Mr.R.Sivaraman, Mr.Venkat Narayanan, Mr.N.V.Balaji, Mr.Joseph Prabakar, Mr.M.VarunPandian, Mr.S.P.Chidambaram, Mr.Madhu and Mr.G.Ashokapathy.

(a) That in terms of Section 151A of the Act read with the Scheme framed by the Central Government in exercise of its powers conferred thereon proceedings under Section 148A and notice under Section 148 of the Act, ought to be done in a faceless manner by FAO and not JAO with effect from 01.04.2021.

(b) Impugned proceedings under Section 148A of the Act and consequential order under Section 148 of the Act having been made by JAO and not FAO, the entire proceeding stands vitiated for want of jurisdiction.

(c) That the language employed in Section 151A of the Act is unambiguous and the legislative intent behind introducing Section 151A of the Act is to bring the said scheme of the Act dealing with income escaping assessment within the fold of faceless mechanism. The said provision seeks to impart greater efficiency, transparency and accountability in the procedure relating to assessment of escaped income/re-assessment.

(d) Section 151A of the Act read with the scheme made under Section 151 A and Section 130 of the Act, which displaces assessment / reassessment based on territorial jurisdiction conducted by JAO hitherto and confers jurisdiction with FAO, through team based assessment.

(e) That Section 147 of the Act which deals with assessment of income which has escaped assessment provides that the power of the assessing officer to assess escaped income is subject to the provisions of Sections 148 to 153 of the Act, i.e., including Section 148A of the Act. The arrangement of the said sections and its purpose would show that the said provisions are part of one Scheme dealing with assessment of escaped income.

(f) That Section 148 of the Act contemplates issuance of notice subject to the conditions prescribed therein for the purpose of framing assessment under Section 148 of the Act. Section 148A of the Act is legislative recognition/incorporation of the procedure laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd., v. Income Tax Officers, reported in (2003) 1 SCC 72, in relation to assessment of escaped income.

(g) That assessment of escaped income is one continuous process consequent to enquiry which would suggest that income chargable to tax has escaped assessment, followed by an order under Section 148A(d) of the Act and a corresponding notice under Section 148 of the Act, culminating in an order of asessement under Section 147 of the Act.

(h) The amendment brought in Section 151A of the Act with effect from 01.04.2021 inserting Section 148A of the Act and Scheme framed by the Central Government in exercise of its power under Section 151A of the Act, wherein issuance of notice under Section 148 of the Act is included within the scope of the Scheme, would show the Scheme would cover proceedings under Section 148A of the Act. Section 151A of the Act dated 29.03.2022 covers Section 148A of the Act, the Scheme framed thereunder expressly provides for issuance of notice under Section 148 of the Act, automatically encompasses within its fold the procedure envisaged under Section 148A of the Act, though the scheme does not expressly cover Section 148 A of the Act.

(i) That any dissection of the proceedings under Section 148A and Section 148 of the Act by treating them as distinct and independent of each other would result in defeating the purpose and object of introducing Faceless Mechanism in terms of Section 151A of the Act.

(j) Reliance was placed on the following judgments in support of their contention that reassessment proceedings commencing with proceedings under Section 148A of the Act and culminating in reassessment under Section 147 of the Act ought to be faceless:-

(1) Kankanala Ravindra Reddy v. Income-tax Officer reported in 2023 SCC Online TS 4476.

(2) Hexaware Technologies Ltd., v. Assistant Commissioner of Income-tax reported i(3) Jatinder Singh Bhangu v. Union of India reported in 2024 SCC OnLine P&H 9337.

(4) Sri Venkataramana Reddy Patloola v. Deputy Commissioner of Income Tax, Circle 1(1), Hyderabad and Others reported in [2024].

(5) Jasjit Singh v. Union of India reported in [2024]  (Punjab & Haryana).

(6) Kairos Properties Private Limited v. Assistant Commissioner of Income-tax and Others reported in

(7) T.K.S. Builders Pvt. Ltd., v. Income Tax Officer Ward 25(3), New Delhi reported in

4.1. The following submissions were made on behalf of Income Tax Department by learned Senior Standing Counsels, Mr.V.Mahalingam, Dr.B.Ramasamy, Mr.A.P.Srinivas, learned Senior Panel Counsel Mr.Rajnish Pathiyil and Mr.Prabhu Mukunth Arunkumar, learned Standing Counsel:

(a) That the writ petitions ought not to be entertained inasmuch as there is an effective alternative remedy available to the petitioner. Reliance was placed on various judgments including the case of Commissioner of Income Tax v. Chhabil Das Agarwal, reported in (2014) 1 SCC 603, to submit that whenever there is a statutory forum provided by law for redressal of grievance, the same ought not to be permitted to be bypassed unless alternate remedy is ineffective or a mere formality and no substantial relief could be obtained.

(b) Section 148 of the Act authorizes JAO to issue notice under Section 148 of the Act. Assessing Officer is defined under Section 2(7A) of the Act and refers to ACIT, DCIT, ADIT, DDIT, ITO who are vested with the relevant jurisdiction by virtue of directions or order issued under Section 120(1) or 120(2) of the Act. Power to issue notice under Section 148 of the Act is not vested with any officer other than JAO. Section 144B of the Act does not authorize NaFAC or Faceless Assessment Units to process the case for reopening of assessment under Section 148A of the Act and issue notice under Section 148 of the Act. Section 144B of the Act authorizes NaFAC to act only from the stage of issuing notice under Section 143(2) or Section 142(1) of the Act.

(c) That Sections 148A and 148 of the Act authorizes only the JAO to process the case for reopening and issue notice under Section 148 of the Act and not NaFAC. JAO is not divested of its power to issue notice under Section 148 of the Act. Consequently, notices issued under Section 148 of the Act by the JAO is valid in law.

(d) Central Government framed E-Assessment of Income Escaping Assessment Scheme, 2022, under Section 151A of the Act, vide notification No. S.O. 1466[E] dated 29.3.2022. The scheme only provides for making reassessment through Section 144B of the Act but has not made any workable scheme for processing the case for reopening under Section 148A of the Act and issuance of notice under Section 148 of the Act.

(e) That reference to issuance of notice under Section 148 of the Act in the Scheme, is a policy statement of the Government and no scheme is brought out in the notification for processing the case for reopening under Section 148A of the Act and issue of notice under Section 148 of the Act. Section 144B of the Act also does not grant/vests any power with NaFAC in relation to proceedings under Section 148A of the Act.

(f) By comparing the provisions of Section 144B(1) of the Act before and after the amendment, it was submitted that before amendment NaFAC is vested with power to carry out assessment proceedings from the stage after the issue of notice under Section 143(2) or 142(1) of the Act by the JAO but after amendment NaFAC is vested with power to act from the stage of issue of notice under Section 143(2) of the Act or issue of notice under Section 142(1) of the Act after the selection of the case for scrutiny. Power of reopening of the assessment under Section 148 of the Act is not conferred on NaFAC either before or after the amendment to Section 144B of the Act. The issue of notice under Section 143(2) in the cases of reopened assessment will arise only after issue of notice under Section 148 of the Act and thereafter processing the return filed in response to notice under Section 148 and Section 143(1) of the Act. Thus NaFAC is not vested with power to process any case for issue of notice under Section 148A of the Act and to issue notice under Section 148 of the Act. No other authority other than JAO is vested with power to process the case for reopening under Section 148A of the Act.

(g) On reading the Faceless Jurisdiction of Income Tax Authorities Scheme, 2022, framed by the Central Government under Section 130 of the Act vide Notification No.S.O.1400(E) dated 28.03.2022, it can be seen that faceless jurisdiction is confined to the extent provided under Section of 144B of the Act and faceless jurisdiction is not conferred on any authority for processing the case under Section 148A of the Act and issue of notice under Section 148 of the Act. Thus, power to process the case for reopening the case under Section 148A of the Act and issue of notice under Section 148 of the Act is available only with JAO.

(h) While notification dated 29.3.2022 mentions about issuance of notice under Section 148 of the Act it does not deal/cover procedure for processing the case for reopening under Section 148A of the Act and issue of notice under Section 148 of the Act.

(i) On a reading of Notification dated 29.3.2022 and the heading of the Notification, it can be seen the scheme is only for making faceless reassessment under Section 147 of the Act and provides that reassessment will be done in a faceless manner to the extent provided under Section 144B of the Act. Clause 3 of the Scheme/Notification has referred to Section 144B of the Act only for making assessment and not for processing the case for reopening under Section 148A of the Act and issue of notice under Section 148 of the Act, Section 144B of the Act also does not deal with processing the case for reopening the case under Section148A of the Act or issue of notice under Section148 of the Act.

(j) Reliance was placed on Section 147 of the Act to submit that on a reading of Sections 147, 148 and 144B of the Act, it can be seen that the reassessment procedure under Section 147 of the Act will be commenced by NaFAC by issuing notice under Section 143(2) of the Act, if the return is filed in response to notice under Section 148 of the Act or by issuing notice under Section 142(1) of the Act, if return is not filed in response to notice under Section 148 of the Act. From this, it is very clear that the processing of the case under Section 148A of the Act and issuance of notice under Section 148 of the Act cannot be done by the Faceless Assessment Centre or the Assessment Units.

5.1.1. It may be necessary to refer to legislative and judicial history relating to reassessment in particular the provisions as it existed prior to 01.04.2021 and the amendments introduced vide Finance Act, 2021, with regard to provisions relating to re-assessment/ assessment of escaped income.

5.1.2. Prior to 01.04.2021, the procedure to be followed in relation to re-assessment was laid down by the Supreme Court in the case of GKN Driveshafts (India) Ltd., v. Income Tax Officers, reported in (2003) 1 SCC 72, wherein it was clarified that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee/assessee is to file return and if assessee so desires, may seek reasons for issuing such notice. The assessing officer would then furnish reasons. On receipt of reasons, the noticee/assessee may file objections to issuance of notice and the assessing officer shall dispose of the same by passing a speaking order.

5.1.3. The above guideline laid down by the Hon’ble Supreme Court in GKN Driveshafts as to the procedure to be followed while making a reassessment was followed by the department and any proceedings initiated contrary/non-compliant with the above guideline was found by the Apex Court and various High Courts as vitiating the entire proceedings.

5.1.4. Against this background, Parliament introduced reformative changes to Sections 147 to 151 of the Income Tax Act, 1961, governing reassessment proceedings by way of Finance Act, 2021, passed on 28.03.2021. Importantly, Section 148A of the Act was inserted vide Finance Act, 2021, legislatively incorporating the procedure laid down by the Supreme Court in GKN Driveshafts for the purpose of re-assessment.

5.1.4. Before proceeding further, it may be relevant to have a broad overview of the amendment to provisions and introduction of schemes framed under the Income Tax Act leading to Faceless Assessment Scheme, which marked a paradigm shift from the regular process of assessment which was hitherto followed.

5.1.5. The first major change which needs to be noted for the purpose of resolving the present controversy is Scheme of E-assessment introduced by way of E-Assessment Scheme, 2019 vide Notification No.S.O. 3264(E) [No. 61/2019 (F.No. 370149/154/2019-TPL)], dated 12.09.2019, wherein assessment proceedings were conducted by JAO, subject to issuance of notices as well as the orders through electronic mode / web portal. The scheme was amended and substituted on 13.08.2020 vide Notification S.O.2745(E) [No.60 / 2020/F.No. 370149/154/2019-TPL] wherein for “Eassessment” the words “Faceless Assessment” stood substituted, introducing faceless jurisdiction for framing assessments for the first time.

5.1.6. Section 151A of the Act was introduced on 01.11.2020 by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, for the purpose of introducing Faceless Assessment for Income Escaping Assessment.

5.1.7. Section 144B of the Act was introduced with effect from 01.04.2021 by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, for the purpose of conduct of Faceless Assessment.

5.1.8. Section 148A of the Act was introduced with effect from 01.04.2021 vide Finance Act, 2021, whereby as stated supra, the procedure laid down by the Supreme Court for re-assessment in GKN Driveshafts was legislatively recognised and incorporated.

5.1.9. Importantly, amendments was correspondingly made to Section 151A of the Act by inserting/adding the expressions “or conduting of enquiries or issuance of show cause notice or passing of order under Section 148A of the Act”, thereby bringing Section 148A of the Act and the procedure covered therein within the ambit of faceless assessment in terms of Section 151A of the Act.

5.1.10. Central Government in exercise of its powers conferred under sub-sections (1) and (2) of Section 151A of the Act, framed a scheme titled “The E-Assessment of Income Escaping Assessment Scheme, 2022” vide Notification S.O.1466(E) [No.18/2022/F.NO.370142/16/2022-TPL(PART1) with effect from 29.03.2022.

5.1.11. Prior to the introduction of aforesaid scheme, on 28.03.2022, Central Government introduced a Scheme titled “The Faceless Jurisdiction of Income Tax Authorities Scheme, 2022”, in exercise of its powers conferred under Section 130 of the Act. The above scheme confers jurisdiction of the Assessing Officer in a faceless manner through automated allocation.

5.1.12. Having broadly referred to relevant provisions and Schemes framed thereunder in relation to faceless assessment, it appears to me that the legislative intent behind introducing Section 151A of the Act, was to bring assessment of income escaping assessment within the fold of faceless mechanism. The legislatively declared object behind faceless assessment scheme inter alia are:

(a) Eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible;

(b) Optimising utilisation of the resources through economies of scale and functional specialisation;

(c) Introducing a team-based assessment, reassessment, recomputation or issuance or sanction of notice with dynamic jurisdiction

5.2.1. Having examined broadly, the provisions and schemes relating to faceless assessment, the present controversy has engaged the attention of several High Courts including this Court. While the High Courts of Bombay, Telangana, Punjab and Haryana, Rajasthan have taken a view that after introduction of the above schemes on Faceless Assessment, it becomes mandatory for the Revenue to conduct/initiate proceedings pertaining to reassessment under Section 147, 148 and 148A of the Act in a faceless manner. While the Delhi High Court in the case of T.K.S. Builders Private Limited v. Income Tax Officer in W.P.(C)No.1968 of 2023 and this Court in the case of Mark Studio India Private Limited v. Income Tax Officer and another in W.P.Nos.25223 and 25227 of 2024 has expressed a contrary view. Importantly, the decision of the Madras High Court in the case of Mark Studios (supra) and the decision of Bombay High Court in Hexaware Technologies (supra) was considered by the Division Bench of Rajasthan High Court in the case of Sharda Devi Chhajer v. The Income Tax Officer & Another in D.B. Civil Writ Petition No.11787 of 2024 and has followed the decision of Bombay High Court. The relevant portion is extracted hereunder:

“8. The judgments which were rendered in the case of Hexaware Technologies Ltd. (supra) provides ample light as to how the applicability of the Scheme has to be made in strict sense, and the concurrent jurisdictions have to be avoided so as to ensure a smooth travel of the revenue assessments. The liberal interpretation made by the Hon’ble Delhi High Court in T.K.S. Builders Private Ltd. (supra) and the Hon’ble Madras High Court in Mark Studio India Private Limited (supra) have to be scrutinized in light of the settled legal position that the Tax Statutes have to be strictly interpreted.”

5.2.2. I shall firstly refer to the cases wherein it was found that proceedings under Section 148A and notice under Section 148 must be carried out in a faceless manner. The following judgments are relevant and relevant portions of the judgments are extracted hereunder:

(a) High Court of Telangana in the case of Kankanala Ravindra Reddy v. Income -tax Officer, reported in 2023 SCC Online TS 4476:

“2 5. A plain reading of the aforesaid two notifications issued by the Central Board of Direct Taxes dated 28-3- 2022 and 29-3-2022, it would clearly indicate that the Central Board of Direct Taxes was very clear in its mind when it framed the aforesaid two schemes with respect to the proceedings to be drawn under section 148A, that is to have it in a faceless manner. There were two mandatory conditions which were required to be adhered to by the Department, firstly, the allocation being made through the automated allocation system in accordance with the risk management strategy formulated by the Board under section 148 of the Act. Secondly, the re-assessment has to be done in a faceless manner to the extent provided under section 144B of the Act.

26. A fter the introduction of the above two schemes, it becomes mandatory for the Revenue to conduct/initiate proceedings pertaining to reassessment under section 147, 148 & 148A of the Act in a faceless manner. Proceedings under section 147 and section 148 of the Act would now have to be taken as per the procedure legislated by the Parliament in respect of reopening/re-assessment i.e., proceedings under section 148A of the Act.

27. In the present case, both the proceedings i.e., the impugned proceedings under section 148A of the Act, as well as the consequential notices under section 148 of the Act were issued by the local jurisdictional officer and not in the prescribedfaceless manner. The order under section 148A(d) of the Act and the notices under section 148 of the Act are issued on 29-4-2022, i.e., after the “Faceless Jurisdiction of the Income-tax Authorities Scheme, 2022” and the “e-Assessment of Income Escaping Assessment Scheme, 2022” were introduced.

28. From the afore given factual matrix, firstly the statutory provisions enumerated in the preceding paragraphs and secondly, the subsequent direction given by the Hon’ble Supreme Court in the case of Ashish Agarwal, supra, what is clearly reflected is the fact that when the Hon’ble Supreme Court had partly allowed the petitions which were filed by the Union of India challenging the judgements of various High Courts whereby the notice under section 148 of the unamended Act were set aside by the High Courts, the Hon’ble Supreme Court has only permitted the Union of India to proceed further with the reassessment proceedings under the amended provision of law, more particularly, as amended by the Finance Act, 2021. It never intended the authorities concerned to continue with the proceedings from the stage of the issuance of notices under section 148, nor is the directions to that effect. And there cannot be any confusion, ambiguity or misconception for the respondent-Department to have in this regard.”

(b) High Court of Bombay in the case of Hexaware Technologies Ltd., v. Assistant Commissioner of Income-tax, reported in ITR 430 (Bombay):

“35. Further, in our view, there is no question of concurrent jurisdiction of the JAO and the FAO for issuance of notice under section 148 of the Act or even for passing assessment or reassessment order. When specific jurisdiction has been assigned to either the JAO or the FAO in the Scheme dated 29th March, 2022, then it is to the exclusion of the other. To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant. If the argument of Revenue is to be accepted, then even when notices are issued by the FAO, it would be open to an assessee to make submission before the JAO and vice versa, which is clearly not contemplated in the Act. Therefore, there is no question of concurrent jurisdiction of both FAO or the JAO with respect to the issuance of notice under section 148 of the Act. The Scheme dated 29th March 2022 in paragraph 3 clearly provides that the issuance of notice “shall be through automated allocation” which means that the same is mandatory and is required to be followed by the Department and does not give any discretion to the Department to choose whether to follow it or not. That automated allocation is defined in paragraph 2(b) of the Scheme to mean an algorithm for randomised allocation of cases by using suitable technological tools including artificial intelligence and machine learning with a view to optimise the use of resources. Therefore, it means that the case can be allocated randomly to any officer who would then have jurisdiction to issue the notice under section 148 of the Act. It is not the case of respondent no. 1 that respondent no. 1 was the random officer who had been allocated jurisdiction.

36. With respect to the arguments of the Revenue, i.e., the notification dated 29th March 2022 provides that the Scheme so framed is applicable only ‘to the extent’ provided in Section 144B of the Act and Section 144B of the Act does not refer to issuance of notice under section 148 of the Act and hence, the notice cannot be issued by the FAO as per the said Scheme, we express our view as follows:- Section 151A of the Act itself contemplates formulation of Scheme for both assessment, reassessment or recomputation under section 147 as well as for issuance of notice under section 148 of the Act. Therefore, the Scheme framed by the CBDT, which covers both the aforesaid aspect of the provisions of Section 151A of the Act cannot be said to be applicable only for one aspect, i.e., proceedings post the issue of notice under section 148 of the Act being assessment, reassessment or recomputation under section 147 of the Act and inapplicable to the issuance of notice under section 148 of the Act. The Scheme is clearly applicable for issuance of notice under section 148 of the Act and accordingly, it is only the FAO which can issue the notice under section 148 of the Act and not the JAO. The argument advanced by respondent would render clause 3(b) of the Scheme otiose and to be ignored or contravened, as according to respondent, even though the Scheme specifically provides for issuance of notice under section 148 of the Act in a faceless manner, no notice is required to be issued under section 148 of the Act in a faceless manner. In such a situation, not only clause 3(b) but also the first two lines below clause 3(b) would be otiose, as it deals with the aspect of issuance of notice under section 148 of the Act. Respondents, being an authority subordinate to the CBDT, cannot argue that the Scheme framed by the CBDT, and which has been laid before both House of Parliament is partly otiose and inapplicable. The argument advanced by respondent expressly makes clause 3(b) otiose and impliedly makes the whole Scheme otiose. If clause 3(b) of the Scheme is not applicable, then only clause 3(a) of the Scheme remains. What is covered in clause 3(a) of the Scheme is already provided in Section 144B(1) of the Act, which Section provides for faceless assessment, and covers assessment, reassessment or recomputation under section 147 of the Act. Therefore, if Revenue’s arguments are to be accepted, there is no purpose of framing a Scheme only for clause 3(a) which is in any event already covered under faceless assessment regime in Section 144B of the Act. The argument of respondent, therefore, renders the whole Scheme redundant. An argument which renders the whole Scheme otiose cannot be accepted as correct interpretation of the Scheme. The phrase “to the extent provided in Section 144B of the Act” in the Scheme is with reference to only making assessment or reassessment or total income or loss of assessee. Therefore, for the purposes of making assessment or reassessment, the provisions of Section 144B of the Act would be applicable as no such manner for reassessment is separately provided in the Scheme. For issuing notice, the term “to the extent provided in Section 144B of the Act” is not relevant. The Scheme provides that the notice under section 148 of the Act, shall be issued through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in Section 148 of the Act and in a faceless manner. Therefore, “to the extent provided in Section 144B of the Act” does not go with issuance of notice and is applicable only with reference to assessment or reassessment. The phrase “to the extent provided in Section 144B of the Act” would mean that the restriction provided in Section 144B of the Act, such as keeping the International Tax Jurisdiction or Central Circle Jurisdiction out of the ambit of Section 144B of the Act would also apply under the Scheme. Further the exceptions provided in sub-section (7) and (8) of Section 144B of the Act would also be applicable to the Scheme.”

(c) High Court of Punjab & Haryana in the case of Jatinder Singh Bhangu v. Union of India, reported in 2024 SCC OnLine P&H 9337 :

” 15. From the perusal of Section 151A, it is quite evident that scheme of faceless assessment is applicable from the stage of show cause notice under Section 148 as well as 148A. Clause 3 (b) of notification dated 29.03.2022 issued under Section 151A clearly provides that scheme would be applicable to notice under Section 148. Even otherwise, it is a settled proposition of law that assessment proceedings commence from the stage of issuance of show cause notice. The object of introduction of faceless assessment would be defeated if show cause notice under Section 148 is issued by Jurisdictional Assessing Officer. The respondents are heavily placing reliance upon office memorandum and letter issued by departmental authorities. It is axiomatic intax jurisprudence that circulars, instructions and letters issued by Board or any other authority cannot override statutory provisions. The circulars are binding upon authorities and Courts are not bound by circulars. The mandate of Section 144B, 151A read with notification dated 29.03.2022 issued thereunder is quite lucid. There is no ambiguity in the language of statutory provisions, thus, office memorandum or any other instruction issued by Board or any other authority cannot be relied upon. Instructions/circulars can supplement but cannot supplant statutory provisions.”

(d) High Court of Telangana in the case of Sri Venkataramana Reddy Patloola v. Deputy Commissioner of Income Tax, Circle 1(1), Hyderabad and Others, reported in  ITR 181 (Telangana):

“24. Thus, there is no cavil of doubt that Section 144B of the Act and order of CBDT dated 06.09.2021 give exemption from following the mandatory faceless procedure only in relation to passing of assessment orders in cases of central charges and international tax charges. Any other interpretation would amount to doing violence with the language employed in the scheme/notification dated 29.03.2022, Section 144B(2) of the Act and order dated 06.09.2021. Since in our view, the plain and unambiguous language used in the scheme and order dated 06.09.2021 shows that the notice under Section 148 does not fall within the ‘exception’, the judgments cited by the learned Senior Standing Counsel for Income Tax Department are of no assistance. The Taxpayer is nowhere distinguished between NRIs and Indian Citizens. The notice issued under Section 148 must comply with the requirement of the Scheme whether or not the Taxpayer is NRI/Indian Citizen. Thus, the second limb of argument of the learned Senior Standing Counsel for Income Tax Department deserves to be rejected.”

(e) High Court of Bombay in the case of Kairos Properties Private Limited v. Assistant Commissioner of Income-tax and Others, reported in(Bombay), while dealing with aspect of whether the issuance of notice under Section 148 of the Act as contemplated under the scheme would also include the procedure under Section 148A of the Act held as under:

“14. Thus, to accept a contention that merely because the notification does not explicitly refer to the provisions of Section 148A, the scope of the Scheme as defined in paragraph 3 would exclude the applicability of Section 148A, would lead to an absolute absurdity, and more particularly, considering the express provisions of subsection (1) of Section 151A. Also it is not possible to accept reading of the provisions of Section 144B de-hors Section 151A(1). Sub-section (2) of Section 151A is specifically incorporated to empower the Central Government to exclude the applicability of any of the provisions of the Act and/or to make such provisions applicable with exceptions, modifications and adaptations. Nothing of this nature is found in the noti fication to infer any exclusion of Section 148A, and when it clearly concerns the entire assessment, reassessment or re-computation under Section 147 and issuance of notice in that regard under Section 148 o f the Act.

15. Thus, the Central Government has not applied the provisions of subsection (2) of Section 151A to specifically exclude the application of Section 148A from the scope of the Scheme in paragraph 3 of the notification dated 29 th March, 2022, it would hence be not be possible to accept the Revenue’s contention that the provision of Section 148A stands excluded from the applicability of the faceless mechanism.

16. For the aforesaid reasons, we would not accept Mr. Mohanty’s submission that the scope of the Scheme would exclude the applicability of Section 148A and if steps are taken by the JAO under Section 148A culminating into issuance of a notice under Section 148 of the Act, the entire exercise being undertaken outside the faceless mechanism would be required to be quashed and set aside. There cannot be any other reading of these provisions along with the notification.”

(f) Rajasthan High Court in the case of Sharda Devi Chhajer v. The Income Tax Officer & Another in D.B. Civil Writ Petition No.11787 of 2024:

“8. The judgments which were rendered in the case of Hexaware Technologies Ltd. (supra) provides ample light as to how the applicability of the Scheme has to be made in strict sense, and the concurrent jurisdictions have to be avoided so as to ensure a smooth travel of the revenue assessments. The liberal interpretation made by the Hon’ble Delhi High Court in T.K.S. Builders Private Ltd. (supra) and the Hon’ble Madras High Court in Mark Studio India Private Limited (supra) have to be scrutinized in light of the settled legal position that the Tax Statutes have to be strictly interpreted.”

(emphasis supplied)

5.2.3. Having examined the judgments of the Bombay, Telangana, Punjab and Haryana and Rajasthan High Court, finding that with the introduction of Faceless Scheme, revenue must necessarily conduct/initiate proceedings pertaining to reassessment under Sections 147, 148 and 148A of the Act in a faceless manner, let us examine the judgment of Delhi and Madras High Court taking a contrary view, the relevant portions from the said judgments are extracted hereunder:

(a) High Court of Delhi in the case of T.K.S. Builders Pvt. Ltd., v. Income Tax Officer Ward 25(3), New Delhi, reported in ITR 657 (Delhi):

“99. Returning then to the Faceless Reassessment Scheme 2022 itself, we find sufficient merit in the interpretation of its clauses as has been commended for our consideration by the respondents. Clause 3 of the said scheme provides that assessment, reassessment or recomputation under Section 147 of the Act as well as issuance of notice under Section 148 would be through automated allocation in accordance with the risk management strategy and in a faceless manner. The respondents rightly draw our attention to the usage of punctuation at various places in Clause 3. A careful reading of that clause shows that the draftsman has used a comma immediately after the phrase “shall be through automated allocation”. Yet another comma appears after the phrase “for issuance of notice”. It thus appears to have been the clear intent of the author to separate and segregate the phases of initiation of action in accordance with RMS, the formation of opinion whether circumstances warrant action under Section 148 of the Act being undertaken by issuance of notice and the actual undertaking of assessment itself.

100. Beyond the specific use of punctuation within Clause 3, a comprehensive reading of the Faceless Reassessment Scheme 2022, supported by the extensive material presented by the respondents, bolsters the clear intent underlying each phase of the faceless assessment process.

101. As we had noticed in the preceding parts of this decision, the RMS and the Insight Portal pushes information to the JAO and is principally not concerned with faceless assessment at all. The RMS essentially enables the JAO to firstly examine the veracity of disclosures made and examine the return against various parameters and information which has been collated by the Directorate of Systems. It thus provides the JAO with an insight in respect of various transactions to which the assessee may be connected as well as data pertaining to that assessee which has otherwise been aggregated and mapped on the basis of material existing on the system of the respondents. The respondents would, therefore, appear to be correct in their submission that when material comes to be placed in the hands of the JAO by the RMS, it would consequently be entitled to initiate the process of reassessment by following the procedure prescribed under Section 148A. If after consideration of the objections that are preferred, it stands firm in its opinion that income was likely to have escaped assessment, it would transmit the relevant record to the NFAC. It is at that stage and on receipt of the said material by NFAC that the concepts of automated allocation and faceless distribution would come into play. The actual assessment would thus be conducted in a faceless manner and in accordance with an allocation that the NFAC would make. This, in our considered opinion, would be the only legally sustainable construction liable to be accorded to the scheme. Our conclusion would thus strike a harmonious balance between the evaluation of information made available to an AO, the preliminary consideration of information for the purposes of formation of opinion and its ultimate assessment in a faceless manner.”

(b) This Court in the case of Mark Studio India Private Limited v. Income Tax Officer and another in W.P.Nos.25223 and 25227 of 2024 dated 20.12.2024, has found that as far as proceedings under Section 148A of the Act and Notice under Section 148 of the Act is concerned only JAO shall have exclusive jurisdiction. The following portions of the order is relevant:

“5 8. In fine, to put it in a nutshell, this Court pass the following orders:

(i) As far as the issuance of notice under Section 148 of the IT Act is concerned, only the JAO will have exclusive jurisdiction.

(ii) As far as the assessment, re~assessment or re~computation in terms of the provisions of Section 147 of the IT Act is concerned, both the FAO as well as the JAO will have concurrent jurisdiction.

(iii) The Directorate of Income Tax (Systems) shall have the power to make allotment of cases, through Automated Allocation System to allot cases for issuance of notice under Section 148A/148 in eligible cases based on the risk management strategy in terms of the provisions of the Scheme dated 29.03.2022, to the Jurisdictional Assessing Officer based on the PAN card jurisdiction.

(iv) The JAO shall issue notice under Section 148 of the IT Act, based on the cases allotted by the Directorate of Income Tax (Systems) in faceless manner, by virtue of signing it digitally without referring their name, to the e~mail id of the registered account of the Assessee through the ITBA Portal.

(v) In the present writ petitions, the cases were allotted by the Directorate of Income Tax (Systems) through Automated Allocation System, based on the risk management strategy formulated by the Board as referred to in Section 148 of the IT Act, for issuance of notice to the Jurisdictional Assessing Officer, who had thereafter sent the Section 148 notice to the registered e~mail account of the Assessee from the ITBA Portal, in faceless manner. Thus, the issuance of the impugned notice was duly in accordance with the Scheme, except the procedural lapse of mentioning the name of the JAO.

(vi) The said procedural errors will not vitiate the initiation of the proceedings for issuance of notice under Section 148 of the IT Act since such errors are curable in nature.

(vii) In terms of the provisions of Section 151A of the IT Act, still the JAOs shall have to obtain prior approval from the higher authority for issuance of Section 148 notice under the Scheme in faceless manner.

(viii) The JAO shall upload in the ITBA Portal, the relevant documents along with the reply received for Section 148 notice from the Assessee.

(ix) Thereafter, the Directorate of Income Tax (Systems) forward the Section 148 cases to NaFAC to take further action. Immediately thereupon, the NaFAC shall assume the jurisdiction in terms of Section 144B of the IT Act.

(x) Once the NaFAC assumed its jurisdiction subsequent to the receipt of the information pertaining to Section 148 cases from the Directorate of Income Tax (Systems), the NaFAC shall issue the notice under Section 143(2) or 142(1) of the IT Act calling for the further information from the Assessee.

(xi) In terms of Sub~Section (2) of Section 144B of the IT Act, the Board shall have power to specify the territorial area, or persons or class of persons, incomes or class of incomes, or cases or class of cases, in which, the assessment shall be made in faceless manner.

(xii) The guidelines issued on 24.05.2023, by the Board, is well within the powers available to them, in terms of the provisions of Sub~Section (2) of Section 144B of the IT Act and issuance of such guidelines will not amount of making any modification, granting exemptions or adaptation of the terms and conditions specified in the Schemes dated 28.03.2022 and 29.03.2022. The Board has exercised the power only in terms of the provisions of Section 144B(2) of the IT Act and not in terms of the provisions of Section 151A(2) of the IT Act. The proviso to Sub~Section (2) of Section 151A of the IT Act deals with the aspect that the Central Government shall not issue any direction after 31.03.2022 to make any exemption, modification and adaptation with regard to the Schemes dated 28.03.2022 and 29.03.2022. In the present case, the guidelines issued in terms of Sub~Section (2) of Section 144B of the IT Act will not amount to the directions issued by the Central Government in terms of Sub~Section (2) of Section 151A of the IT Act.

(xiii) The power of Central Government to issue any direction in terms of Sub~Section (2) of Section 151A of the IT Act read with its proviso, will be entirely different from the issuance of guidelines, by the Board, with the power available in terms of Sub~Section (2) of Section 144B of the IT Act.

(xiv) The provisions of Section 144B of the IT Act is both in the nature of substantive as well as procedural.

(xv) While the FAO performing the duties of faceless assessment in faceless manner, the JAO is also equally performing his duties, in faceless manner, while issuing the notice under Section 148A/148 of the IT Act, as intended in the Scheme.”

5.2.4. Having considered the contrary views of the High Courts Bombay, Telangana Punjab and Haryana and Rajasthan High Court on the one hand and contrary view expressed by the High Courts of Delhi and Madras on the other, with respect I am unable to concur with the views expressed by the High Courts Delhi and Madras while inclined to follow the view /reasons expressed by the High Courts of Bombay, Telangana, Punjab and Haryana and Rajasthan, which has been extracted above and thus not repeated.

5.3. Apart from the reasons set out in their judgments by the High Courts of Bombay, Telangana, Punjab and Haryana High Courts, Rajasthan, this Court finds that conclusion arrived at by the above High Courts may also find support from the following reasons/aspects not examined but which may have a material bearing on the question of jurisdiction of officers under the faceless scheme:

5.3.1. The High Courts of Delhi and Madras appear to proceed on the premise that re-assessment would commence only on issuance of notice under Section 148 of the Act and proceedings under Section 148A is atleast a step removed from commencement of proceedings relating to reassessment. This, I would think involves dissection of proceeding relating to assessment of escaped income/ reassessment into two parts. The first part relating to assessment being until orders are passed under Section 148A and corresponding issuance of notice under Section 148 of the Act. The second part being post issuance of notice under Section 148 of the Act, commencing with issuance of notice under Section 143(2) or Section 142(1) of the Act. While, the first part is to be carried out/performed by JAO, second part of assessment must be by FAO. This dissection appears to be artificial.

5.3.2. The above view also appears to be in conflict with the judgments of the Hon’ble Supreme Court wherein assessment has been held to be comprehensive and would encompass the entire gamut of proceedings starting with filing of returns or issue of notice and ending with the determination of tax payable by assessee. Importantly, in Auto and metal Engineers case, the Hon’ble Supreme Court had also rejected the contention suggesting splitting/ dissecting the assessment into various stages, the relevant portions of the judgment are extracted hereunder:

“3…… The word assessment is used in a comprehensive sense and includes all proceedings, starting with the filing of the return or issue of notice and ending with the determination of the tax payable by assessee.”

“9…… The word ‘assessment’ includes not only computation of income but also the entire machinery and procedure for imposing and enforcing the tax liability.”

“7…… the expression “assessment proceeding” in the explanation must be construed to comprehend the entire process of assessment starting from the stage of filing of the return under Section 139 or issuance of notice under Section 142(1) till the making of the order of assessment under Section 143(3) or Section 144. Since the making of the order of assessment under Section 143(3) or Section 144 of the Act is an integral part of the assessment proceeding, it is not possible to split the assessment proceeding and confine it up to the stage of inquiry under Sections 142 and 143 and exclude the making of the order of assessment from its ambit.”

5.3.3. It thus appears that proceedings for reassessment would commence with initiation of proceedings under Section 148A of the Act inasmuch as the notice is preceded by an enquiry with respect to information, which suggests that income chargeable to tax has escaped assessment. In other words, proceedings under Section 148 A of the Act itself could be invoked only when there is information which suggests that income chargeable to tax has escaped assessment. It is thus an integral part of re-assessment/ assessment of escaped income and any attempt to treat it as distinct or removed from re-assessment would only result in distorting the scheme relating to reassessment/ assessment of escaped income. This would be clear if we bear in mind that Section 148A of the Act, was inserted with a view to legislatively incorporate the procedure laid down in GKN Driveshafts. The dissection of reassessment proceedings into two parts appear to be in conflict with the judgment of the Hon’ble Supreme Court on assessment being comprehensive and expansive to take within its fold all proceedings relating thereto referred supra.

5.3.4. It may also be relevant to note that Apex Court in the case of Union of India v. Ashish Agarwal reported in (2023) 1 SCC 617, while dealing with validity of reassessment notices issued post 01.04.2021 under the erst while priovisions governing re-assessment viz., Sections 148 to Section 151 of the Act and not in terms of the amended Sections 147 to 149 and Section 151 of the Act which would govern re-assessment with effect from 01.04.2021, observed as under:

“10. Parliament introduced reformative changes to Sections 147 to 151 of the Income Tax Act, 1961 governing reassessment proceedings by way of the Finance Act, 2021, which was passed on 28-3-2021. The substituted Sections 147 to 149 and Section 151 applicable w.e.f. 1-4-2021

……

11. In sub-section (1) of Section 151-A of the Income Tax Act, in the opening portion, after the words and figures “issuance of notice under Section 148”, the words, figures and letter “or conducting of enquiries or issuance of show-cause notice or passing of order under Section 148-A” are inserted.

12. Despite the substituted Sections 147 to 151 of the Income Tax Act, 1961 by the Finance Act, 2021 coming into force on 1-4-2021, according to learned ASG, the Revenue issued approximately 90,000 reassessment notices to the respective assessees under the erstwhile Sections 148 to 151 thereof by relying on explanations in the Notifications dated 31-3-2021 and 27-4-2021. The said reassessment notices were the subject-matter of writ petitions before the various High Courts. The respective High Courts have held that all the respective reassessment notices issued under the erstwhile Sections 148 to 151 of the Income Tax Act, 1961, are bad in law as the reassessment notices issued after 1-42021 are governed by the substituted Sections 147 to 151 of the Income Tax Act, 1961, substituted by the Finance Act, 2021. Consequently, the respective High Courts have set aside all the reassessment notices issued under Section 148 of the Income Tax Act, 1961 wherever assailed.

13. The common judgment and order [Ashok Kumar Agarwal v. Union of India, 2021 SCC OnLine All 799] passed by the High Court of Allahabad is the subject-matter of the present appeals. However, the High Court of Delhi in its common judgment and order dated 15-12-2021 [Mon Mohan Kohli v. CIT, 2021 SCC OnLine Del 5250] while quashing the respective reassessment notices has also observed that if the law permits the Revenue to take further steps in the matter they shall be at liberty to do so.

14. We have heard Shri N. Venkataraman, learned ASG appearing on behalf of the Revenue and Shri C.A. Sundaram and Shri S. Ganesh, learned Senior Advocates and other learned counsel appearing on behalf of the respective assessee.

15. It cannot be disputed that by substitution of Sections 147 to 151 of the Income Tax Act (“the IT Act”) by the Finance Act, 2021, radical and re formative changes are made governing the procedure for reassessment proceedings. Amended Sections 147 to 149 and Section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as:

(1) no valid “reason to believe”,

(2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in GKN Driveshafts (India) Ltd. v. ITO [GKN Driveshafts (India) Ltd. v. ITO, (2003) 1 SCC 72], has not been followed.

…..

17. Under the substituted provisions of the IT Act vide the Finance Act, 2021, no notice under Section 148 of the IT Act can be issued without following the procedure prescribed under Section 148-A of the IT Act. Along with the notice under Section 148 of the IT Act, the assessing officer (“AO”) is required to serve the order passed under Section 148-A of the IT Act. Section 148-A of the IT Act is a new provision which is in the nature of a condition precedent. Introduction of Section 148-A of the IT Act can thus be said to be a game changer with an aim to achieve the ultimate object of simplifying the tax administration, ease compliance and reduce litigation.

18. But prior to pre-Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in GKN Driveshafts (India) [GKN Driveshafts (India) Ltd. v. ITO, (2003) 1 SCC 72].

19. However, by way of Section 148-A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under Section 148, the assessing officer shall:

(i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority;

(iii) consider the reply of the assessee furnished, if any, in response to the show-cause notice referred to in clause (b); and

(iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under Section 148 of the IT Act; and

(v) the AO is required to pass a specific order within the time stipulated.

…..

24. There appears to be genuine non-application of the amendments as the officers of the Revenue may have been under a bona fide belief that the amendments may not yet have been enforced. Therefore, we are of the opinion that some leeway must be shown in that regard which the High Courts could have done so. Therefore, instead of quashing and setting aside the reassessment notices issued under the unamended provision of the IT Act, the High Courts ought to have passed an order construing the notices issued under the unamended Act/unamended provision of the IT Act as those deemed to have been issued under Section 148-A of the IT Act as per the new provision Section 148-A and the Revenue ought to have been permitted to proceed further with the reassessment proceedings as per the substituted provisions of Sections 147 to 151 of the IT Act as per the Finance Act, 2021, subject to compliance of all the procedural requirements and the defences, which may be available to the assessee under the substituted provisions of Sections 147 to 151 of the IT Act and which may be available under the Finance Act, 2021 and in law.

…..

25.1. The respective impugned Section 148 notices issued to the respective assessees shall be deemed to have been issued under Section 148-A of the IT Act as substituted by the Finance Act, 2021 and treated to be show-cause notices in terms of Section 148-A(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter.

25.2. The requirement of conducting any enquiry with the prior approval of the specified authority under Section 148-A(a) be dispensed with as a one-time measure vis-a-vis those notices which have been issued under Section 148 of the unamended Act from 1-4-2021 till date, including those which have been quashed by the High Courts.”

(emphasis supplied)

5.3.5. The above observations would suggest the following:

(a) Proceedings under Section 148A of the Act is an integral part of reassessment.

(b) Proceedings under Section 148 A of the Act is a condition precedent and thus to say that re-assessment would commence only after issuance of a notice under Section 142(1) or Section 143(2) of the Act, after completion of proceedings under Section 148A of the Act, results in bringing about an artificial dissection of an integrated re-assessment proceeding.

(c) It cannot be disputed that the changes to Sections 147 to 151 of the Act, introduced vide Finance Act, 2021, are made governing the procedure relating to reassessment. In other words, Section 148A of the Act is also part of the procedure governing reassessment.

(d) If Section 148A of the Act is distinct from re-assessment/ assessment of escaped income, the need to deem notice issued under Section 148 of the Act, post introduction of Section 148 A of the Act as one under Section 148A of the Act, would not have arisen. The deeming was necessary, else reassessment would be rendered vulnerable to challenge on the ground of want of jurisdiction.

5.3.6. In view of the above, I am unable to concur with the decision of this Court dissecting the integrated reassessment proceeding into two parts.

5.3.7. Considering the legislative and judicial history leading up to insertion of Section 148A and Section 151A of the Act, it appears that omission of Section 148A in the Scheme framed by the Central Government in exercise of powers under Section 151A is an omission by the delegate and may well constrict the scope and policy behind Section 151A of the Act. Thus, the scheme may have to be understood as also covering the procedure contemplated under Section 148A of the Act. While this Court is conscious that a matter which should have been, but has not been provided for in a statute cannot be supplied by Courts, as to do so will be legislation and not costruction.¹ However, the same is not without exception and the following observations of Denning, L.J. cited with approval by the Supreme Court would make it clear:

“When a defect appears a judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament and then he must supplement the written words so as to give ‘force and life’ to the intention of the Legislature. A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he 41 can and should iron out the creases.”

5.3.8. Yet another reason why I am inclined to depart from the restraint which Courts are normally required to exercise while examining a case of omission by legislature or its delegate, is in view of the fact that Section 151A of the Income Tax Act (Parent Act) provides and contemplates a scheme being framed for assessment, re-assessment, re computation under Section 147, 148A and 148 of the Act.

5.3.9. It is trite law that legislature shall enunciate the policy before entrusting the power to make subordinate/subsidiary legislation to another body of its choice. The delegate must necessarily work within the scope of its authority and cannot widen or constrict the scope of the Act or the policy laid down thereunder. The relevant portion is extracted hereunder:

(i) Agricultural Market Committee v. Shalimar Chemical Works Ltd., reported in (1997) 5 SCC 516:

“26. The principle which, therefore, emerges out is that the essential legislative function consists of the determination of the legislative policy and the legislature cannot abdicate essential legislative function in favour of another. Power to make subsidiary legislation may be entrusted by the legislature to another body of its choice but the legislature should, before delegating, enunciate either expressly or by implication, the policy and the principles for the guidance of the delegates. These principles also apply to taxing statutes. The effect of these principles is that the delegate which has been authorised to make subsidiary rules and regulations has to work within the scope of its authority and cannot widen or constrict the scope of the Act or the policy laid down thereunder. It cannot, in the garb of making rules, legislate on the field covered by the Act and has to restrict itself to the mode of implementation of the policy and purpose of the Act.”

(ii) Gaurav Kumar v. Union of India, reported in (2025) 1 SCC 641:

“67. A two-Judge Bench of this Court identified the following relevant principles in matters of delegated legislation : (Shalimar Chemical Works case [Agricultural Market Committee v. Shalimar Chemical Works Ltd., (1997) 5 SCC 516], SCC p. 525, para 26)

“26…. the delegate which has been authorised to make subsidiary rules and regulations has to work within the scope of its authority and cannot widen or constrict the scope of the Act or the policy laid down thereunder. It cannot, in the garb of making rules, legislate on the field covered by the Act and has to restrict itself to the mode of implementation of the policy and purpose of the Act.”

Given the above principle, it was observed that Section 12 is a fiscal provision and had to be construed strictly. It was further observed that any circumstance, situation, factor, or condition which was not contemplated by the Act could not be taken into consideration to raise the presumption regarding sale or purchase of the notified agricultural produce. It was held that the bye-law introduced additional factors such as “weighed”, “measured”, and “counted” which were not contemplated under Section 12. Therefore, the bye-laws were held to be ultra vires for widening the scope of the presumption under Section 12.

…..

72.2. A delegate cannot widen or constrict the scope of the parent legislation or the legislative policy prescribed under it; and……”

5.3.10. Section 151A being an Act of parliament reflects the legislative policy. Importantly, Section 151A of the Act expressly includes within the scope of faceless assessment, conducting of enquiries, issuance of notice, passing order under Section 148A and issuance of notice under Section 148 of the Act. Section 151A confers power on the Central Government to make a scheme by notification in the official gazettee for the purpose of effectuating the above legislative policy. The Central Government has in exercise of its powers conferred under Section 151A of the Act framed a scheme wherein Section 148A of the Act, has been omitted while including other provisions mentioned in Section 151A of the Act including Section 148 of the Act, which is consequential to a proceeding under Section 148A of the Act. It appears doubtful if it is even open to the Central Government to frame a scheme leaving out one of the elements enumerated in the parent Act viz., Section 148A of the Act, while exercising its powers conferred under Section 151A of the Act, moreso when the enabling provision i.e., Section 151 A of the Act expressly includes Section 148A of the Act. It appears unless Section 148 A of the Act is read into the scheme framed under Section 151A of the Act, it would result in constricting the scope of Section 151A of the Act, which is a plenary legislation, by a delegated legislation i.e., scheme, which is impermissible. It thus appears to me that any attempt to suggest that Section 148A of the Act is outside the Scheme framed by the Central Government in exercise of its power conferred under Section 151A of the Act, would be overlooking the legislative policy enunciated in Section 151A of the Act. It may result in giving primacy to the scheme which is a subordinate legislation over Section 151A of the Act, which as stated above is the parent Act enabling the Central Government to frame a scheme. A consequence/ construction which ought to be avoided.

5.3.11. The rule of restraint exercised by Courts in cases of Cassus Omissus has been departed while dealing with cassus omissus by legislature with reference to omissions in related provisions. In the present case, we are dealing with a case where the parent/ enabling Act viz., Section 151A of the Act, while providing for faceless assessment of income escaping assessment has expressly included proceeding under Section 148A of the Act. The scheme framed by the Central Government in exercise of the power conferred under Section 151A has omitted to include Section 148 A of the Act, while including every other provision mentioned in Section 151A of the Act. The scheme as discussed supra is a piece of subordinate legislation and thus must be in conformity with the parent Act. The inclusion of Section 148A of the Act in the scheme appears to me to be a necessary consequence which ought to follow while framing the scheme by the Central Government. Keeping this in view, it appears that there is a need to depart from the normal rule of restraint which Courts would exercise while dealing with the case of cassus omissus. This would be clear for the Hon’ble Supreme Court, while dealing with cases of cassus omissus with reference to related provisions has departed from the above rule of restraint. In this regard, it may be relevant to note that the Apex Court while construing Rule 89 of Order 21 of the Code of Civil Procedure and Article 127 of the Limitation Act, 1963, had departed from the above rule of restraint. Rule 89 of Order 21 of CPC provided that if any person, claiming an interest in the property sold in execution of a decree, applies to have the execution sale set aside and deposits within thirty days from the date of the sale, five percent of the purchase money for payment to the purchaser and the amount payable to the decree holder for recovery of which the sale was held, ‘the court shall make an order setting aside the sale’. The period of limitation for applying under Rule 89 for setting aside the sale was also thirty days under Article 127 of the Limitation Act, 1963 before its amendment by Act 104 of 1976 by which this period of limitation was enlarged from thirty days to sixty days. Parliament, however, omitted to make corresponding amendment in Rule 89 of Order 21 to enlarge the period for making the deposit from thirty days to sixty days. The object and reasons of the Bill which became Act 104 of 1976 showed that the period was enlarged from thirty days to sixty days 68/84 as the period of thirty days was considered to be too short for making the de-posit often causing hardship. Having regard to this object a two judge bench of the Supreme Court in Dharwadkar held that not only the period of limitation for making an application for setting aside the sale was ex-tended from thirty to sixty days but the period for making the deposit under Rule 89 of CPC was also impliedly extended from thirty days to sixty days. But this view was not accepted by a three judge bench in Nirmala Industries on the reasoning that the omission to amend Rule 89 of CPC by Parliament could not be supplied by the court. Later a five judge bench in Ramulu overruled Nirmala Industries. Although accepting that the court cannot make up deficiencies left by the legislature, it was observed that the Court must try to harmonize the conflicting provisions. On this reasoning it was held that Rule 89 does not provide any limitation and it really directs that the court will have no discretion and will have to set aside the sale if the deposit is made within thirty days and that it does not prevent deposit being made later. Thus in view of this decision if an application for setting aside the sale is made within sixty days and deposit is also made within sixty days though beyond thirty days, the court will have a discretion to set aside the sale. The following extracts of the judgment in the case of Dadi Jagannadham v. Jammulu Ramulu, reported in (2001) 7 SCC 71 are relevant in this regard:

“18. Having given our careful consideration to the question, we are of the opinion that there is no anomaly and that there are no different periods of limitation for making deposits and/or filing an application for setting aside the sale. It is by virtue of Order 21 Rule 89 CPC that an application for setting aside a sale and a deposit can be made. Order 21 Rule 89 CPC does not prescribe any period within which the application is to be made or deposit is to be made. All that Order 21 Rule 92(2) provides is that if the deposit is made within 30 days from the date of sale and an application is filed then the court would have no discretion but to set aside the sale. That does not mean that if the deposit is made after 30 days the court could not entertain the application. If the deposit is made beyond the period of 30 days, but within the period of 60 days, then it will be within the discretion of the court whether or not to grant the application. Thus, an application can be made within the period prescribed under Article 127 of the Limitation Act. As an application can be made within 60 days and, as stated above, no period for making a deposit is prescribed under Order 21 Rule 92(2) the deposit can also be made within 60 days. In our view, therefore, the view expressed in P.K. Unni case [(1990) 2 SCC 378] that Order 21 Rule 92(2) CPC prescribes a period of limitation for making a deposit is not correct.”

5.3.12. Another illustration of the difficulty faced in construction when a related provision is not amended is Section 25 of the Code of Civil Procedure (“herein after referred to as “CPC”) as substituted by the Amendment Act of 1976. Section 25 of CPC confers power on the Supreme Court to transfer any suit appeal or other proceeding from a High Court or Civil Court in one state to a High Court or Civil Court in another state. The amending Act did not delete or omit Section 23(3) of CPC which provides that where several Courts having jurisdiction are subordinate to different High Courts, the application for transfer shall be made to the High Court within the local limits of whose jurisdiction the High Court in which the suit is brought is situate. Be-cause of continuance of Section 23 of CPC, it was held by Bombay, Andhra Pradesh and Madhya Pradesh High Courts that it was still open for a party to apply to the High Court for transfer of a proceeding pending in a Court Subordinate to it to a Court in another state and it was left to the choice of the party whether he should apply for transfer in the Supreme Court or in the High Court. This view was overruled by the Supreme Court in Durgesh Sharma v. Jayshree, reported in (2008) 9 SCC 648, which holds that Section 23 of CPC must be read subject to Section 25 of CPC and even if the High Courts had the power to transfer a case from one state to another state that must be taken to have been withdrawn from 01.01.1977 when the amendment Act 1976 came into force. The view so taken makes Section 23(3) of CPC wholly nugatory and if this was the intention the amending Act ought to have deleted Section 23(3) of CPC which it failed to do and it was this failure which led to the difference between the views taken by the High Courts and the Supreme Court.

5.3.13. The above principle/reason for departing from the normal rule that legislature do not mistakes and may not be permissible for Courts to add or read into provisions when the omission is with reference to related provisions would apply afortiorari while dealing with a scheme framed in exercise of its powers under the parent act by a delegate. As discussed supra, the parent/ enabling Act viz., Section 151A of the Act while providing for faceless assessment of income escaping assessment has expressly included proceeding under Section 148A of the Act. The scheme framed by the Central Government in exercise of the power conferred under Section 151A has omitted to include Section 148 A of the Act. The scheme ought to be in conformity with the parent Act. The inclusion of Section 148A of the Act in the scheme appears to me to be a necessary consequence which ought to follow while framing the scheme by the Central Government. Any attempt to keep Section 148A of the Act outside the scheme, may render the scheme itself vulnerable to challenge as constricting the scope and not being in conformity of the parent act, a consequence which ought to be avoided.

5.4.1. Apart from the fact that this Court is inclined to adopt the reasoning of Bombay, Telangana, Punjab and Haryana High Courts and Rajasthan High Court, and conclusion of which finds support in the reasons discussed supra, with respect, this Court also finds that the order of the Madras High Court in the case of Mark Studio may possibly suffer from the following contradictions/fallacies:

(a) This Court would think that there is a distinction between “faceless assessment” or “assessment in a faceless manner” and assessment by JAO of cases selected by the Directerate of Income Tax (Systems) and served electronically or by way of “e-proceedings”. A faceless assessment is one where assessment would be carried out by a specific “assessment unit” which has been assigned case selected for the purposes of faceless assessment. Assessment is carried out by “assessment unit”, to which it has been assigned and not JAO. The learned judge has equated automated allocation of cases by the Directerate of Income Tax (Systems) and sending the notices/orders electronically with faceless assessment. Applying the above reasoning of the learned Judge it would result in JAO carrying out assessment of cases automatically allocated. In other words it would result in the jurisdictional officer continuing to have exclusive jurisdiction over assessee within the jurisdiction of JAO.

(b) The learned Judge finds that notices in the above cases were sent in a faceless manner. In other words, the learned judge also appears to be of the view that issuance of notice/communication/assessment orders ought to be carried in a faceless manner. However, the learned Judge had found that the cases for assessment is selected rather allocated by the Directorate of Income Tax (Systems) based on the discrepancies identified by RSM followed by issuance of notice electronically and thus the notices were found to have been issued in a faceless manner. The following extract is relevant:

“41….

(c) Faceless Manner

(x) A reading of the above two notices would show that the notice has been signed digitally and it was sent to the Assessees- registered e~mail account through ITBA web portal. As contended above, the cases have not been selected by the person, who has send notice. However, as narrated above, the Directorate of Income Tax (Systems) selected the cases based on the discrepancies identified by the risk management system as referred in clause (i) of Explanation (1) to Section 148 of the Act.

42. Except the procedure mentioned above for the purpose of sending notice under Section 148, no other provision enables any of the Income Tax Officers to send notice in any other mode in faceless manner. In the present case, as discussed above, notice has been sent in the faceless manner by duly complying with the conditions and the modalities mentioned in the scheme itself which were already discussed that in the absence of specific provision empowering the Faceless Assessment Officer in terms of Section 144B, the power and the Jurisdiction of the Jurisdictional Assessment Officer cannot be taken away as long as Section 148 notice sent by automated allocation based on risk management strategy and in a faceless manner in terms of the provisions of the Scheme.

43. In the present case, all the three ingredients have been duly complied with by the respondents in issuance of the notice. Therefore, by no stretch of imagination, one can construe that the respondents have sent the notice through ITBA portal not in the faceless manner. Notices were already issued in faceless manner.”

5.4.2. The above finding would reduce “faceless assessment” to assessment by JAO by means of E-Proceedings that in my view with respect may not constitute assessment in a faceless manner.

(c) The learned Judge while dealing with the submission that the notice was digitally signed by the JAO and thus does not satisfy have been issued in a faceless manner would reject the contention by finding that it is only a procedural error. The following extracts are relevant:

“44. By referring the notices, the learned counsel for the petitioner has agreed that the e~notice was sent by JAO through e~mail id of the assessee from the web portal of ITBA. However, she would contend that the Officer name has been mentioned in the notices. As far as this contention is concerned, this Court is of the view that if all the notices have been send in faceless manner, name of the Officer should not be mentioned. However, it will only be considered as a procedural error, which will not vitiate the entire initiation of the proceedings and hence, it will not affect the jurisdiction to issue the notice by the respondent. But in future cases, the respondent is being advised not to mention the name of the officer and from where the notices has been sent.”

5.4.3. The above finding appears to strike a discordant note with the finding in the other portions of the order wherein, it has been found that faceless assessment is only a mode of assessment by the JAO, I say so since if it is only the JAO who would carry out the assessment even in a faceless scheme then whether it is digitally signed or not may not have any bearing for the assessee would in any event know that the assessment ought to be carried out only by JAO though by way of e-proceedings.

5.5. Before I close, it may be relevant to note that in W.P.No.35385 of 2024, assessment is assigned to Central Charges and would thus fall within the exception to faceless assessment procedure carved out of CBDT’s order dated 06.09.2021. Since, this Court is inclined to refer the matter to a Division/ Larger Bench for the reasons discussed supra, on the question of jurisdiction of JAO to conduct proceeedings under Section 148 A of the Act, the outcome of which may have a bearing on the question raised in writ petition in W.P.No.35385 of 2024, rather preliminary to the challenge made in the above writ petition, I do not propose to examine the above issue for the present.

5.6. For all the reasons discussed/dealt with supra, with respect I am unable to concur with the order of the learned Judge in the case of Marks Studio in W.P.Nos.25223 and 25227 of 2024, while concurring with the view expressed by High Court’s of Bombay, Telangana and Punjab and Haryana High Courts.

6. In view of the fact that I am unable to concur with the reasoning of the learned Judge, it is only appropriate that the matters be heard by a Division/ Larger Bench after the registry obtains appropriate orders from the Hon’ble Chief Justice.