The Delhi High Court has upheld that authority of the Jurisdictional Assessing Officer (JAO) to issue notice under faceless assessment scheme.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the JAO‘s powers should be understood as integral and not in conflict with faceless assessment. Rather, it represents a foundational jurisdictional safeguard, enabling the JAO to initiate reassessment based on independent, credible sources of information. This concurrent authority of the JAO reinforces the integrity and adaptability of the faceless system, ensuring that both centralized and jurisdictional assessments operate cohesively within the larger statutory framework.
The bench disagreed with the ruling of Bombay High Court in the Hexaware Technologies Case.
Table of Contents
Background – Faceless Assessment Scheme
The batch of writ petitions assail the validity of reassessment action initiated under Section 148 of the Income Tax Act, 1961. Although that action is impugned on various grounds, learned counsels for the writ petitioners have confined their submissions to the issue of whether a notice issued by the Jurisdictional Assessing Officer would be valid and compliant with the Faceless Scheme of Assessment which had come to be adopted by virtue of Sections 144B and 151A of the Act.
The court restricted the judgement to the issue alone and reserved the right of the writ petitioners to address all other objections which are taken to the commencement of reassessment in independent and appropriate proceedings.
Arguments – Faceless Assessment Scheme
The assessees contended that once the respondents had chosen to adopt the faceless procedure for assessment even in respect of reassessment, the JAO would have no authority to invoke Section 148. The judgments of different High Courts have consistently taken the position as advocated above and consequently that view meriting affirmation and these writ petitions being allowed on this score alone.
The department contended that the Act creates no distinction nor does it distinguish between a JAO or the NFAC with respect to a particular case. They take the stand that merely because Assessment Units conduct assessment proceedings in a specific case in a particular Assessment Year, the same cannot be construed as amounting to the JAO being deprived of jurisdiction over a particular assessee. The respondents further drew our attention to sub-sections (7) and (8) of Section 144B and which contemplates a transfer of records back to the JAO during or after the conclusion of assessment proceedings in a faceless manner.
Statutory Provisions Relevant To Faceless Scheme Of Assessment
Section 135A of the Act, which deals with the subject of faceless collection of information
Section 144B came to be inserted for the first time by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 with effect from 01 April 2021. As the provision originally existed, the non obstante clause in Section 144B initially covered assessments under Sections 143(3) and 144(2) only. The provision came to be amended thereafter by way of Finance Act, 2022 and the class of assessments to which it was ordained to extend came to be expanded to cover assessment as well as reassessment as contemplated under Sections 143(3), 144 and 147 of the Act.
Conclusion
The court held that the initial enquiry and formation of opinion to reassess being part of one defined process followed by actual assessment in a faceless manner. It thus divides the process of reassessment into two stages and when viewed in that light it is manifest that it strikes a just balance between the obligation of the JAO to scrutinise information and the conduct of assessment itself through a faceless allocation.
The court ruled that the distribution of functions between the JAO and NFAC is complimentary and concurrent as contemplated under the various schemes and the statutory provisions. The balanced distribution underscores the legislative intent to create a seamless integration of traditional and faceless assessment mechanisms within a unified statutory framework.
The court held that the notices are not liable to be quashed merely on the ground of the same having been issued by the JAO.
Case Details
Case Title: T.K.S. Builders Pvt. Ltd. v/s INCOME TAX OFFICER
Case No.: W.P.(C) 1968/2023
Date: October 28, 2024
Counsel For Petitioner: Aseem Chawla
Counsel For Respondent: Prakash Kumar
