Section 148A Income Tax Act Not Excluded From Applicability Of Faceless Mechanism: Bombay High Court

The Court said that the Central Government has not applied the provisions of Section 151A(2) to specifically exclude the application of Section 148A hence provision of Section 148A cannot be excluded from the applicability of the faceless mechanism.

The Court was hearing a Writ Petition that challenged a notice issued to the Petitioner under Section 148 of the Income Tax Act, 1961 and also the underlying prior notice and order under Section 148A(b) and Section 148A(d) of the Act, respectively.

The bench of Justice G.S. Kulkarni and Justice Somasekhar Sundaresan observed, “Section 148A in its object, intent and purpose is inextricably connected with the assessment, re-assessment or re- computation, for which a notice under Section 148 may be issued. Any other view would mean that the requirement to adopt the faceless procedure under the Scheme is a mere ministerial requirement for issuance of the notice. Such a reading would not be in conformity with the objectives spelt out in clauses (a), (b) and (c) of Section 151A(1)…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.”

Advocate Madhur Agrawal appeared for the Appellant and Advocate Akhileshwar Sharma appeared for the Respondent.

The Court noted that the above-mentioned notices and orders were passed by the Jurisdictional Assessing Officer and not by a Faceless Assessing Officer as required by the provisions of Section 151A of the Act.

The Court mentioned the decision of the Bombay High Court in Hexaware Technologies Limited Vs. Assistant Commissioner of Income Tax & 4 Ors. where Section 151A was interpreted and analysed in detail, the Court quoted, “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…To take any other view in the matter, would not only result in chaos but also render the whole faceless proceedings redundant…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.”

The Court perused the notification and the relevant provisions of the Act, namely Section 148A Clauses (b) and (d) and said that it cannot be held that the proceedings under these provisions would fall outside the scope of E-Assessment of Income Escaping Assessment Scheme, 2022.

The Court observed, “the provision of Section 148A would also fall within the ambit/scope of the Scheme. All aspects pertaining to ‘assessment’, ‘re-assessment’ or ‘re-computation’ under Section 147 of the Act and issuance of notice under Section 148 of the Act, are to be undertaken through automated allocation, in accordance with risk management strategy formulated by the Board, as provided for in Section 148 of the Act for issuance of notice, and in a faceless manner, to the extent provided under Section 144B of the Act, in making assessment or reassessment of total income or loss of assessee.”

The Court said that 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 sub-section (1) of Section 151A.

The Court further said that Section 151A (2) 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. According to the Court, nothing of this nature is found in the notification to infer any exclusion of Section 148A, and when it concerns the entire assessment, reassessment or re-computation under Section 147 and issuance of notice in that regard under Section 148 of the Act.

Accordingly, the Court said that if steps are taken by the JAO under Section 148A culminating in 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.

Finally, the Court allowed the Writ Petition on the grounds of non-compliance with Section 151A of the Act.