S.148A Notice Invalid If Issued By Jurisdictional AO Instead Of Faceless AO: Madras High Court

Madras High Court Quashes S.148 Notice Issued by Jurisdictional AO, Upholds Faceless Assessment Mandate

CHENNAI: In a significant ruling on procedural jurisdiction in income tax matters, the Madras High Court has quashed a reassessment notice issued under Section 148 of the Income Tax Act, holding that such notices must be issued by the Faceless Assessment Officer (FAO) and not the Jurisdictional Assessment Officer (JAO).

The Division Bench, comprising Chief Justice K.R. Shriram and Justice Sunder Mohan , allowed the appeal filed by Mark Studio India Private Limited against an order of a single judge who had previously upheld the notice's validity.

Case Background

The case revolved around a reassessment notice dated April 15, 2024, issued to Mark Studio India Private Limited by the Jurisdictional Assessment Officer. The company challenged this notice through a writ petition, which was dismissed by a learned Single Judge on the grounds that a notice issued by a JAO instead of an FAO would still be valid. The company subsequently filed a writ appeal before the Division Bench.

Key Arguments

Appellant's Contention: Ms. Vardhini Karthik, counsel for the appellant, argued that the notice was invalid as it violated the mandated procedure for faceless assessments. She relied on the precedent set by the Bombay High Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax , a judgment which has been consistently followed by the Madras High Court. The core of her argument was that if the law designates the Faceless Assessment Officer as the proper authority to issue the notice, a notice issued by any other officer, including the Jurisdictional Assessment Officer, is void for lack of jurisdiction.

Revenue's Concession: In a notable turn, Ms. Premalatha , counsel for the Income Tax Department (Revenue), conceded that the legal position articulated by the appellant's counsel was correct based on current judicial precedent.

Court's Ruling and Precedent

The Division Bench accepted the arguments presented and aligned its decision with the established legal principle. The judgment cited the Bombay High Court's ruling in Hexaware Technologies , which firmly established that notices for faceless assessments must originate from the Faceless Assessment Officer.

The Court observed:

"...this Court has, in many matters, held, following the judgment of the Bombay High Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax, that notice that has to be issued by Faceless Assessment Officer has to be issued by Faceless Assessment Officer and if issued by Jurisdictional Assessment Officer, the same is not valid."

Final Decision and Its Implications

The Madras High Court quashed and set aside the impugned notice dated April 15, 2024. However, the decision came with a significant rider. Acknowledging the Revenue's request, the Court granted liberty to the department to "re-ignite" the reassessment proceedings against the company if the Supreme Court were to interfere with or overturn the Bombay High Court's judgment in the Hexaware Technologies case.

This judgment reinforces the strict procedural requirements of the faceless assessment scheme, emphasizing that jurisdictional errors in the issuance of notices can be fatal to the proceedings. It provides immediate relief to the assessee while protecting the Revenue's interests pending a potential final determination on the issue by the Apex Court.