Indian Court Rules on Jurisdiction in Faceless Income Tax Assessments

Category: Law
Sub-Category: Tax Law
Subject: Income Tax

Background

This article discusses a recent court judgment concerning the jurisdiction of tax authorities in issuing notices under Section 148 of the Income Tax Act, 1961, in the context of the faceless assessment scheme. The case involved writ petitions challenging orders issued by a Jurisdictional Assessment Officer (JAO). The central question was whether the JAO or the National Faceless Assessment Centre (NaFAC) had the authority to issue Section 148 notices after the introduction of the e-Assessment of Income Escaping Assessment Scheme, 2022, and the Faceless Jurisdiction of Income-tax Authorities Scheme, 2022.

Arguments

The petitioner argued that the introduction of the two schemes, coupled with Section 151A of the IT Act, eliminated the JAO's power to issue Section 148 notices. They contended that Section 148 notices should only be issued by NaFAC in a faceless manner, as mandated by the schemes. They cited several High Court judgments supporting their position.

The respondent, represented by the government, countered that the schemes and Section 144B explicitly grant jurisdiction to the JAO for issuing Section 148 and 148A notices. They argued that the notices were issued in a faceless manner, fulfilling all requirements of the schemes, even though the JAO's name was mentioned (a procedural error). They also presented their own supporting High Court judgments.

Court's Analysis and Reasoning

The court meticulously analyzed Section 144B of the IT Act, which governs faceless assessments. It noted that while NaFAC handles the assessment process under Section 147, its jurisdiction begins only after the issuance of a Section 148 notice by the JAO. The court found that the schemes did not explicitly remove the JAO's power to issue Section 148 notices. The court acknowledged that the JAO's name being mentioned on the notice was a procedural error but not a jurisdictional flaw. The court also clarified that the Board's guidelines issued on 24.05.2023 were within their power under Section 144B(2) and did not contradict the schemes.

Decision and Implications

The court dismissed the writ petitions. It ruled that the JAO has exclusive jurisdiction to issue Section 148 notices, while NaFAC handles subsequent assessment proceedings under Sections 142(1) and 143(2). The court's decision provides clarity on the division of labor between the JAO and NaFAC in faceless assessments, emphasizing that the JAO's role in initiating the process remains crucial. The court's decision also highlights the importance of adhering to procedural aspects of the faceless assessment scheme, even if the procedural errors do not affect the jurisdiction. The court granted liberty to the petitioners to file a reply within 30 days.

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