Bishamber Dayal Chander Mohan (Acting Through Competent Partner Mr Chander Mohan Agarwal) vs. Income Tax Officer Ward 58(3), Delhi

Facts

A batch of writ petitions challenged reassessment notices issued under Section 148 of the Income Tax Act, 1961. The core issue was the validity of these notices issued by the Jurisdictional Assessing Officer (JAO) under the Faceless Scheme of Assessment, as introduced by Sections 144B and 151A of the Act. The petitioners argued that the Faceless Scheme mandates a specific procedure for such notices. The factual background of the lead petition, W.P.(C) 8891/2023, involved a Section 148 notice issued on March 31, 2021, for Assessment Year 2014-15. This notice was previously challenged, and interim orders were passed. The Supreme Court's decision in Union of India v. Ashish Agarwal, which modified judgments concerning reassessment notices issued after the Finance Act, 2021, was also a significant factor.

Held

The Court held that the reassessment notices issued by the Jurisdictional Assessing Officer (JAO) are valid and compliant with the Faceless Scheme of Assessment. The Court found that the Faceless Reassessment Scheme, 2022, particularly Clause 3, contemplates a two-stage process. The first stage involves the JAO examining information received through the Risk Management System (RMS) and the Insight Portal, forming an opinion on whether income has escaped assessment, and issuing a notice under Section 148A. The second stage, after the assessee's objections are considered, involves the transmission of the record to the National Faceless Assessment Centre (NFAC) for conducting the actual assessment in a faceless manner through automated allocation. The Court reasoned that this interpretation strikes a harmonious balance between the JAO's role in scrutinizing information and the conduct of assessment through a faceless mechanism, aligning with the legislative intent. The Court disagreed with the contrary view expressed in Hexaware Technologies, finding that the JAO's role in preliminary evaluation is not rendered redundant. The Court dismissed the writ petitions, stating that the challenge based solely on the JAO issuing the notice is negated, but other objections to the reassessment proceedings remain open for independent adjudication.

Key Issues

1. Whether a notice issued by the Jurisdictional Assessing Officer (JAO) for reassessment under Section 148 of the Income Tax Act, 1961, is valid and compliant with the Faceless Scheme of Assessment, particularly concerning Sections 144B and 151A of the Act. Petitioner's Arguments: The petitioners contended that the Faceless Reassessment Scheme, 2022, specifically Clause 3, mandates a phased process where initiation of action, formation of opinion, and actual assessment are distinct. They argued that the JAO's role should be limited to preliminary examination and that the actual assessment must be conducted in a faceless manner after automated allocation. They relied on the interpretation of punctuation in Clause 3 and the principle of beneficial construction to argue that the JAO should not be completely deprived of jurisdiction but that the assessment itself should be faceless. Respondent's Arguments: The Revenue argued that the JAO, upon receiving information through the Risk Management System (RMS) and the Insight Portal, is entitled to initiate the reassessment process by following the procedure under Section 148A. They contended that after considering objections, if the JAO forms an opinion that income has escaped assessment, the record should be transmitted to the National Faceless Assessment Centre (NFAC) for faceless assessment. They supported a construction that balances the JAO's scrutiny role with faceless assessment, citing the scheme's intent and the complementary distribution of functions between the JAO and NFAC.