Delhi High Court
Gdr Finance And Leasing Private Limited vs Income Tax Officer, Ward 10(1), New … on 28 October, 2024
Author: Yashwant Varma
Bench: Yashwant Varma
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: October 04, 2024
Judgment pronounced on: October 28, 2024
+ W.P.(C) 1968/2023
T.K.S. BUILDERS PVT. LTD. .....Petitioner
Through: Mr. Kapil Goel and Mr. Sandeep
Goel, Advs.
versus
INCOME TAX OFFICER WARD 25(3)
NEW DELHI .....Respondent
Through: Mr. Aseem Chawla, SSC with
Ms. Pratishta, Ms. Nivedita, Ms.
Priya Sarkar, Advs.
+ W.P.(C) 4512/2023 & CM APPL. 17291/2023 (Interim Relief)
GDR FINANCE AND LEASING PRIVATE
LIMITED .....Petitioner
Through: Mr. Prakash Kumar & Mr.
Rupinder Kumar, Advs.
versus
INCOME TAX OFFICER, WARD 10(1), NEW
DELHI .....Respondent
Through: Mr. Abhishek Maratha, SSC
with Ms. Nupur Sharma, Mr.
Parth Semwal & Mr. Apoorv
Agarwal, JSCs, Mr. Gaurav
Singh, Mr. Bhanukaran Singh,
Ms. Muskan Goel, Ms. Parithi
Kohli, Mr. Himanshu Gaur,
Advs.
+ W.P.(C) 8891/2023 & CM APPL. 33614/2023( stay)
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
SULOCHNA GOEL .....Petitioner
Through: Mr. Kapil Goel and Mr. Sandeep
Goel, Advs.
versus
ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE
43(1) DELHI AND ANR. .....Respondents
Through: Mr. Aseem Chawla, SSC with
Ms. Pratishta, Ms. Nivedita &
Ms. Priya Sarkar, Advs.
+ W.P.(C) 5246/2023& CM APPL. 20477/2023 (stay)
BISHAMBER DAYAL CHANDER MOHAN .....Petitioner
Through: Mr. Kapil Goel and Mr. Sandeep
Goel, Advs.
versus
INCOME TAX OFFICER WARD 58(3) .....Respondent
Through: Mr. Gaurav Gupta, SSC with Mr.
Shivendra Singh & Mr. Yojit
Pareek, JSCs for IT Deptt.
+ W.P.(C) 6777/2023 & CM APPL. 26479/2023 (stay)
BISHAMBER DAYAL CHANDER MOHAN (ACTING
THROUGH COMPETENT PARTNER, MR. CHANDER
MOHAN AGARWAL) .....Petitioner
Through: Mr. Kapil Goel and Mr. Sandeep
Goel, Advs.
versus
INCOME TAX OFFICER, WARD 58(3),
DELHI .....Respondent
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
Through: Mr. Gaurav Gupta, SSC with Mr.
Shivendra Singh & Mr. Yojit
Pareek, JSCs for IT Deptt.
+ W.P.(C) 7178/2023 & CM APPL. 27960/2023 (stay)
BISHAMBER DAYAL CHANDER MOHAN (ACTING
THROUGH COMPETENT PARTNER MR CHANDER
MOHAN AGARWAL) .....Petitioner
Through: Mr. Kapil Goel and Mr. Sandeep
Goel, Advs.
versus
INCOME TAX OFFICER WARD 58(3),
DELHI .....Respondent
Through: Mr. Gaurav Gupta, SSC with Mr.
Shivendra Singh & Mr. Yojit
Pareek, JSCs for IT Deptt.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
JUDGMENT
TABLE OF CONTENTS
A. FACTUAL BACKGROUND ……………………………………………….. 4
B. ARGUMENTS ADVANCED BY RESPECTIVE SIDES …….. 11
C. STATUTORY PROVISIONS RELEVANT TO THE
FACELESS SCHEME OF ASSESSMENT……………………………….. 41
D. NOTIFICATIONS AND INSTRUCTIONS PERTAINING TO
THE FACELESS SCHEME OF ASSESSMENT ………………………. 58
E. RATIONALE AND LEGISLATIVE INTENT UNDERLYING
THE FACELESS SCHEME OF ASSESSMENT ………………………. 69
F. RMS AND OTHER MODES OF SELECTION OF CASES .. 76
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
G. ―INFORMATION‖ RELEVANT FOR ASSESSMENTS ……. 80
H. THE CONCURRENT CONFERRAL OF JURISDICTION .. 84
I. ASSESSMENT AND RE-ASSESSMENT ACTION IN LIGHT
OF THE FACELESS ASSESSMENT REGIME ……………………….. 86
J. DISPOSITION …………………………………………………………………. 106
YASHWANT VARMA, J.
A. FACTUAL BACKGROUND
1. This batch of writ petitions assail the validity of reassessment
action initiated under Section 148 of the Income Tax Act, 19611.
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 Officer2
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. We, consequently, restrict the present judgment to the
aforesaid issue alone and reserve the right of the writ petitioners to
address all other objections which are taken to the commencement of
reassessment in independent and appropriate proceedings.
2. For purposes of disposal of the present batch, we propose to take
note of the salient facts which obtain in lead petition, W.P.(C)
8891/2023, and which pertains to Assessment Year3 2014-15. On 31
March 2021, a notice under Section 148 of the Act came to be issued
against the writ petitioner. That notice was challenged by way of
W.P.(C) 965/2022 and which formed part of a larger batch of writ
petitions which has since then come to be commonly known as Suman
1
Act
2
JAO
3 AY
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
Jeet Agarwal v. Income Tax Officer, Ward 61(1) and Others4. The
aforenoted writ petition was duly entertained and interim orders passed
on 24 March 2022, restraining the respondents from taking any
coercive action against the petitioner in pursuance of the notice
referable to Section 148.
3. On 04 May 2022, the Supreme Court pronounced its judgment in
a batch of Special Leave Petitions and appeals titled Union of India v.
Ashish Agarwal5. The said batch was principally concerned with the
validity of notices of reassessment issued after the promulgation of
Finance Act, 2021 and the respondents, despite the above, having
chosen to commence reassessment proceedings in accordance with the
erstwhile statutory regime which existed.
4. In order to lend a quietus to that controversy and which had
resulted in numerous challenges being mounted before various High
Courts, the Supreme Court in Ashish Agarwal modified the judgments
handed down by different High Courts in the following terms:-
―25. Therefore, we propose to modify the judgments and orders
passed by the respective High Courts as under:
25.1. The respective impugned Section 148 notices issued to the
respective assessees shall be deemed to have been issued under
Section 148-A of the IT Act as substituted by the Finance Act, 2021
and treated to be show-cause notices in terms of Section 148-A(b).
The respective assessing officers shall within thirty days from today
provide to the assessees the information and material relied upon by
the Revenue so that the assessees can reply to the notices within two
weeks thereafter.
25.2. The requirement of conducting any enquiry with the prior
approval of the specified authority under Section 148-A(a) be
dispensed with as a one-time measure vis-a-vis those notices which
have been issued under Section 148 of the unamended Act from 1-4-
4 2022 SCC OnLine Del 3141
5 (2023) 1 SCC 617
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
2021 till date, including those which have been quashed by the High
Courts.
25.3. The assessing officers shall thereafter pass an order in terms of
Section 148-A(d) after following the due procedure as required
under Section 148-A(b) in respect of each of the assessees
concerned.
25.4. All the defences which may be available to the assessee under
Section 149 and/or which may be available under the Finance Act,
2021 and in law and whatever rights are available to the Assessing
Officer under the Finance Act, 2021 are kept open and/or shall
continue to be available.
25.5. The present order shall substitute/modify respective judgments
and orders passed by the respective High Courts quashing the similar
notices issued under unamended Section 148 of the IT Act
irrespective of whether they have been assailed before this Court or
not.
26. There is a broad consensus on the aforesaid aspects amongst the
learned ASG appearing on behalf of the Revenue and the learned
Senior Advocates/learned counsel appearing on behalf of the
respective asses sees. We are also of the opinion that if the aforesaid
order is passed, it will strike a balance between the rights of the
Revenue as well as the respective assessees as because of a bona fide
belief of the officers of the Revenue in issuing approximately 90,000
such notices, the Revenue may not suffer as ultimately it is the
public exchequer which would suffer.
27. Therefore, we have proposed to pass the present order with a
view to avoiding filing of further appeals before this Court and
burden this Court with approximately 9000 appeals against the
similar judgments and orders passed by the various High Courts, the
particulars of some of which are referred to hereinabove. We have
also proposed to pass the aforesaid order in exercise of our powers
under Article 142 of the Constitution of India by holding that the
present order shall govern, not only the impugned judgments and
orders passed by the High Court of Judicature at Allahabad, but shall
also be made applicable in respect of the similar judgments and
orders passed by various High Courts across the country and
therefore the present order shall be applicable to PAN INDIA.
28. In view of the above and for the reasons stated above, the present
appeals are allowed in part. The impugned common judgments and
orders passed by the High Court of Judicature at Allahabad in WT
No. 524 of 2021 and other allied tax appeals/petitions, is/are hereby
modified and substituted as under:
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
28.1. The impugned Section 148 notices issued to the respective
assessees which were issued under unamended Section 148 of the IT
Act, which were the subject-matter of writ petitions before the
various respective High Courts shall be deemed to have been issued
under Section 148-A of the IT Act as substituted by the Finance Act,
2021 and construed or treated to be show cause notices in terms of
Section 148-A(b). The assessing officer shall, within thirty days
from today provide to the respective assessees information and
material relied upon by the Revenue, so that the assessees can reply
to the show-cause notices within two weeks thereafter.
28.2. The requirement of conducting any enquiry, if required, with
the prior approval of specified authority under Section 148-A(a) is
hereby dispensed with as a one-time measure vis-a-vis those notices
which have been issued under Section 148 of the unamended Act
from 1-4-2021 till date, including those which have been quashed by
the High Courts.
28.3. Even otherwise as observed hereinabove holding any enquiry
with the prior approval of specified authority is not mandatory but it
is for the assessing officers concerned to hold any enquiry, if
required.
28.4. The assessing officers shall thereafter pass orders in terms of
Section 148-A(d) in respect of each of the assessees concerned;
Thereafter after following the procedure as required under Section
148-A may issue notice under Section 148 (as substituted).
28.5. All defences which may be available to the assessees including
those available under Section 149 of the IT Act and all rights and
contentions which may be available to the assessees concerned and
Revenue under the Finance Act, 2021 and in law shall continue to be
available.
29. The present order shall be applicable PAN INDIA and all
judgments and orders passed by the different High Courts on the
issue and under which similar notices which were issued after 1-4-
2021 issued under Section 148 of the Act are set aside and shall be
governed by the present order and shall stand modified to the
aforesaid extent. The present order is passed in exercise of powers
under Article 142 of the Constitution of lndia so as to avoid any
further appeals by the Revenue on the very issue by challenging
similar judgments and orders, with a view not to burden this Court
with approximately 9000 appeals. We also observe that the present
order shall also govern the pending writ petitions, pending before
various the High Courts in which similar notices under Section 148
of the Act issued after 1-4-2021 are under challenge.
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
30. The impugned common judgments and orders passed by the
High Court of Allahabad and the similar judgments and orders
passed by various High Courts, more particularly, the respective
judgments and orders passed by the various High Courts particulars
of which are mentioned hereinabove, shall stand
modified/substituted to the aforesaid extent only.‖
5. Pursuant to the liberty so accorded in Ashish Agarwal, a notice
under Section 148A(b) came to be issued in respect of the petitioner on
02 June 2022. The petitioner furnished a response to that notice on 15
June 2022. Ultimately and in compliance with the procedure as
prescribed in Section 148A, the JAO passed an order under Section
148A(d) dated 22 July 2022 rejecting the objections raised to the
commencement of reassessment. This was followed by the issuance of
a consequential notice under Section 148 of the same date.
6. Pursuant to the judgment rendered by the Supreme Court in
Ashish Agarwal, the batch of writ petitions pending before this Court in
Suman Jeet Agarwal came to be disposed of on 27 September 2022. It
becomes relevant to note that Suman Jeet Agarwal was principally
concerned with a challenge raised to various notices under Section 148
which had come to be issued at the cusp of Finance Act, 2021 coming
into effect. While dealing with the categories of notices and the date
when those notices would be deemed to have been issued, the Court
had classified various notices into five stated categories. That batch
ultimately came to be disposed of in the following terms:-
―209. For the reasons and principles that we have laid down, we
dispose of these Writ Petitions with the following directions:
210. Category ‗A’ : The Notices falling under category ‗A’, which
were digitally signed on or after 1st of April, 2021, are held to bear
the date on which the said Notices were digitally signed and not 31st
March 2021. The said petitions are disposed of with the direction
that the said Notices are to be considered as show-cause-notices
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By:KAMLESH KUMAR
Signing Date:28.10.2024
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under Section 148A (b) of the Act as per the directions of the apex
Court in the Ashish Agarwal (Supra) judgment.
211. Category ‗B’ : The Notices falling under category ‗B’ which
were sent through the registered e-mail ID of the respective JAOs,
though not digitally signed are held to be valid. The said petitions
are disposed of with the direction to the JAOs to verify and
determine the date and time of its despatch as recorded in the ITBA
portal in accordance with the law laid down in this judgment as the
date of issuance. If the date and time of despatch recorded is on or
after 1 of April, 2021, the Notices are to be considered as show-
cause-notices under Section 148A (b) as per the directions of the
apex Court in the Ashish Agarwal (Supra) judgment.
212. Category ‗C : The petitions challenging Notices falling under
category ‗C which were digitally signed on 31st of March 2021, are
disposed of with the direction to the JAOs to verify and determine
the date and time of despatch as recorded in the ITBA portal in
accordance with the law laid down in this judgment as the date of
issuance. If the date and time of despatch recorded is on or after 1st
of April, 2021, the Notices are to be considered as show-cause-
notices under Section 148A (b) as per the directions of the apex
Court in the Ashish Agarwal (Supra) judgment.
213. Category ‗D’: The petitions challenging Notices falling under
category ‗D’ which were only uploaded in the E-filing portal of the
assessees without any real time alert, are disposed of with the
direction to the JAOs to determine the date and time when the
assessees viewed the Notices in the E-filing portal, as recorded in the
ITBA portal and conclude such date as the date of issuance in
accordance with the law laid down in this judgment. If such date of
issuance is determined to be on or after 1st of April 2021, the Notices
will be construed as issued under Section 148A (b) of the Act of
1961 as per the Ashish Agarwal (Supra) judgment.
214. Category ‗E’: The petitions challenging Notices falling under
category ‗E’ which were manually despatched, are disposed of with
the direction to the JAOs to determine in accordance with the law
laid down in this judgment, the date and time when the Notices were
delivered to the post office for despatch and consider the same as
date of issuance. If the date and time of despatch recorded is on or
after 1 of April, 2021, the Notices are to be construed as show-
cause-notices under Section 148A (b) as per the directions of the
apex Court in the Ashish Agarwal (Supra) judgment.
215. Notices sent to unrelated e-mail addresses: The petitions
challenging Notices which were sent to unrelated e-mail addresses
are disposed of with the direction the JAOs to verify the date on
which the Notice was first viewed by the assessee on the E-filing
portal and consider the same as the date of issuance. If such date of
issuance is determined to be on or after 01 April, 2021, the Notices
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17:50:00
will be construed as issued under Section 148A (b) of the Act of
1961 as per judgment in Ashish Agarwal (Supra).
216. We may note that in the writ petitions, the petitioners have
raised additional defenses to challenge the impugned Notices. Such
additional defenses have not been considered by this Court and the
petitioners shall be at liberty to raise all such additional defenses as
available inlaw.
217. We are conscious that the time granted by the Supreme Court in
Ashish Agarwal to the Department has since expired on 3rd June,
2022 however, the proceedings in the present writ petitions were
stayed on 24th March, 2022 until the pronouncement of this
judgment. Therefore, we grant the JAOs in the first instance eight
(8) weeks time from today to determine the date of issuance of the
Notices as per the law laid down in this judgment.
218. The Notices which in accordance with the law laid down in this
judgment has been verified by the JAOs to have been issued on or
after 01st April 2021 and until 30th June, 2021 shall be deemed to
have been issued under Section 148A of the Act of 1961 as
substituted by the Finance Act, 2021 and construed to be show-cause
notices in terms of Section 148A(b) as per the judgment of the apex
Court in Ashish Agarwal (Supra) and the JAOs shall thereafter
follow the procedure set down by the Supreme Court in the said
judgment which reads as follows:
xxxx xxxx xxxx
219. With the aforesaid directions, present writ petitions and
pending applications stand disposed of.‖
7. It would appear that taking a cue from the aforesaid decision, yet
another notice under Section 148A(b) dated 28 October 2022 came to
be issued in respect of the petitioner. This was followed by an order
dated 13 December 2022 being passed referable to Section 148A(d)
along with a notice under Section 148 of even date. Although a final
assessment order dated 24 May 2023 thereafter came to be framed, the
said order alludes to the second notice under Section 148 dated 22 July
2022. We have not been informed of the fate of the notice dated 13
December 2022 and which represented the last of the multiple notices
issued by the respondents. It is at this juncture that the present writ
petition came to be filed before this Court.
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
8. The challenge to the notice under Section 148 was principally
founded on the decisions handed down by the High Courts of
Karnataka, Telangana, Bombay, and Gauhati, all of which have in
unison, held that after the introduction of Sections 144B and 151A read
together with the E- Assessment of Income Escaping Assessment
Scheme, 20226 as embodied in the Notification dated 29 March 2022,
the JAO would stand denuded of jurisdiction to commence proceedings
under Section 148 of the Act.
B. ARGUMENTS ADVANCED BY RESPECTIVE SIDES
9. Both Mr. Goel as well as Mr. Kumar, learned counsels who
appeared in support of the writ petitions, commended for our
consideration the judgments handed down by the aforenoted High
Courts and argued 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. It was their
contention that 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.
10. The first of those judgments which appears to have dealt with
this issue was of the Telangana High Court in Kankanala Ravindra
Reddy vs. Income-tax Officer7. The challenge which was addressed
before that High Court to the Section 148 notices was that once the
respondents had adopted faceless assessment in terms of the scheme
enacted under Section 151A, the JAO would stand denuded of power
6
Faceless Reassessment Scheme 2022
7
W.P (C) 25903/2023 decided on 14 September 2023
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
and authority to commence proceedings under Section 148A and that it
was only the faceless route of assessment which could have been
followed.
11. Dealing with this issue, the Telangana High Court in Kankanala
Ravindra Reddy had observed as follows: –
―25. A plain reading of the aforesaid two notifications issued by the
Central Board of Direct Taxes dated 28-3-2022 and 29-3-2022, it
would clearly indicate that the Central Board of Direct Taxes was
very clear in its mind when it framed the aforesaid two schemes with
respect to the proceedings to be drawn under section 148A, that is to
have it in a faceless manner. There were two mandatory conditions
which were required to be adhered to by the Department, firstly, the
allocation being made through the automated allocation system in
accordance with the risk management strategy formulated by the
Board under section 148 of the Act. Secondly, the re-assessment has
to be done in a faceless manner to the extent provided under section
144B of the Act.
26. After the introduction of the above two schemes, it becomes
mandatory for the Revenue to conduct/initiate proceedings
pertaining to reassessment under section 147, 148 & 148A of the Act
in a faceless manner. Proceedings under section 147 and section 148
of the Act would now have to be taken as per the procedure
legislated by the Parliament in respect of reopening/re-assessment
i.e., proceedings undersection 148A of the Act.
27. In the present case, both the proceedings i.e., the impugned
proceedings under section 148A of the Act, as well as the
consequential notices under section 148 of the Act were issued by
the local jurisdictional officer and not in the prescribed faceless
manner. The order under section 148A(d) of the Act and the notices
undersection 148 of the Act are issued on 29-4-2022, i.e., after the
“Faceless Jurisdiction of the Income-tax Authorities Scheme, 2022”
and the “e-Assessment of Income Escaping Assessment Scheme,
2022” were introduced.‖
We are informed that the Revenue has assailed that judgment by way of
Special Leave Petition (Civil) Diary No. 2041/2024 before the Supreme
Court and on which notice came to be issued on 02 February 2024.
12. A similar question arose for consideration of the High Court of
Telangana yet again in Venkataramana Reddy Patloola vs. Deputy
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By:KAMLESH KUMAR
Signing Date:28.10.2024
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Commissioner of Income Tax and Others8. The Telangana High
Court, while construing the Faceless Reassessment Scheme, 2022
which had come to be introduced on 29 March 2022, negated the
argument of the Revenue of the JAO being concurrently empowered to
undertake reassessment by observing:-
―18. Learned counsel for the petitioners, by placing reliance on the
judgment of Bombay High Court in Hexaware Technologies
Ltd.(supra), argued that the provision has already been interpreted by
the Bombay High Court, and therefore, the aforesaid expression ‗to
the extent provided in Section 144B of the Act’ does not deal with
the aspect of issuance of notice under Section 148 of the Act.
19. As noticed, learned Senior Standing Counsel for Income Tax
Department has taken a diametrically opposite stand by contending
that the said expression, indeed, covers the issuance of notice under
Section 148 of the Act. His contention was that issuance of notice
under Section 148 of the Act was also part of assessment procedure.
20. In the considered opinion of this Court, clause 3(b) of the
notification dated 29.03.2022, in specific, deals with issuance of
notice under Section 148 of the Act. For that purpose, the
notification seeks to apply e-assessment of income escaping
assessment scheme, 2022. A microscopic reading of clause 3(b)
shows that its only literal interpretation could be that issuance of
notice under Section 148 of the Act is squarely covered under the
scheme, and for the purpose of issuance of notice, the faceless
procedure must be followed. The expression ‗to the extent provided
in Section 144B of the Act’ in our judgment does not deal with
‗issuance of notice’ under Section 148. The said expression is
applicable with reference to ‗assessment’ and ‗reassessment’. Sub-
section (2) of Section 144B relates to ―assessment‖ and does not
deal with issuance of notice under Section 148 of the Act.
xxxx xxxx xxxx
22. A careful reading of the scheme points out that law makers
consciously provided two different sub clauses (a) and (b). Clause 3
‗(a)’ specifically deals with assessment, reassessment and
recomputation whereas sub-clause ‗(b)’ deals with notice under
Section 148 of the Act and gives reference of Section 144B for
providing ‗extent’ for the purpose of ‗assessment’ and
‗reassessment’. Putting it differently, sub-clause (b) of Clause 3 of
the scheme, before use of word ‗and’ is complete in itself and makes
it obligatory to issue notice under Section 148 as per automated
8 2024 SCC OnLine TS 1792
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Signing Date:28.10.2024
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allocation procedure envisaged in clause 2 (b) of the scheme. The
sentence after use of word ‗and’ in sub-clause (b) of clause 3 talks
about ‗extent’ provided in Section 144B with reference to
assessment and reassessment. The second portion of sub-clause (b)
of clause 3 after ‗and’ does not deal with issuance of notice under
Section 148 of the Act. Therefore, sub-clause (b) of clause 3 is in
two parts. First part is confined to notice under Section 148 of the
Act, whereas, second part after the word ‗and’ is confined to
‗assessment’ and ‗reassessment’.
xxxx xxxx xxxx
24. Thus, there is no cavil of doubt that Section 144B of the Act and
order of CBDT dated 06.09.2021 give exemption from following the
mandatory faceless procedure only in relation to passing of
assessment orders in cases of central charges and international tax
charges. Any other interpretation would amount to doing violence
with the language employed in the scheme/notification dated
29.03.2022, Section 144B(2) of the Act and order dated 06.09.2021.
Since in our view, the plain and unambiguous language used in the
scheme and order dated 06.09.2021 shows that the notice under
Section 148 does not fall within the ‗exception’, the judgments cited
by the learned Senior Standing Counsel for Income Tax Department
are of no assistance. The Taxpayer is nowhere distinguished between
NRIs and Indian Citizens. The notice issued under Section 148 must
comply with the requirement of the Scheme whether or not the
Taxpayer is NRI/Indian Citizen. Thus, the second limb of argument
of the learned Senior Standing Counsel for Income Tax Department
deserves to be rejected.
25. Pertinently, this Court in Kankanala Ravindra Reddy (supra),
held as under:
―25. A plain reading of the aforesaid two notifications
issued by the Central Board of Direct Taxes dated
28.03.2022 and 29.03.2022, it would clearly indicate
that the Central Board of Direct Taxes was very clear
in its mind when it framed the aforesaid two schemes
with respect to the proceedings to be drawn under
Section 148A, that is to have it in a faceless manner.
There were two mandatory conditions which were
required to be adhered to by the Department, firstly,
the allocation being made through the automated
allocation system in accordance with the risk
management strategy formulated by the Board under
Section 148 of the Act. Secondly, the re-assessment
has to be done in a faceless manner to the extent
provided under Section 144B of the Act.‖
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13. By the time the Telangana High Court came to pronounce its
verdict in Venkataramana Reddy Patloola, it also had the benefit of
considering a detailed decision which had come to be pronounced by
the Bombay High Court in Hexaware Technologies Ltd. v. Assistant
Commissioner of Income Tax9. In Hexaware Technologies, the
Bombay High Court, apart from the various other questions which were
formulated, also had an occasion to examine the issue of whether a
notice under Section 148, if issued by the JAO, would sustain in light
of the scheme formulated in accordance with Section 151A of the Act.
Since most of the High Courts have thereafter followed the opinion
expressed in Hexaware Technologies, we deem it apposite to extract the
following passages from that decision: –
―33. The guideline dated August 1, 2022 relied upon by the Revenue
is not applicable because these guidelines are internal guidelines as
is clear from the endorsement on the first page of the guideline
―Confidential For Departmental Circulation Only‖. The said
guidelines are not issued under section 119 of the Act. Any such
guideline issued by the Central Board of Direct Taxes is not binding
on the petitioner. Further the said guideline is also not binding on
respondent No. 1 as they are contrary to the provisions of the Act
and the Scheme framed under section 151A of the Act. The effect of
a guideline came up for discussion in Sofitel Realty LLP v. ITO
(TDS) [(2023) 457 ITR 18 (Bom); 2023 SCC OnLine Bom 1498;
(2023) 153 taxmann.com 496 (Bom).] wherein this court has held
that the guidelines which are contrary to the provisions of the Act
cannot be relied upon by the Revenue to reject an application for
compounding filed by an assessee. The court held that guidelines are
subordinate to the principal Act or Rules, it cannot restrict or
override the application of specific provisions enacted by
Legislature. The guidelines cannot travel beyond the scope of the
powers conferred by the Act or the Rules.
33.1. The guidelines do not deal with or even refer to the Scheme
dated March 29, 2022 ((2022) 442 ITR (Stat) 198) framed by the
Government under section 151A of the Act. Section 151A(3) of the
Act provides that the Scheme so framed is required to be laid before
each House of the Parliament. Therefore, the Scheme dated March
9 2024 SCC OnLine Bom 1249
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29, 2022 under section 151A of the Act, which has also been laid
before Parliament, would be binding on the Revenue and the
guideline dated August 1, 2022 cannot supersede the Scheme and if
it provides anything to the contrary to the said Scheme, then the
same is required to be treated as invalid and bad in law.
34. As regards Income-tax Business Application step-by-step
Document No. 2 regarding issuance of notice under section 148 of
the Act, relied upon by the Revenue, an internal document cannot
depart from the explicit statutory provisions of, or supersede the
Scheme framed by the Government under section 151A of the Act
which Scheme is also placed before both the Houses of Parliament
as per section 151A(3) of the Act. This is specially the case when the
document does not even consider or even refer to the Scheme.
Further the said document is clearly intended to be a manual/guide
as to how to use the Income-tax Department’s portal, and does not
even claim to be a statement of the Revenue’s position/stand on the
issue in question. Our observations with respect to the guidelines
dated August 1, 2022 relied upon by the Revenue will equally be
applicable here.
35. Further, in our view, there is no question of concurrent
jurisdiction of the jurisdictional Assessing Officer and the Faceless
Assessing Officer for issuance of notice under section 148 of the Act
or even for passing assessment or reassessment order. When specific
jurisdiction has been assigned to either the jurisdictional Assessing
Officer or the Faceless Assessing Officer in the Scheme dated March
29, 2022, then it is to the exclusion of the other. To take any other
view in the matter, would not only result in chaos but also render the
whole faceless proceedings redundant. If the argument of the
Revenue is to be accepted, then even when notices are issued by the
Faceless Assessing Officer, it would be open to an assessee to make
submission before the jurisdictional Assessing Officer and vice
versa, which is clearly not contemplated in the Act. Therefore, there
is no question of concurrent jurisdiction of both Faceless Assessing
Officer or the jurisdictional Assessing Officer with respect to the
issuance of notice under section 148 of the Act. The Scheme dated
March 29, 2022 ((2022) 442 ITR (Stat) 198) 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. That
automated allocation is defined in paragraph 2(b) of the Scheme to
mean an algorithm for randomised allocation of cases by using
suitable technological tools including artificial intelligence and
machine learning with a view to optimise the use of resources.
Therefore, it means that the case can be allocated randomly to any
officer who would then have jurisdiction to issue the notice under
section 148 of the Act. It is not the case of respondent No. 1 that
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respondent No. 1 was the random officer who had been allocated
jurisdiction.
36. With respect to the arguments of the Revenue, i.e., the
Notification dated March 29, 2022 ((2022) 442 ITR (Stat) 198)
provides that the Scheme so framed is applicable only ―to the
extent‖ provided in section 144B of the Act and section 144B of the
Act does not refer to issuance of notice under section 148 of the Act
and hence, the notice cannot be issued by the Faceless Assessing
Officer as per the said Scheme, we express our view as follows:
36.1 Section 151A of the Act itself contemplates formulation
of Scheme for both assessment, reassessment or recomputation
under section 147 as well as for issuance of notice under
section 148 of the Act. Therefore, the Scheme framed by the
Central Board of Direct Taxes, which covers both the
aforesaid aspect of the provisions of section 151A of the Act
cannot be said to be applicable only for one aspect, i.e.,
proceedings post the issue of notice under section 148 of the
Act being assessment, reassessment or recomputation under
section 147 of the Act and inapplicable to the issuance of
notice under section 148 of the Act. The Scheme is clearly
applicable for issuance of notice under section 148 of the Act
and accordingly, it is only the Faceless Assessing Officer
which can issue the notice under section 148 of the Act and
not the jurisdictional Assessing Officer. The argument
advanced by the respondent would render clause 3(b) of the
Scheme otiose and to be ignored or contravened, as according
to the respondent, even though the Scheme specifically
provides for issuance of notice under section 148 of the Act in
a faceless manner, no notice is required to be issued under
section 148 of the Act in a faceless manner. In such a
situation, not only clause 3(b) but also the first two lines below
clause 3(b) would be otiose, as it deals with the aspect of
issuance of notice under section 148 of the Act. The
respondents, being an authority subordinate to the Central
Board of Direct Taxes, cannot argue that the Scheme framed
by the Central Board of Direct Taxes, and which has been laid
before both Houses of Parliament is partly otiose and
inapplicable. The argument advanced by the respondent
expressly makes clause 3(b) otiose and impliedly makes the
whole Scheme otiose. If clause 3(b) of the Scheme is not
applicable, then only clause 3(a) of the Scheme remains. What
is covered in clause 3(a) of the Scheme is already provided in
section 144B(1) of the Act, which section provides for faceless
assessment, and covers assessment, reassessment or
recomputation under section 147 of the Act. Therefore, if the
Revenue’s arguments are to be accepted, there is no purpose of
framing a Scheme only for clause 3(a) which is in any event
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already covered under faceless assessment regime in section
144B of the Act. The argument of the respondent, therefore,
renders the whole Scheme redundant. An argument which
renders the whole Scheme otiose cannot be accepted as correct
interpretation of the Scheme. The phrase ―to the extent
provided in section 144B of the Act‖ in the Scheme is with
reference to only making assessment or reassessment or total
income or loss of the assessee. Therefore, for the purposes of
making assessment or reassessment, the provisions of section
144B of the Act would be applicable as no such manner for
reassessment is separately provided in the Scheme. For issuing
notice, the term ―to the extent provided in section 144B of the
Act‖ is not relevant. The Scheme provides that the notice
under section 148 of the Act, shall be issued through
automated allocation, in accordance with risk management
strategy formulated by the Board as referred to in section 148
of the Act and in a faceless manner. Therefore, ―to the extent
provided in section 144B of the Act‖ does not go with
issuance of notice and is applicable only with reference to
assessment or reassessment. The phrase ―to the extent
provided in section 144B of the Act‖ would mean that the
restriction provided in section 144B of the Act, such as
keeping the International Tax Jurisdiction or Central Circle
Jurisdiction out of the ambit of section 144B of the Act would
also apply under the Scheme. Further the exceptions provided
in sub-sections (7) and (8) of section 144B of the Act would
also be applicable to the Scheme.
37. When an authority acts contrary to law, the said act of the
authority is required to be quashed and set aside as invalid and bad
in law and the person seeking to quash such an action is not required
to establish prejudice from the said Act. An act which is done by an
authority contrary to the provisions of the statue, itself causes
prejudice to the assessee. All assessees are entitled to be assessed as
per law and by following the procedure prescribed by law.
Therefore, when the Income-tax authority proposes to take action
against an assessee without following the due process of law, the
said action itself results in a prejudice to the assessee. Therefore,
there is no question of the petitioner having to prove further
prejudice before arguing the invalidity of the notice.‖
14. A reading of the decision in Hexaware Technologies would
compel one to notice a detailed reference being made to an Office
Memorandum dated 20 February 2023. It, however, becomes pertinent
to clarify here that the document dated 20 February 2023, and which
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has been described to be an ―Office Memorandum‖, was actually
instructions provided to counsels for the Revenue in connection with
the batch of writ petitions which were pending before that High Court.
They were thus rightly construed as not being statutory instructions
which the Central Board of Direct Taxes10 is otherwise, and
undoubtedly, empowered to issue under the Act.
15. However, those instructions were duly examined and dealt with
by the Bombay High Court in the following terms: –
―38. With respect to the Office Memorandum dated February 20,
2023, the said Office Memorandum merely contains the comments
of the Revenue issued with the approval of Member (L&S) Central
Board of Direct Taxes and the said Office Memorandum is not in the
nature of a guideline or instruction issued under section 119 of the
Act so as to have any binding effect on the Revenue. Moreover, the
arguments advanced by the Revenue on the said Office
Memorandum dated February 20, 2023 is clearly contrary to the
provisions of the Act as well as the Scheme dated March 29, 2022
and the same are dealt with as under–
(i) It is erroneously stated in paragraph 3 of the Office
Memorandum that ―The scheme clearly lays down that the
issuance of notice under section 148 of the Act has to be
through automation in accordance with the risk management
strategy referred to in section 148 of the Act‖. The issuance
of notice is not through automation but through ―automated
allocation‖. The term ―automated allocation‖ is defined in
clause 2(1)(b) of the said Scheme to mean random allocation
of cases to the Assessing Officers. Therefore, it is clear that
the Assessing Officers are randomly selected to handle a case
and it is not merely a case where notice is sought to be issued
through automation.
(ii) It is further erroneously stated in paragraph 3 of the
Office Memorandum that ―To this end, as provided in section
148 of the Act, the Directorate of Systems randomly selects a
number of cases based on the criteria of Risk Management
Strategy‖. The term ―randomly‖ is further used at numerous
other places in the Office Memorandum with respect to
selection of cases for consideration/issuance of notice under
section 148 of the Act. The respondent is clearly incorrect in
its understanding of the said Scheme as the reference to
10
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random in the said Scheme is reference to selection of
Assessing Officer at random and not selection of section 148
cases as random. If the cases for issuance of notice under
section 148 of the Act are selected based on criteria of the
risk management strategy, then, obviously, the same are not
randomly selected. The term ―randomly‖ by definition mean
something which is chosen by chance rather than according
to a plan. Therefore, if the cases are chosen based on risk
management strategy, they certainly cannot be said to be
random. The computer/system cannot select cases on random
but selection can be based on certain well-defined criteria.
Hence, the argument of the respondents is clearly
unsustainable. If the case of the respondent is that the
applicability of section 148 of the Act is on random basis,
then the provisions of section 148 itself would become
contrary to article 14 of the Constitution of India as being
arbitrary and unreasonable. Randomly selecting cases for
reopening without there being any basis or criteria would
mean that the section is applied by the Revenue in an
arbitrary and unreasonable manner. The word ―random‖ is
used in clause 2(1)(b) of the said Scheme in the definition of
―automated allocation‖.―Automated allocation‖ is defined in
the said clause to mean ―an algorithm for randomised
allocation of cases….‖. The term ―random‖, in our view, has
been used in the context of assigning the case to a random
Assessing Officer, i.e., an Assessing Officer would be
randomly chosen by the system to handle a particular case.
The term ―random‖ is not used for selection of case for
issuance of notice under section 148 as has been alleged by
the Revenue in the Office Memorandum. Further, in
paragraph 3.2 of the Office Memorandum, with respect to the
reassessment proceedings, the reference to ―random
allocation‖ has correctly been made as random allocation of
cases to the Assessment Units by the National Faceless
Assessment Centre. When random allocation is with
reference to officer for reassessment then the same would
equally apply for issuance of notice under section 148 of the
Act.
(iii) The conclusion at the bottom of page 2 in paragraph 3 of
the Office Memorandum that ―Therefore, as provided in the
Scheme the notice under section 148 of the Act is issued on
automated allocation of cases to the Assessing Officer based
on the risk management criteria‖ is also factually incorrect
and on the basis of incorrect interpretation of the Scheme.
Clause 2(1)(b) of the Scheme defined ―automated allocation‖
to mean ―an algorithm for randomised allocation of cases by
using suitable technological tools, including artificial
intelligence and machine learning, with a view to optimise
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the use of resources‖. The said definition does not provide
that the automated allocation of case to the Assessing Officer
is based on the risk management criteria. The reference to
risk management criteria in clause 3 of the Scheme is to the
effect that the notice under section 148 of the Act should be
in accordance with the risk management strategy formulated
by the Board which is in accordance with Explanation 1 to
section 148 of the Act. In our view, the Revenue is
misinterpreting the Scheme, perhaps to cover its deficiency of
not following the Scheme for issuing notice under section
148 of the Act.
(iv) In paragraph 3.1 of the Office Memorandum, it is stated
that the case is selected prior to issuance of notice are decided
on the basis of an algorithm as per risk management strategy
and are, therefore, randomly selected. It is further stated that
these cases are ―flagged‖ to the jurisdictional Assessing
Officer by the Directorate of Systems and the jurisdictional
Assessing Officer does not have any control over the process.
It is further stated that the jurisdictional Assessing Officer has
no way of predicting or determining before hand whether the
case will be ―flagged‖ by the system. The contention of the
Revenue is that only cases which are ―flagged‖ by the system
as per the risk management strategy formulated by the
Central Board of Direct Taxes can be considered by the
Assessing Officer for reopening, however, in clause (i) in the
Explanation 1 to section 148 of the Act, the term ―flagged‖
has been deleted by the Finance Act, 2022, with effect from
April 1, 2022. In any case, whether only cases which are
flagged can be reopened or not is not relevant to decide the
scope of the Scheme framed under section 151A of the Act,
which required the notice under section 148 of the Act to be
issued on the basis of random allocation and in a faceless
manner.
(v) The Revenue has wrongly contended in paragraph 3.1 of
the Office Memorandum that ―Therefore, whether
jurisdictional Assessing Officer or National Faceless
Assessment Centre should issue such notice is decided by
administration keeping in mind the end result of natural
justice to the assessees as well as completion of required
procedure in a reasonable time‖. In our opinion, there is no
such power given to the administration under either section
151A of the Act or under the said Scheme. The Scheme is
clear and categorical that notice under section 148 of the Act
shall be issued through automated allocation and in a faceless
manner. Therefore, the argument of the Revenue is clearly
contrary to the provisions of the Scheme.
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(vi) In paragraph 3.3 of the Office Memorandum, it is again
erroneously stated that ―Here it is pertinent to note that the
said notification does not state whether the notices to be
issued by the National Faceless Assessment Centre or the
jurisdictional Assessing Officer (―JAO‖)… It states that
issuance of notice under section 148 of the Act shall be
through automated allocation in accordance with the risk
management strategy and that the assessment shall be in a
faceless manner to the extent provided in section 144B of the
Act. The Scheme is categoric as stated aforesaid that the
notice under section 148 of the Act shall be issued through
automated allocation and in a faceless manner. The Scheme
clearly provides that the notice under section 148 of the Act
is required to be issued by National Faceless Assessment
Centre and not the jurisdictional Assessing Officer. Further,
unlike as canvassed by the Revenue that only the assessment
shall be in faceless manner, the Scheme is very clear that
both the issuance of notice and assessment shall be in
faceless manner.
(vii) In paragraph 5 of the Office Memorandum, a completely
unsustainable and illogical submission has been made that
section 151A of the Act takes into account that procedures
may be modified under the Act or laid out taking into account
the technological feasibility at the time. Reading the said
Scheme along with section 151A of the Act makes it clear
that neither the section or the Scheme speak about the
detailed specifics of the procedure to be followed therein.
This argument of the Revenue is clearly contrary to the
Scheme as the Scheme is very specific to provide, inter alia,
that the issuance of notice under section 148 of the Act shall
be through automated location and in a faceless manner.
Therefore, the Scheme is mandatory and provides the
specification as to how the notice has to be issued. Further
the argument of the Revenue that section 151A of the Act
takes into account that the procedure may be modified under
the Act is without appreciating that if the procedure is
required to be modified then the same would require
modification of the notified Scheme. It is not open to the
Revenue to refuse to follow the Scheme as the Scheme is
clearly mandatory and is required to be followed by all
Assessing Officers.
(viii) The argument of the Revenue in paragraph 5.1 of the
Office Memorandum that the section and Scheme have left it
to the administration to device and modify procedures with
time while remaining confined to the principles laid down in
the said section and Scheme, is without appreciating that one
of the main principles laid down in the Scheme is that the
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notice under section 148 of the Act is required to be issued
through automated allocation and in a faceless manner. There
is no leeway given on the said aspect and, therefore, there is
no question of the administration to device and modify
procedures with respect to the issuance of notice.‖
16. The reasoning assigned by the Bombay High Court in Hexaware
Technologies then came to be adopted by the High Court of Gauhati in
Ram Narayan Sah v. Union of India and Others11. This becomes
apparent from the following passages of that judgment: –
―8. A careful perusal of the scheme reveals that the scope of the
scheme is for the purpose of the assessment, reassessment,
recomputation under section 147 of the Act and issuance of notices
under section 148 of the Act and the same shall be by a process
through automated allocation in accordance with the risk
management strategy formulated by the Board as referred to in
section 148 of the Act for issuance of the notice and in a faceless
manner and to the extent provided under section 144B of the Act
with reference to making the assessment or reassessment of total
income or loss of the assessee.
9. A perusal of section 151A along with the scheme reveals that the
statute in order to obviate prejudice and bias has resorted to issuance
of notices by automated allocation through the risk management
strategy. The judgments referred to by the learned counsel for the
petitioner supports the contention raised by the writ petition and hold
that the notices are required to be issued in an automated manner
without there being any interface between the Department and the
assessee. The judgment relied upon by the learned counsel for the
respondent however had discussions on the issue as to whether there
is any vested or any fundamental right in respect of the assessee’s
demand for automated issuance of notice. The Delhi High Court
vide judgment and order dated May 26, 2023 passed in W.P. (C) No.
3535 of 2021 (Sanjay Gandhi Memorial Trust v. CIT (Exemptions)
and C.M. Appl. No. 10693 of 2021 Magick Woods Exports P. Ltd. v.
Addl./Joint/Dy./Asst. CIT/ITO has categorically held that there is no
fundamental right or legal right available to an assessee to demand
that the notices though automated digital allocation should be issued.
10. The question of whether the petitioner has the fundamental right
or not may not be required to be answered in the present proceedings
inasmuch as Mr. Keyal has fairly submitted that in terms of the
provisions of section 151A, the Department has already framed a
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scheme and the same is notified by notification dated March 29,
2022 ((2022) 442 ITR (Stat) 198).
11. As discussed above, the scope of the scheme is for the purposes
of the assessment, reassessment, recomputation under section 147
and for issuance of notices under 148 and which shall be done
through automated allocations by the Department.‖
17. A challenge to reassessment action on identical lines thereafter
came to be addressed before the High Court of Punjab and Haryana in
Jatinder Singh Bhangu and Another v. Union of India and
Others12. The question of whether the JAO could commence
reassessment in light of the Faceless Reassessment Scheme, 2022 was
ultimately answered in favor of the assessee as would be evident from
the following passages forming part of that decision: –
―15. From the perusal of section 151A, it is quite evident that the
scheme of faceless assessment is applicable from the stage of show-
cause notice under section 148 as well as section 148A. Clause 3(b)
of notification dated March 29, 2022 issued under section 151A
clearly provides that scheme would be applicable to notice under
section 148. Even otherwise, it is a settled proposition of law that
assessment proceedings commence from the stage of issuance of
show-cause notice. The object of introduction of faceless assessment
would be defeated if show-cause notice under section 148 is issued
by the jurisdictional Assessing Officer. The respondents are heavily
placing reliance upon the office memorandum and letter issued by
the Departmental authorities. It is axiomatic in tax jurisprudence that
circulars, instructions and letters issued by the Board or any other
authority cannot override statutory provisions. The circulars are
binding upon the authorities and the courts are not bound by such
circulars. The mandate of sections 144B, 151A read with
notification dated March 29, 2022 ((2022) 442 ITR (Stat) 198)
issued thereunder is quite lucid. There is no ambiguity in the
language of statutory provisions, thus, the office memorandum or
any other instruction issued by the Board or any other authority
cannot be relied upon. Instructions/circulars can supplement but
cannot supplant statutory provisions.
16. In the wake of the above discussion and findings, we find it
appropriate to subscribe the view expressed by the Bombay,
Telangana and Gauhati High Courts. The instant petitions deserve to
be allowed and accordingly allowed.
12 2024 SCC OnLine P&H 9337
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17. The notices issued by the jurisdictional Assessing Officer under
section 148 are hereby quashed with liberty to the respondent to
proceed in accordance with procedure prescribed by law.‖
18. A Division Bench of the Bombay High Court in Kairos
Properties Private Limited v. Assistant Commissioner of Income-
tax and Others13 then reaffirmed the view taken in Hexaware
Technologies, albeit on the basis of the following reasoning: –
―12. On a plain reading of sub-section (1) of Section 151A, it is seen
that it clearly provides that the Central Government may make a
scheme by notification in the Official Gazette for the purposes of
assessment, reassessment or re-computation under section 147 or
issuance of notice under section 148 or conducting of enquiries etc.,
or sanction for issue of such notice under section 151, so as to impart
greater efficiency, transparency and accountability which could be in
terms of clauses (a), (b) and (c) of sub-section (1) of Section 151A,
namely, eliminating the interface between the income-tax authority
and the assessee or any other person, to the extent technologically
feasible; optimising utilisation of resources through economies of
scale and functional specialisation; and introducing a team-based
assessment, reassessment, re-computation or issuance or sanction of
notice with dynamic jurisdiction. Sub-section (2) makes it explicit
that for the purpose of giving effect to the Scheme made under sub-
section (1), by notification in the Official Gazette, the Central
Government can also direct that any of the provisions of this Act
shall not apply or shall apply with such exceptions, modifications
and adaptations as may be specified in the notification and further
under sub-section (3), every notification issued under sub-section (1)
and sub-section (2) shall be laid before each House of Parliament.
13. It is thus clear from the implications as brought about by the
provisions of Section 151A that the notification dated 29th March,
2022 is issued in terms of what has been provided under Section
151A. It has been issued after the amendments were incorporated in
subsection (1) by Finance Act, 2021 with effect from 1 April, 2022.
It would be thus difficult to accept a proposition when in paragraph
3(a) of the Scheme defining the scope of the Scheme when the
words ―assessment‖, ―reassessment‖ or ―re-computation‖ under
Section 147 of the Act are explicitly provided, and further when
clause (b) in paragraph 3 of the Scheme provides for issuance of
notice under Section 148 of the Act, it would not take within its
ambit the provisions of Section 148A which are the initial steps,
which in a given case are required to be taken in issuance of notice
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under Section 148 of the Act. Section 148A provides for
―Conducting inquiry, providing opportunity before issue of notice
under section 148‖. Thus, this provision postulates a procedure
inextricably linked to Section 148 which would apply to all cases of
reassessment with a proviso stipulating exceptions to the rule. In
other words, Section 148A in its object, intent and purpose is
inextricably connected with the assessment, re-assessment or
recomputation, 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).
14. Thus, 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
subsection (1) of Section 151A. Also it is not possible to accept
reading of the provisions of Section 144B de-hors Section 151A(1).
Sub-section (2) of Section 151A 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. Nothing
of this nature is found in the notification to infer any exclusion of
Section 148A, and when it clearly concerns the entire assessment,
reassessment or re-computation under Section 147 and issuance of
notice in that regard under Section 148 of the Act.
15. Thus, the Central Government has not applied the provisions of
subsection (2) of Section 151A to specifically exclude the
application of Section 148A from the scope of the Scheme in
paragraph 3 of the notification dated 29th March, 2022, it would
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.‖
In view of the above, the petitioner would contend that the impugned
notices under Section 148, all of which have come to be issued by the
JAO, would not sustain.
19. We had, while taking note of those judgments, the issues that
stood raised in these petitions and being mindful of the impact which
our decision was likely to have on a large number of matters which
were flooding our board daily, on 29 August 2024 passed a direction
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
for an appropriate affidavit being filed by the respondents bearing in
mind the larger ramifications of an action annulling innumerable
notices which had come to be issued in the meanwhile.
20. Pursuant to the said direction, a detailed additional affidavit came
to be submitted by the respondents. We deem it apposite to extract
paragraphs 6 to 19 thereof hereunder: –
―6. That as envisioned in the Section 148 of the Act, the Directorate
of Systems randomly selects a number of cases based on the criteria
of the Risk Management Strategy. The Assessing Officer has no role
to play in such selection. Consequent to such selection, the
information is made available to the Assessing Officer who, with the
prior approval of specified authority, determines which of these
cases are fit for proceedings under the Section 147 of the Act as per
the procedure provided in Section 148A of the Act. This involves
conducting an enquiry, if needed and giving the assessee an
opportunity of hearing.
7. That the procedure outlined under Section 148A of the Act is a
mandatory process (for cases other than search cases) and initiation
of proceedings under Section 148A is based on risk assessment
strategy and randomness. The notice under Section 148A issued
thereafter is naturally based on risk management strategy and
automated allocation.
8. That the scheme provides for randomized allocation of cases. The
intent behind is to ensure fair and reasonableness in the selection of
cases. In the procedure for issuance of notice under Section 148 of
the Act this is ensured as cases selected prior to issuance of the said
notice are decided on the basis of an algorithm as per the Risk
Management Strategy and are, therefore, randomly selected.
9. That such cases are flagged to the JAO by the Directorate of
Systems and the JAO does not have any control over the process.
10. That the cases are selected on the basis of risk management
strategy in a random manner, and the JAO has no way of predicting
or determining beforehand whether a case will be flagged by the
Systems.
11. That consequent to the issuance of notice under Section 148 of
the Act as per the procedure discussed above are again randomly
allocated to the Assessment Units by the National Faceless
Assessment Centre as per clause (i) of sub-Section (1) of Section
144B of the Act.
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
12. That the assessment is conducted as per the procedure provided
in Section 144B of the Act in a faceless manner, as is also stated in
the scheme. From the above, it is quite clear that the procedure for
issuance of notices under Section 148 of the Act as well as the
consequent assessment proceedings are following the scheme
notified under Section 151A of the Act.
13. That it is also pertinent to note here that under the provisions of
the Act both the JAO as well as units under NFAC have concurrent
jurisdiction. The Act does not distinguish between JAO or NFAC
with respect to jurisdiction over a case. This is further corroborated
by the fact that under Section 144B of the Act the records in a case
are transferred back to the JAO as soon as the assessment
proceedings are completed.
14. That Section 144B of the Act lays down the role of NFAC and
the units under it for the specific purpose of conduct of assessment
proceedings in a specific case in a particular Assessment Year. This
cannot be construed to mean that the JAO is bereft of the jurisdiction
over a particular assessee or with respect to procedures not falling
under the ambit of Section 144B of the Act. Since, Section 144B of
the Act does not provide for issuance of notice under Section 148 of
the Act, there can be no ambiguity in the fact that the JAO still has
the jurisdiction to issue notice under Section 148 of the Act.
15. That in the present context it is apt not to lose sight of the parent
Section, that is Section 151A of the Act, as the power to notify the
scheme originates in the said Section.
16. That in terms of sub-section (1) of the said Section it has been
provided that the Central Government may notify a scheme for
conduct of procedures mentioned therein by:-
(a) eliminating the interface between the income-tax
authority and the assessee or any other person to the extent
technologically feasible;
(b) optimizing utilisation of the resources through
economies of scale and functional specialisation;
(c) introducing a team-based assessment, reassessment, re-
computation or issuance or sanction of notice with dynamic
jurisdiction.
Therefore, the parent Section takes in to account that procedures
may be modified under the Act or laid down taking into account
their technological feasibility at the time. Further, instead of laying
down specifics of the procedure, the Section clarifies that the
scheme so notified should make optimal utilisation of resources
through economies of scale and functional specialisation.
17. That reading the Section 151A of the Act in tandem with the
scheme as given in Notification S.O. 1466(E) dated 29.03.2022, it is
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
quite clear that neither the Section nor the scheme speak about the
detailed specifics of the procedure to be followed therein. They lay
down the general principles that should be followed so as to impart
greater efficiency, transparency and accountability to the procedures
contained therein. The said scheme lays down that the issuance of
notice under Section 148 of the Act shall be through automated
allocation in accordance with the risk management strategy and that
the assessment shall be in a faceless manner to the extent provided in
Section 144B of the Act.
18. That the specifics of the various parts of the procedure will
evolve with time as the technology evolves and the structures in the
Income-tax Department change. The Section and the scheme have
left it to the administration to devise and modify procedures with
time while remaining confined to the principles laid down in the said
Section and scheme. By conducting the procedures under the e-
Assessment vide Notification No. S.O. 1466(E) [NO. 18/2022/F.
NO. 370142/16/2022, Dated- March 29, 2022 (Scheme on
automated allocation) at two levels, one with the JAO and other with
NFAC, an attempt has been made to introduce checks and balances
within the system that the assessee can submit evidences and can
avail opportunity of hearing prior to commencement of any
proceedings under the Act. Since issuance of notice under Section
148 of the Act does not suo moto result in enhancement of the total
income of the assessee or levy of any penalty etc., the procedure is
conducted by the JAO.
19. That re-assessment proceedings consequent to the issuance of
notice are conducted as per the faceless assessment. This ensures
convenience of the assessee, equitable distribution of workload
among the officers and is alto compatible with the technological
abilities in the Department as on date to ensure a procedure which is
seamless, reasonable and fair for the assessee.‖
21. The respondents, as would be evident from the additional
affidavit filed in these proceedings and the averments made therein,
have sought to explain the working and implementation of the Risk
Management Strategy14 as well as the identification of cases on a
random basis. They assert that the Directorate of Systems selects a
number of cases based on the criteria of the RMS and thereafter flags
those matters for the consideration of the JAO. It is averred that the
selection of cases under the RMS is on the basis of an algorithm
14
RMS
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
adopted and the data thus compiled being thereafter made available on
the Insight Portal which is accessible by the JAO.
22. They assert that cases selected randomly in terms of the RMS are
principally picked up by the Directorate of System and which process
of selection is undertaken independently and without the involvement
of the JAO. It is thus asserted that since the cases are selected in a
random manner, the JAO has no way of predicting or determining
beforehand which case would come to be flagged by the Directorate of
Systems.
23. It is then submitted that the cases so flagged by the Directorate of
Systems are then forwarded to the JAO, who remains in seisen of
proceedings till the issuance of a notice under Section 148 and
whereafter the assessment is randomly allocated to an Assessment Unit
by the National Faceless Assessment Center15 in accordance with
Section 144B of the Act.
24. The respondents further assert and seek to emphasize that the Act
proceeds on the premise of both the JAO as well as Assessment Units
under NFAC being empowered to exercise concurrent jurisdiction. It
was their contention 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
15
NFAC
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
JAO during or after the conclusion of assessment proceedings in a
faceless manner.
25. The additional affidavit further adverts to the system of faceless
assessment itself resting on technological feasibility and being a
procedure which is envisaged to continually evolve based on factors
such as technological feasibility and efficient use of available
resources. The respondents consequently assert that both Section 144B
as well as the Faceless Reassessment Scheme 2022 have thus, out of
prudence, left it to the administration to devise and modify procedures
over time.
26. It was averred that the Notification of 29 March 2022 which had
introduced the Faceless Reassessment Scheme 2022, in fact, seeks to
introduce appropriate checks and balances within the system and
bifurcates the reassessment action into two levels, with one being up to
the stage where the JAO goes through the procedure prescribed Section
148A and which may culminate in a final decision to initiate
reassessment being made and a notice under Section 148 being issued.
The second stage, according to the respondents, is of actual assessment
and which is thereafter made by the NFAC. According to the
disclosures made in the additional affidavit, the aforesaid procedure as
adopted ensures equitable distribution of workload amongst officers
and has been so designed so as to be compatible with the technological
abilities available in the hands of the Revenue as on date.
27. Appearing for the respondents, Mr. Chawla and Mr. Maratha
addressed elaborate submissions and provided invaluable assistance to
the Court by placing for our consideration the legislative measures
adopted from time to time, the evolution of faceless assessment over
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
the years as well as the various instructions, circulars and clarifications
which had been issued by the respondents to aid and guide faceless
assessment.
28. Mr. Chawla at the outset drew our attention to the following table
which attempts to capture the evolution of the faceless assessment
regime over time:-
S. No. Parameters E-Assessment Faceless Faceless Faceless
Scheme, 2019 Assessment Assessment Assessment
(September Scheme (Section , 2022
12, 2019) (August 13, 144B of the (Section
2020) Act) 144B of the
Act)
1. Nomenclature E-assessment Faceless Faceless Faceless
2019 assessment assessment assessment
scheme, 2019
2. Act/CBDT S.O 3264 (E) S.O 2745 (E) TOLA, 2020 Finance
Notification Act, 2022
3. Applicability Regular (i)All All Section
assessment u/s assessment assessments 143(3), 144,
143(3) of the specified 147 of the
Income Tax, (except non- Act except
1961 (―the residents and 142A of the
Act‖), selected search cases) Act cases
on pilot basis
4. Excluded Other than Search and non- Search cases Search,
selected residents cases and other 142(2A) of
relocated the Act and
cases other
relocated
cases
5. National To facilitate To facilitate the
To facilitate To facilitate
Faceless the conduct of conduct of and
the conduct the conduct
Assessment make an e-asst. make faceless
of and make of and
Centre (NaFC) in centralized assessment in
faceless convey
manner centralized assessment in assessments
manner centralized
manner.
6. Regional E- To facilitate To facilitate the To facilitate –
Faceless the conduct of conduct of and the conduct
Assessment and make e- make e- of and make
Centres assessment assessment e-assessment
7. Assessment Conduct and Conduct and Conduct and Conduct
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
Unit perform perform perform and
function to function of function perform
make making of makingfunction of
assessment as assessment, as assessment,
making
includes includes as assessment,
identifying identifying includes as includes
points points or issues identifying
identifying
or issues for for determining points or
points
Determining any issues or issues for
any liability/refund for determining
liability/ seeking determining
any
refund information any liability/refu
seeking clarification liability/refun
nd
information analysis of d seeking
clarification material seeking information
analysis of furnished by the information
clarification
material assessee and clarification
analysis of
furnished such other analysis of
material
by assessee functions material furnished
and such other required for furnished by
by the
functions making faceless the assessee
required assessment assessee and
and
for making such other
assigned
assessment functionssuch other
required for
functions
making required
faceless for making
assessment.
faceless
assessment
8. Review Unit Facilitate Facilitate Facilitate Facilitate
conduct conduct of conduct of conduct
of e- faceless faceless of faceless
assessment, assessment, assessment, assessment,
perform perform review perform perform
review of of draft order review review of
draft order checking of draft order ―ILDP‖
including relevant material checking (Income &
checking evidence, relevant Loss
relevant relevant points material Determinati
material of fact and law evidence, on
evidence and issues relevant Proposal)
was brought on requiring points and
record, incorporation of of fact and checking
relevant point addition or law relevant
of facts and disallowance and issues material
law and the and other requiring evidence,
issues required review incorporation relevant
requiring functions. of addition points of
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
incorporation and fact and law
of addition or disallowance ad
disallowance and other issues
and required requiring
other required review addition or
review functions. disallowanc
functions. e are
incorporate
d and
other
required
review
functions.
9. Technical Unit Technical Technical Technical Technical
(TU) assistance on assistance on assistance on assistance
legal, audit in addition audit, legal, on audit,
accounting, to legal, accounting, legal,
forensic, accounting, forensic, accounting,
information forensic, information forensic,
technology, information technology, information
valuation, technology, valuation, technology,
transfer valuation, Transfer valuation,
pricing, data Transfer, pricing, Transfer
analytics, pricing, data data pricing, data
management analytics, analytics, analytics,
or other management or management managemen
technical other technical or t or
matters. matters other other
technical technical
matters. matters
10. Verification Facilitate Facilitate assessment, Facilitate
Unit conduct conduct of function of conduct of
of e- faceless verification, faceless
assessment, assessment, including assessment,
perform perform faceless perform
function function examination function of
of verification, of verification, inquiry, cross verification,
including including verification, including
inquiry, conduct of of inquiry,
cross verification, books of cross books
verification, inquiry, cross witnesses, of
books of examination of recording of verification,
witnesses, books of statements, examination
examination of witnesses, and of
recording of recording of other witnesses,
statements, and statements, and required in recording of
other required other required verification statements,
in verification and
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Digitally Signed
W.P.(C) 1968/2023 & connected matters Page 34 of 107
By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
verification other
required in
verification
11. Scope & Regular Territorial area, As per As per
Coverage assessments or persons or Section Section 144
under section class of persons, 144B (2) of B (2) of the
143(3) of or incomes or the Act,
the Act class of Act, territorial
incomes, territorial area. or
or cases or class area, or persons or
of cases, as may persons class of
be specified by or class of persons, or
Board persons, or incomes
incomes or or class of
class incomes,
of incomes, or cases or
or class of
cases or class cases, as
of may be
cases, as may specified by
be Board
specified by
Board
12. Compliance of Response Response within Response Response
AU within 15 days within within 15
(Assessment 15 days. 15 days Days
Unit) Notice or
requisition
13. Requisition There was no Now, NeAC is NeAC is NeAC is
Report of VU specific mandated to mandated to mandated to
(Verification requirement to forward to AU. forwarded to forward to
Unit) and TU forward the AU. AU.
(Technical reports of
Unit) Verification
Unit
(VU) and TU
to the AU.
14. Best Judgment No provision On inclusion Compliances Compliance
Assessment for provisions of failure by s
Notice Best Judgment Section 144 of assessee, failure by
Assessment the Act, in the NeAC assessee,
under event of non- to serve show NCAC to
Section 144 of compliances cause notice serve
the compliances by Assessee to show cause
Act. assessee, NeAC file notice
to serve show response Assessee to
cause notice within file
Assessee to file time response
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
response within specified or within
time specified or extended. time
extended. specified or
extended;
15. Assessment Revised Draft Revised Draft Final Draft Prepare
Unit Order, Order, Order, 'income
to Draft incorporating incorporating incorporating /loss
Revised suggested by the suggestion the determinati
Draft Review Unit by the Review suggestion on
Assessment (RU), by same Unit (RU), is to by the proposal'
Order Unit which be prepared by a Review Draft
drafted new Regional Unit (RU), is Order,
original Assessment Unit to be considering
draft order. of (ReAC), prepared by a modificatio
selected by new n
NeAC on Assessment suggested
random Unit of by the
allocation basis. (RCAC), Review
selected by Unit (RU).
NFAC on Prepare
random draft send
allocation to eligible
basis. assessee
or finalise
in other
case as
conveyed
by
NeFC. Or
on
receipt of
DRP
directions.
16. Response Assessee was Scheme Scheme Scheme
Time required to file suggests suggests suggests
his provision for provision for provision
response to extension of extension of for
draft time. time. extension of
assessment time.
order,
on or before
the
date and time
specified in the
notice
17. Transfer of NeAC was AO shall take AO shall take Transfer all
records to required, after such action as such action electronic
Jurisdictional completion of may be required as records
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Digitally Signed
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
AO the under the Act. may be of the case
assessment, to Provision for required to
transfer all the transfer of the under the jurisdictiona
electronic electronic Act. l AO
records records of the for further
of the case to penalty required
the proceedings action under
jurisdictional also, on the Act
AO completion of
the same.
18. Power to Power to Principal Chief By section By Section
transfer transfer Commissioner 144B 144B(1)(xx
Assessment assessment or Principal (8) of the Act xii) of
cases to the cases Director by the Act, if
Jurisdictional to the General, NeAC, the Principal Section
Assessing jurisdictional is authorised to CC 142(2A) of
Officer assessing transfer certain or Pr. DG in the Act,
officers, assessment charge of special
lies with the cases to the NFAC audit
National e- jurisdictional may at any reference
Assessment assessing stage of made by
Centre officers, only assessment, NeFC; or in
(NeAC). after prior transfer the terms
approval of the case of Section
Board. to 144B (8)
Jurisdictional of the Act,
AO with at any
prior stage of
approval of assessment,
the with prior
Board. approval
of the
Board.
19. Right of The assessee is The assessee or Assessee to Assessee to
Personal entitled to other person file file
Hearing personal may only response to response to
hearing, request prejudicial prejudicial
by way of for a personal variation in variation in
video hearing by way the the
conferencing / of video draft, or income or
telephony, in telephony. The review loss
case of Chief or final draft determinati
disagreement Commissioner order by on
with the or the Director video. proposal,
additions/disall General, ReAC, Personal draft,
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
o may pprove hearing draft order,
conferencing/ such may only DRP,
wances request, if he is request Request on
proposed of the opinion for hearing personal
in the draft that the case by hearing
assessment falls way of video may is
order, in the list conferencing/ granted but
in all of specified telephony by way of
assessment circumstances as and video
cases. notified by subject to conferencin
CBDT. approval of g/
The telephony
Chief
Commissione
r
or the
Director
General,
NFAC
20. Communicatio All All All All
n communicatio communication communicati
communicat
mode between n with assessee, on ions
the assessee between the various Units by only through
only
and assessee, exclusive NFAC and through
Assessment Technical, electronic mode; exclusively
NFAC
Unit, Verification except with by and
Technical and Verification electronicexclusively
Unit, Review Units Unit mode; by
Verification for conducting except with
electronic
Unit, and enquiry/ enquiry mode;
Review Unit verification. Verification
except with
by enquiry/
Verification
verification
Unit, by
Verification
Unit.
21. Authentication Authentication Authentication/ An electronic An
of Electronic /signing of the signing of the record shall electronic
Record electronic electronic record be be record
record has to be done authenticated shall be
was to be done by by ---NFAC authenticate
by NeAC by and Units d by--- the
affixing the affixing its affixing NFAC by
digital digital signature digital way
signature signature. of an
electronic
communicat
ion,Units by
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Digitally Signed
W.P.(C) 1968/2023 & connected matters Page 38 of 107
By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
affixing its
digital
signature;
22. Power to Principal Chief Pr.CC or the Pr. Pr.CC or the Pr.CC or
specify Commissioner DG are Pr. the Pr.
format, mode, or authorised to DG are DG, are
procedure and the Principal specify format, authorised to authorised
processes Director mode, procedure specify to specify
General, and processes format, format,
were vested only with the mode, mode,
with prior approval of procedure procedure
the power to CBDT. and processes and
specify format, with the prior processes
mode, approval of with
procedure the the prior
and processes Board approval
under the of the Board
Scheme. (CBDT).
29. Mr. Chawla also, and for our convenience, placed on the record a
table which depicts the various faceless schemes as envisioned under
the Act by referring to the following illustrations:-
Faceless Jurisdiction of Faceless Collection of Faceless Inquiry or
Income Tax Authorities Information Valuation
[Section 130 of the [Section 135A of the [Section 142B of the Act]
Income Act]
Tax Act, 1961 (―the
Act‖)]
Purpose of Schemes
Exercise of all or Calling for Issuing notice under
any of the powers and information under Section 142(1) of the Act,
performance of all or Section 133 of the Act, OR
any of the functions OR Making inquiry
conferred on or Collecting before assessment under
assigned to Income Tax certain information Section 142(2) of the Act,
authorities referred under Section 133B of OR
under Section 120 of the Act, OR Directing the
the Act , OR Calling for assessee to get his
Vesting the information by accounts audited under
jurisdiction with the prescribed Income Tax Section 142(2A), OR
Assessing Officer as authority under Estimating the value
referred under Section Section 133C of the of any asset, property or
124 of the Act, OR Act, OR investment by a valuation
Exercise of power Exercise of officer under Section 142A
to transfer cases under power to inspect of the Act
Signature Not Verified
Digitally Signed
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
Section 127 of the Act, register of Companies
OR under Section 134 of
Exercise of the Act, OR
jurisdiction in case of Exercise of
change of incumbency power of Assessing
as referred under Officer under Section
Section 129 of the Act 135 of the ActFaceless Assessment of Faceless Rectification, Faceless Collection and
Income Escaping Amendments and Recovery of Tax
Assessment Issuance [Section 231 of the Act]
[Section 151A of the of Notice or
Act] information
[Section 157A of the
Act]
Assessment, Rectification of Issuance of
reassessment or any mistake apparent certificate for deduction of
recomputation under from record under income tax at any lower
Section 147 of the Act, Section 154 or other rates or no deduction of
OR amendments under income-tax under Section
Issuance of notice Section 155 of the Act, 197 of the Act, OR
under Section 148 or OR Deeming a person to
Sanction for issue of Issue of notice of be an assessee in default
such notice under demand under Section under Section 201(1) or
Section 151 of the Act, 156 of the Act, or under Section 206C(6A) of
OR intimation of loss the Act,
Conducting under Section 157 of Issuance of
enquiries of or issuance the Act certificate for lower
of show cause notice or collection of tax under
passing of order under Section 206C (9) of the
Section 148A of the Act, OR
Act, OR Passing of order or
amended order under
Section 210(3)/(4) of the
Act, OR
Reduction or waiver
of the amount of interest
paid or payable by an
assessee under Section
220(2A) of the Act, OR
Extending the time
for payment or allowing
payment by instalment
under Section 220(3) of
the Act, OR
Treating the assessee
as not being in defaultSignature Not Verified
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
under Section 220(6) or
(7) of the Act, OR
Levy of penalty
under Section 221 of the
Act, OR
Drawing of
certificate by the Tax
Recovery Officer under
Section 222 of the Act, OR
Jurisdiction of Tax
Recovery Officer under
Section 223 of the Act, OR
Stay of proceedings
in pursuance of certificate
and amendment or
cancellation thereof by the
Tax Recovery Officer
under Section 225 of the
Act, or other modes of
recovery under Section
226 of the Act, OR
Issuance of tax
clearance certificate under
Section 230 of the ActFaceless Revision of Faceless Effect of Faceless Approval or
Orders orders Registration
[Section 264A of the [Section 264B of the [Section 293D of the Act]
Act] Act]
Purpose of Schemes
Revision of orders under Giving effect to an order Granting approval or
Section 263 of the Act or under Section 250, 254, registration by the Income
under Section 264 of the 260, 262, 263, or 264 of Tax Authority under any
Act the Act provision of the ActC. STATUTORY PROVISIONS RELEVANT TO THE
FACELESS SCHEME OF ASSESSMENT
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By:KAMLESH KUMAR
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17:50:00
30. In order to appreciate the statutory scheme of faceless
assessment, some of the provisions which deal with the information on
the basis of which reassessment may be initiated as well as the
paradigm shift which came to be introduced with respect to assessment,
it would be apposite to take note of the following statutory provisions.
31. Section 135A of the Act, which deals with the subject of faceless
collection of information, reads as follows:-
―Section 135A – Faceless collection of information
(1) The Central Government may make a scheme, by notification in
the Official Gazette, for the purposes of calling for information
under section 133, collecting certain information under section
133B, or calling for information by prescribed income-tax authority
under section 133C, or exercise of power to inspect register of
companies under section 134, or exercise of power of Assessing
Officer under section 135 so as to impart greater efficiency,
transparency and accountability by–
(a) eliminating the interface between the income-tax authority
and the assessee or any other person to the extent
technologically feasible;
(b) optimising utilisation of the resources through economies
of scale and functional specialisation;
(c) introducing a team-based exercise of powers, including to
call for, or collect, or process, or utilise, the information, with
dynamic jurisdiction.
(2) The Central Government may, for the purpose of giving effect to
the scheme made under sub-section (1), by notification in the
Official Gazette, direct that any of the provisions of this Act shall
not apply or shall apply with such exceptions, modifications and
adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of
March, 2022:
[Provided further that the Central Government may amend any
direction, issued under this sub-section on or before the 31st day of
March, 2022, by notification in the Official Gazette.]
(3) Every notification issued under sub-section (1) and sub-section
(2) shall, as soon as may be after the notification is issued, be laid
before each House of Parliament.]‖Signature Not Verified
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
32. Section 144B came to be inserted for the first time by the
Taxation and Other Laws (Relaxation and Amendment of Certain
Provisions) Act, 202016 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.
33. That provision, as it exists presently, is reproduced hereinbelow:-
―144B. [(1) Notwithstanding anything to the contrary contained in
any other provision of this Act, the assessment, reassessment or
recomputation under sub-section (3) of section 143 or under section
144 or under section 147, as the case may be, with respect to the
cases referred to in sub-section (2), shall be made in a faceless
manner as per the following procedure, namely:–
(i) the National Faceless Assessment Centre shall assign the
case selected for the purposes of faceless assessment under
this section to a specific assessment unit through an
automated allocation system;
(ii) the National Faceless Assessment Centre shall intimate
the assessee that assessment in his case shall be completed in
accordance with the procedure laid down under this section;
(iii) a notice shall be served on the assessee, through the
National Faceless Assessment Centre, under sub-section (2)
of section 143 or under sub-section (1) of section 142 and the
assessee may file his response to such notice within the date
specified therein, to the National Faceless Assessment Centre
which shall forward the same to the assessment unit;
(iv) where a case is assigned to the assessment unit, under
clause (i), it may make a request through the National
Faceless Assessment Centre for–
(a) obtaining such further information, documents or
evidence from the assessee or any other person, as it may
specify;
16 TOLA
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
(b) conducting of enquiry or verification by verification unit;
(c) seeking technical assistance in respect of determination of
arm’s length price, valuation of property, withdrawal of
registration, approval, exemption or any other technical
matter by referring to the technical unit;
(v) where a request under sub-clause (a) of clause (iv) has
been initiated by the assessment unit, the National Faceless
Assessment Centre shall serve appropriate notice or
requisition on the assessee or any other person for obtaining
the information, documents or evidence requisitioned by the
assessment unit and the assessee or any other person, as the
case may be, shall file his response to such notice within the
time specified therein or such time as may be extended on the
basis of an application in this regard, to the National Faceless
Assessment Centre which shall forward the reply to the
assessment unit;
(vi) where a request,–
(a) for conducting of enquiry or verification by the
verification unit has been made by the assessment unit under
sub-clause (b) of clause (iv), the request shall be assigned by
the National Faceless Assessment Centre to a verification
unit through an automated allocation system; or
(b) for reference to the technical unit has been made by the
assessment unit under sub-clause (c) of clause (iv), the
request shall be assigned by the National Faceless
Assessment Centre to a technical unit through an automated
allocation system;
(vii) the National Faceless Assessment Centre shall
send the report received from the verification unit or the
technical unit, as the case may be, based on the request
referred to in clause (vi) to the concerned assessment unit;
(viii) where the assessee fails to comply with the notice
served under clause (v) or notice issued under sub-section (1)
of section 142 or the terms of notice issued under sub-section
(2) of section 143, the National Faceless Assessment Centre
shall intimate such failure to the assessment unit;
(ix) the assessment unit shall serve upon such assessee,
as referred to in clause (viii), a notice, through the National
Faceless Assessment Centre, under section 144, giving him
an opportunity to show-cause on a date and time as specified
in such notice as to why the assessment in his case should not
be completed to the best of its judgment;
(x) the assessee shall, within the time specified in the notice
referred to in clause (ix) or such time as may be extended on
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By:KAMLESH KUMAR
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the basis of an application in this regard, file his response to
the National Faceless Assessment Centre which shall forward
the same to the assessment unit;
(xi) where the assessee fails to file response to the
notice served under clause (ix) within the time specified
therein or within the extended time, if any, the National
Faceless Assessment Centre shall intimate such failure to the
assessment unit;
(xii) the assessment unit shall, after taking into account all
the relevant material available on the record, prepare, in
writing,–
(a) an income or loss determination proposal, where no
variation prejudicial to assessee is proposed and send a copy
of such income or loss determination proposal to the National
Faceless Assessment Centre; or
(b) in any other case, a show-cause notice stating the
variations prejudicial to the interest of assessee proposed to
be made to the income of the assessee and calling upon him
to submit as to why the proposed variation should not be
made and serve such show-cause notice, on the assessee,
through the National Faceless Assessment Centre;
(xiii) the assessee shall file his reply to the show-cause notice
served under sub-clause (b) of clause (xii) on a date and time
as specified therein or such time as may be extended on the
basis of an application made in this regard, to the National
Faceless Assessment Centre, which shall forward the reply to
the assessment unit;
(xiv) where the assessee fails to file response to the notice
served under sub-clause (b) of clause (xii) within the time
specified therein or within the extended time, if any, the
National Faceless Assessment Centre shall intimate such
failure to the assessment unit;
(xv) the assessment unit shall, after considering the
response received under clause (xiii) or after receipt of
intimation under clause (xiv), as the case may be, and taking
into account all relevant material available on record, prepare
an income or loss determination proposal and send the same
to the National Faceless Assessment Centre;
(xvi) upon receipt of the income or loss determination
proposal, as referred to in sub-clause (a) of clause (xii) or
clause (xv), as the case may be, the National Faceless
Assessment Centre may, on the basis of guidelines issued by
the Board,–
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17:50:00
(a) convey to the assessment unit to prepare draft order in
accordance with the income or loss determination proposal,
which shall thereafter prepare a draft order; or
(b) assign the income or loss determination proposal to a
review unit through an automated allocation system, for
conducting review of such proposal;
(xvii) the review unit shall conduct review of the income or
loss determination proposal assigned to it by the National
Faceless Assessment Centre, under sub-clause (b) of clause
(xvi), whereupon it shall prepare a review report and send the
same to the National Faceless Assessment Centre;
(xviii) the National Faceless Assessment Centre shall, upon
receiving the review report under clause (xvii), forward the
same to the assessment unit which had proposed the income
or loss determination proposal;
(xix) the assessment unit shall, after considering such review
report, accept or reject some or all of the modifications
proposed therein and after recording reasons in case of
rejection of such modifications, prepare a draft order;
(xx) the assessment unit shall send such draft order
prepared under sub-clause (a) of clause (xvi) or under clause
(xix) to the National Faceless Assessment Centre;
(xxi) in case of an eligible assessee, where there is a proposal
to make any variation which is prejudicial to the interest of
such assessee, as mentioned in sub-section (1) under Section
144-C, the National Faceless Assessment Centre shall serve
the draft order referred to in clause (xx) on the assessee;
(xxii) in any case other than that referred to in clause (xxi),
the National Faceless Assessment Centre shall convey to the
assessment unit to pass the final assessment order in
accordance with such draft order, which shall thereafter pass
the final assessment order and initiate penalty proceedings, if
any, and send it to the National Faceless Assessment Centre;
(xxiii) upon receiving the final assessment order as per clause
(xxii) the National Faceless Assessment Centre shall serve a
copy of such order and notice for initiating penalty
proceedings, if any, on the assessee, along with the demand
notice, specifying the sum payable by, or refund of any
amount due to, the assessee on the basis of such assessment;
(xxiv) where a draft order is served on the assessee as
referred to in clause (xxi), such assessee shall,–
(a) file his acceptance of the variations proposed in such draft
order to the National Faceless Assessment Centre; or
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
(b) file his objections, if any, to such variations, with–
(I) the Dispute Resolution Panel, and
(II) the National Faceless Assessment Centre, within the
period specified in sub-section (2) of Section 144-C;
(xxv) the National Faceless Assessment Centre shall,–
(a) upon receipt of acceptance from the eligible assessee; or
(b) if no objections are received from the eligible assessee,
within the period specified in sub-section (2) of Section 144-
C, intimate the assessment unit to complete the assessment on
the basis of the draft order;
(xxvi) the assessment unit shall, upon receipt of intimation
under clause (xxv), pass the assessment order, in accordance
with the relevant draft order, within the time allowed under
subsection (4) of Section 144-C and initiate penalty
proceedings, if any, and send the order to the National
Faceless Assessment Centre;
(xxvii) where the eligible assessee files objections with the
Dispute Resolution Panel, under sub-clause (b) of clause
(xxiv), the National Faceless Assessment Centre shall send
such intimation along with a copy of objections filed to the
assessment unit;
(xxviii) the National Faceless Assessment Centre shall, in a
case referred to in clause (xxvii), upon receipt of the
directions issued by the Dispute Resolution Panel under sub-
section (5) of Section 144-C, forward such directions to the
assessment unit;
(xxix) the assessment unit shall, in conformity with the
directions issued by the Dispute Resolution Panel under sub-
section (5) of Section 144-C, complete the assessment within
the time allowed in sub-section (13) of Section 144-C and
initiate penalty proceedings, if any, and send a copy of the
assessment order to the National Faceless Assessment Centre;
(xxx) the National Faceless Assessment Centre shall,
upon receipt of the assessment order referred to in clause
(xxvi) or clause (xxix), as the case may be, serve a copy of
such order and notice for initiating penalty proceedings, if
any, on the assessee, along with the demand notice,
specifying the sum payable by, or the amount of refund due
to, the assessee on the basis of such assessment;
(xxxi) the National Faceless Assessment Centre shall,
after completion of assessment, transfer all the electronic
records of the case to the Assessing Officer having
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
jurisdiction over the said case for such action as may be
required under the provisions of this Act;
(xxxii) if at any stage of the proceedings before it, the
assessment unit having regard to the nature and complexity of
the accounts, volume of the accounts, doubts about the
correctness of accounts, multiplicity of transactions in the
accounts or specialised nature of business activity of the
assessee, and the interests of the revenue, is of the opinion
that it is necessary to do so, it may, upon recording its
reasons in writing, refer the case to the National Faceless
Assessment Centre stating that the provisions of sub-section
(2A) of section 142 may be invoked and such case shall be
dealt with in accordance with the provisions of sub-section
(7).
(2) The faceless assessment under sub-section (1) shall be
made in respect of such territorial area, or persons or class of
persons, or incomes or class of incomes, or cases or class of
cases, as may be specified by the Board.
(3) The Board may, for the purposes of faceless assessment,
set up the following Centre and units and specify their
functions and jurisdiction, namely–
(i) a National Faceless Assessment Centre to facilitate the
conduct of faceless assessment proceedings in a centralised
manner;
(ii) such assessment units, as it may deem necessary to
conduct the faceless assessment, to perform the function of
making assessment, which includes identification of points or
issues material for the determination of any liability
(including refund) under this Act, seeking information or
clarification on points or issues so identified, analysis of the
material furnished by the assessee or any other person, and
such other functions as may be required for the purposes of
making faceless assessment, and the term ―assessment unit‖,
wherever used in this section, shall refer to an Assessing
Officer having powers so assigned by the Board;
(iii) such verification units, as it may deem necessary to
facilitate the conduct of faceless assessment, to perform the
function of verification, which includes enquiry, cross
verification, examination of books of account, examination of
witnesses and recording of statements, and such other
functions as may be required for the purposes of verification
and the term ―verification unit‖, wherever used in this
section, shall refer to an Assessing Officer having powers so
assigned by the Board:
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By:KAMLESH KUMAR
Signing Date:28.10.2024
17:50:00
Provided that the function of verification unit under this
section may also be performed by a verification unit located
in any other faceless centre set up under the provisions of this
Act or under any scheme notified under the provisions of this
Act; and the request for verification may also be assigned
through the National Faceless Assessment Centre to such
verification unit;
(iv) such technical units, as it may deem necessary to
facilitate the conduct of faceless assessment, to perform the
function of providing technical assistance which includes any
assistance or advice on legal, accounting, forensic,
information technology, valuation, transfer pricing, data
analytics, management or any other technical matter under
this Act or an agreement entered into under section 90 or
90A, which may be required in a particular case or a class of
cases, under this section and the term ―technical unit‖,
wherever used in this section, shall refer to an Assessing
Officer having powers so assigned by the Board;
(v) such review units, as it may deem necessary to facilitate
the conduct of faceless assessment, to perform the function of
review of the income determination proposal assigned under
sub-clause (b) of clause (xvi) of sub-section (1), which
includes checking whether the relevant and material evidence
has been brought on record, relevant points of fact and law
have been duly incorporated, the issues requiring addition or
disallowance have been incorporated and such other
functions as may be required for the purposes of review and
the term ―review unit‖, wherever used in this section, shall
refer to an Assessing Officer having powers so assigned by
the Board;
(4) The assessment unit, verification unit, technical
unit and the review unit shall have the following authorities,
namely–
(i) Additional Commissioner or Additional Director or Joint
Commissioner or Joint Director, as the case may be;
(ii) Deputy Commissioner or Deputy Director or
Assistant Commissioner or Assistant Director, or Income-tax
Officer, as the case may be;
(iii) such other income-tax authority, ministerial staff,
executive or consultant, as may be considered necessary by
the Board.
(5) All communications,–
(i) among the assessment unit, review unit, verification unit
or technical unit or with the assessee or any other person
with respect to the information or documents or evidence or
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any other details, as may be necessary for the purposes of
making a faceless assessment shall be through the National
Faceless Assessment Centre;
(ii) between the National Faceless Assessment Centre
and the assessee, or his authorised representative, or any
other person shall be exchanged exclusively by electronic
mode; and
(iii) between the National Faceless Assessment Centre and
various units shall be exchanged exclusively by electronic
mode:
Provided that the provisions of this sub-section shall not
apply to the enquiry or verification conducted by the
verification unit in the circumstances as may be specified by
the Board in this behalf.
(6) For the purposes of faceless assessment–
(i) an electronic record shall be authenticated by–
(a) the National Faceless Assessment Centre by way of an
electronic communication;
(b) the assessment unit or verification unit or technical
unit or review unit, as the case may be, by affixing digital
signature;
(c) assessee or any other person, by affixing his digital
signature or under electronic verification code, or by logging
into his registered account in the designated portal;
(ii) every notice or order or any other electronic
communication shall be delivered to the addressee, being the
assessee, by way of–
(a) placing an authenticated copy thereof in the
registered account of the assessee; or
(b) sending an authenticated copy thereof to the registered
email address of the assessee or his authorised representative;
or
(c) uploading an authenticated copy on the Mobile App of the
assessee, and followed by a real time alert;
(iii) every notice or order or any other electronic
communication shall be delivered to the addressee, being any
other person, by sending an authenticated copy thereof to the
registered email address of such person, followed by a real
time alert;
(iv) the assessee shall file his response to any notice or order
or any other electronic communication, through his registered
account, and once an acknowledgement is sent by the
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By:KAMLESH KUMAR
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National Faceless Assessment Centre containing the hash
result generated upon successful submission of response, the
response shall be deemed to be authenticated;
(v) the time and place of dispatch and receipt of electronic
record shall be determined in accordance with the provisions
of section 13 of the Information Technology Act, 2000 (21 of
2000);
(vi) a person shall not be required to appear either personally
or through authorised representative in connection with any
proceedings before any unit set up under this section;
(vii) in a case where a variation is proposed in the
income or loss determination proposal or the draft order, and
an opportunity is provided to the assessee by serving a notice
calling upon him to show cause as to why the assessment
should not be completed as per such income or loss
determination proposal, the assessee or his authorised
representative, as the case may be, may request for personal
hearing so as to make his oral submissions or present his case
before the income-tax authority of the relevant unit;
(viii) where the request for personal hearing has been
received, the income-tax authority of relevant unit shall allow
such hearing, through National Faceless Assessment Centre,
which shall be conducted exclusively through video
conferencing or video telephony, including use of any
telecommunication application software which supports
video conferencing or video telephony, to the extent
technologically feasible, in accordance with the procedure
laid down by the Board;
(ix) subject to the proviso to sub-section (5), any examination
or recording of the statement of the assessee or any other
person (other than the statement recorded in the course of
survey under Section 133-A) shall be conducted by an
income-tax authority in the relevant unit, exclusively through
video conferencing or video telephony, including use of any
telecommunication application software which supports
video conferencing or video telephony, to the extent
technologically feasible, in accordance with the procedure
laid down by the Board;
(x) the Board shall establish suitable facilities for
video conferencing or video telephony including
telecommunication application software which supports
video conferencing or video telephony at such locations as
may be necessary, so as to ensure that the assessee, or his
authorised representative, or any other person is not denied
the benefit of faceless assessment merely on the
consideration that such assessee or his authorised
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representative, or any other person does not have access to
video conferencing or video telephony at his end;
(xi) the Principal Chief Commissioner or the Principal
Director General, as the case may be, in charge of the
National Faceless Assessment Centre shall, with the prior
approval of the Board, lay down the standards, procedures
and processes for effective functioning of the National
Faceless Assessment Centre and the units set up, in an
automated and mechanised environment.
(7)(a)The Principal Chief Commissioner or the Principal
Director General, as the case may be, in charge of the
National Faceless Assessment Centre shall, in accordance
with the procedure laid down by the Board in this regard, if
he considers appropriate that the provisions of sub-section
(2A) of section 142 may be invoked in the case,–
(i) forward the reference received from an assessment unit
under clause (xxxii) of sub-section (1) to the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner having jurisdiction over
such case, and inform the assessment unit accordingly;
(ii) transfer the case to the Assessing Officer having
jurisdiction over such case in accordance sub-section (8);
(b) where a reference has been received by the
Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner under sub-clause
(i) of clause (a), he shall direct the Assessing Officer, having
jurisdiction over the case, to invoke the provisions of sub-
section (2A) of section 142;
(c) where a reference has not been forwarded to the Principal
Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, having jurisdiction over the
case, in a case referred to in sub-clause (i) of clause (a), the
assessment unit shall proceed to complete the assessment in
accordance with the procedure laid down in this section.
(8) Notwithstanding anything contained in sub-section
(1) or subsection (2), the Principal Chief Commissioner or
the Principal Director General, as the case may be, in charge
of National Faceless Assessment Centre may, at any stage of
the assessment, if considered necessary, transfer the case to
the Assessing Officer having jurisdiction over such case, with
the prior approval of the Board.]
(9) [Omitted by Finance Act, 2022, w.e.f. 1-4-2021.]
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Explanation.–In this section, unless the context otherwise
requires–
(a) ―addressee‖ shall have the same meaning as assigned to it
in clause (b) of sub-section (1) of Section 2 of the
Information Technology Act, 2000 (21 of 2000);
(b) ―authorised representative‖ shall have the same meaning
as assigned to it in sub-section (2) of Section 288;
(c) ―automated allocation system‖ means an algorithm for
randomised allocation of cases, by using suitable
technological tools, including artificial intelligence and
machine learning, with a view to optimise the use of
resources;
(d) ―automated examination tool‖ means an algorithm for
standardised examination of draft orders, by using suitable
technological tools, including artificial intelligence and
machine learning, with a view to reduce the scope of
discretion;
(e) ―computer resource‖ shall have the same meaning as
assigned to it in clause (k) of sub-section (1) of Section 2 of
the Information Technology Act, 2000 (21 of 2000);
(f) ―computer system‖ shall have the same meaning as
assigned to it in clause (l) of sub-section (1) of Section 2 of
the Information Technology Act, 2000 (21 of 2000);
(g) ―computer resource of assessee‖ shall include assessee’s
registered account in designated portal of the income tax
Department, the Mobile App linked to the registered mobile
number of the assessee, or the registered email address of the
assessee with his email service provider;
(h) ―digital signature‖ shall have the same meaning as
assigned to it in clause (p) of sub-section (1) of Section 2 of
the Information Technology Act, 2000 (21 of 2000);
(i) ―designated portal‖ means the web portal designated as
such by the Principal Chief Commissioner or the Principal
Director General, in charge of the National Faceless
Assessment Centre;
(j) ―Dispute Resolution Panel‖ shall have the same meaning
as assigned to it in clause (a) of sub-section (15) of Section
144-C;
(k) ―faceless assessment‖ means the assessment proceedings
conducted electronically in ‗e-Proceeding’ facility through
assessee’s registered account in designated portal;
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(l) ―electronic record‖ shall have the same meaning as
assigned to it in clause (t) of sub-section (1) of Section 2 of
the Information Technology Act, 2000 (21 of 2000);
[(la) ―electronic verification code‖ means a code generated
for the purpose of electronic verification as per the data
structure and standards specified by the Principal Director
General or Director General, as the case may be, in charge of
information technology;]
(m) ―eligible assessee‖ shall have the same meaning as
assigned to in clause (b) of sub-section (15) of Section 144-
C;
(n) ―email‖ or ―electronic mail‖ and ―electronic mail
message‖ means a message or information created or
transmitted or received on a computer, computer system,
computer resource or communication device including
attachments in text, image, audio, video and any other
electronic record, which may be transmitted with the
message;
(o) ―hash function‖ and ―hash result‖ shall have the same
meaning as assigned to them in the Explanation to sub-
section (2) of Section 3 of the Information Technology Act,
2000 (21 of 2000);
(p) ―Mobile app‖ shall mean the application software of the
income tax Department developed for mobile devices which
is downloaded and installed on the registered mobile number
of the assessee;
(q) [* * *]
(r) ―real time alert‖ means any communication sent to the
assessee, by way of Short Messaging Service on his
registered mobile number, or by way of update on his Mobile
App, or by way of an email at his registered email address, so
as to alert him regarding delivery of an electronic
communication;
(s) ―registered account‖ of the assessee means the electronic
filing account registered by the assessee in designated portal;
(t) ―registered e-mail address‖ means the e-mail address at
which an electronic communication may be delivered or
transmitted to the addressee, including–
(i) the e-mail address available in the electronic filing account
of the addressee registered in designated portal; or
(ii) the e-mail address available in the last income tax return
furnished by the addressee; or
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(iii) the e-mail address available in the Permanent Account
Number database relating to the addressee; or
(iv) in the case of addressee being an individual who
possesses the Aadhaar number, the e-mail address of
addressee available in the database of Unique Identification
Authority of India; or
(v) in the case of addressee being a company, the e-
mail address of the company as available on the official
website of Ministry of Corporate Affairs; or
(vi) any e-mail address made available by the addressee to
the income tax authority or any person authorised by such
authority.
(u) ―registered mobile number‖ of the assessee means the
mobile number of the assessee, or his authorised
representative, appearing in the user profile of the electronic
filing account registered by the assessee in designated portal;
(v) ―video conferencing or video telephony‖ means the
technological solutions for the reception and transmission of
audio-video signals by users at different locations, for
communication between people in real-time.]‖
34. It is pertinent to note that when Section 144B was originally
introduced in the statute book with effect 01 April 2021, it also
included sub-section (9) which read as under:-
―(9) Notwithstanding anything contained in any other provision of
this Act, assessment made under sub-section (3) of section 143 or
under section 144 in the cases referred to in sub-section (2) [other
than the cases transferred under sub-section (8)] on or after the 1st
day of April, 2021, shall be non est if such assessment is not made in
accordance with the procedure laid down under this section.‖
Sub-section (9) ultimately came to be deleted by Finance Act, 2022
with retrospective effect from 01 April 2021. The reasons which appear
to have weighed upon the Legislature to delete sub-section (9) from
Section 144B can be gleaned from Circular No. 23/2022 dated
03 November 2022 and relevant parts whereof are reproduced
hereinbelow: –
―(II) Sub-section (9) of erstwhile section 144B of the Act provided
that the assessment proceedings shall be void if the procedure
mentioned in the section was not followed. The said sub-section
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refers to violation of the procedure laid down by the law whereas a
large number of disputes have been raised under the sub-section
involving technical issues arising due to use of information
technology, leading to unnecessary litigation, It is, therefore, omitted
for its date of inception.‖
35. While noticing the relevant provisions of the Act and which
would have a bearing on the controversy which stands raised, this
would perhaps be an appropriate juncture to also extract Sections 148
and 151A:-
―Section 148 – Issue of notice where income has escaped
assessment.
Before making the assessment, reassessment or recomputation under
section 147, and subject to the provisions of section 148A, the
Assessing Officer shall serve on the assessee a notice, along with a
copy of the order passed, if required, under clause (d) of section
148A, requiring him to furnish within a period of three months from
the end of the month in which such notice is issued, or such further
period as may be allowed by the Assessing Officer on the basis of an
application made in this regard by the assessee, a return of his
income or the income of any other person in respect of which he is
assessable under this Act during the previous year corresponding to
the relevant assessment year, in the prescribed form and verified in
the prescribed manner and setting forth such other particulars as may
be prescribed; and the provisions of this Act shall, so far as may be,
apply accordingly as if such return were a return required to be
furnished under section 139:
Provided that no notice under this section shall be issued unless
there is information with the Assessing Officer which suggests that
the income chargeable to tax has escaped assessment in the case of
the assessee for the relevant assessment year and the Assessing
Officer has obtained prior approval of the specified authority to issue
such notice:
Provided further that no such approval shall be required where the
Assessing Officer, with the prior approval of the specified authority,
has passed an order under clause (d) of section 148A to the effect
that it is a fit case to issue a notice under this section:]
Provided also that any return of income, required to be furnished by
an assessee under this section and furnished beyond the period
allowed shall not be deemed to be a return under section 139.
Explanation 1.–For the purposes of this section and section 148A,
the information with the Assessing Officer which suggests that the
income chargeable to tax has escaped assessment means,–
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i. any information in the case of the assessee for the relevant
assessment year in accordance with the risk management
strategy formulated by the Board from time to time; or
ii. any audit objection to the effect that the assessment in the
case of the assessee for the relevant assessment year has not
been made in accordance with the provisions of this Act; or
iii. any information received under an agreement referred to in
section 90 or section 90A of the Act; or
iv. any information made available to the Assessing Officer
under the scheme notified under section 135A; or
v. any information which requires action in consequence of the
order of a Tribunal or a Court.]
Explanation 2.–For the purposes of this section, where,–
i. a search is initiated under section 132 or books of account, other
documents or any assets are requisitioned under section 132A,
on or after the 1st day of April, 2021, in the case of the assessee;
or
ii. a survey is conducted under section 133A, other than under sub-
section (2A) of that section, on or after the 1st day of April,
2021, in the case of the assessee; or
iii. the Assessing Officer is satisfied, with the prior approval of the
Principal Commissioner or Commissioner, that any money,
bullion, jewellery or other valuable article or thing, seized or
requisitioned under section 132 or section 132A in case of any
other person on or after the 1st day of April, 2021, belongs to
the assessee; or
iv. the Assessing Officer is satisfied, with the prior approval of
Principal Commissioner or Commissioner, that any books of
account or documents, seized or requisitioned under section 132
or section 132A in case of any other person on or after the 1st
day of April, 2021, pertains or pertain to, or any information
contained therein, relate to, the assessee,
v. the Assessing Officer shall be deemed to have information
which suggests that the income chargeable to tax has escaped
assessment in the case of the assessee 67[where] the search is
initiated or books of account, other documents or any assets are
requisitioned or survey is conducted in the case of the assessee
or money, bullion, jewellery or other valuable article or thing or
books of account or documents are seized or requisitioned in
case of any other person.
Explanation 3.–For the purposes of this section, specified authority
means the specified authority referred to in section 151.]‖
―Faceless assessment of income escaping assessment.–
151A. (1) The Central Government may make a scheme, by notification
in the Official Gazette, for the purposes of assessment, reassessment
or recomputation under section 147 or issuance of notice under
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section 148 or sanction for issue of such notice under section 151, so
as to impart greater efficiency, transparency and accountability by–
(a) eliminating the interface between the income tax authority and
the assessee or any other person to the extent technologically
feasible;
(b) optimising utilisation of the resources through economies of
scale and functional specialisation;
(c) introducing a team-based assessment, reassessment,
recomputation or issuance or sanction of notice with dynamic
jurisdiction.
(2) The Central Government may, for the purpose of giving effect to the
scheme made under sub-section (1), by notification in the Official
Gazette, direct that any of the provisions of this Act shall not apply
or shall apply with such exceptions, modifications and adaptations as
may be specified in the notification:
Provided that no direction shall be issued after the 31st day of
March, 2022.
(3) Every notification issued under sub-section (1) and sub-section (2)
shall, as soon as may be after the notification is issued, be laid
before each House of Parliament.]‖D. NOTIFICATIONS AND INSTRUCTIONS PERTAINING TO
THE FACELESS SCHEME OF ASSESSMENT
36. The Faceless Re-Assessment Scheme, 2022 came to be
promulgated on 29 March 2022 and the same is reproduced in its
entirety hereunder: –
―E-ASSESSMENT OF INCOME ESCAPING ASSESSMENT
SCHEME, 2022 NOTIFICATION S.O. 1466(E) [NO. 18/2022/F.
NO. 370142/16/2022-TPL(PART1], DATED 29-3-2022‖
In exercise of the powers conferred by sub-sections (1) and (2) of
section 151A of the Income-tax Act, 1961 (43 of 1961), the Central
Government hereby makes the following Scheme, namely:–
Short title and commencement
1. (1) This Scheme may be called the e-Assessment of Income
Escaping Assessment Scheme, 2022.
(2) It shall come into force with effect from the date of its
publication in the Official Gazette.
Definitions
2. (1) In this Scheme, unless the context otherwise requires, —
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(a) “Act” means the Income-tax Act, 1961 (43 of 1961);
(b) “automated allocation” means an algorithm for randomised
allocation of cases, by using suitable technological tools,
including artificial intelligence and machine learning, with a view
to optimize the use of resources.
(2) Words and expressions used herein and not defined, but defined in
the Act, shall have the meaning respectively assigned to them in the
Act.
Scope of the Scheme
3. For the purpose of this Scheme,–
(a) assessment, reassessment or recomputation under section 147 of
the Act,
(b) issuance of notice under section 148 of the Act, shall be through
automated allocation, in accordance with risk management
strategy formulated by the Board as referred to in section 148 of
the Act for issuance of notice, and in a faceless manner, to the
extent provided in section 144B of the Act with reference to
making assessment or reassessment of total income or loss of
assessee.‖
37. With the advent of technology, the Revenue appears to have over
a course of time adopted new tools for assembling, accumulation and
analysis of data embedded in the millions of returns which come to be
filed every financial year. It has thus over a period of time adopted
measures such as Computer Aided Scrutiny Selection17, Annual
Information Return18 data and Central Information Branch19 data.
These measures appear to have been formulated in order to aid and
assist the Revenue with respect to scrutiny assessment, investigation
and evaluation.
38. For instance, AIR is stated to be a Return which is obtained with
respect to high value financial transactions and is obtained in terms of
Section 285BA of the Act. The information is then aggregated on the
17 CASS
18 AIR
19 CIB
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basis of the returns that would have been filed across the nation and
appropriate information thus centralized. The CIB is stated to be one of
the nodal agencies of the Income Tax Department and concerned with
collection and systemized organization of information from internal as
well as external sources, dissemination of the same to the individual
Assessing Officers and other agencies within the Department as also
the sorting, managing, organizing and analysis of information being
provided to the Revenue by various sources. The information so
collected is thereafter stated to form part of a larger database housed in
the CIB module under the control of the Directorate of Systems.
39. Mr. Chawla has, along with his compilation, placed for our
consideration the Instructions issued by the Department of Revenue
from time to time and which assists us in appreciating how these new
technological capabilities have been deployed by the Department to aid
it in the discharge of its functions.
40. For instance, the instruction of 26 September 2014 deals with the
selection of cases for scrutiny under CASS. Similar explanatory
instructions appear in the communication of the CBDT dated 29
December 2015 and which was followed by yet another direction
pertaining to cases of limited scrutiny on 14 July 2016. Of equal
significance is the response of the Hon’ble Minister of State for Finance
in the Rajya Sabha, who on 07 December 2021 disclosed the manner in
which random scrutiny of taxpayers is undertaken. The extracts of the
proceedings of the Rajya Sabha are reproduced hereunder: –
―GOVERNMENT OF INDIA
MINISTRY OF FINANCE
RAJYA SABHA
UNSTARRED QUESTION NO-1018
ANSWERED ON – 07/12/2021
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RANDOM SCRUTINY OF TAX PAYERS1018. SHRI NARANBHAI J. RATHWA
Will the Minister of FINANCE be pleased to state:
(a) whether Government has issued guidelines prescribing
framework for random selection of scrutiny cases for
financial year 2021-2022 through Computer Aided Scrutiny
Selection (CASS);
(b) if so, the percentage of cases fixed for random scrutiny
for this year;
(c) whether generally small tax payers get notices, whereas
big tax payers escape the random scrutiny cases; and
(d) if so, the reasons for targeting small tax payers having
less than one crore income; and
(e) whether Government would revise guidelines so as to
include industrial houses in random scrutiny and, if not, the
reasons therefor?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) No sir. The Income-tax Department has not issued any guidelines
prescribing framework for selection of cases through Computer
Aided Scrutiny Selection (CASS) for Financial Year 2021-22.
For scrutiny, cases are not selected randomly but are selected as per
the Board (Central Board of Direct Taxes) approved selection rules
through a Computer Aided Scrutiny Selection (CASS) process in an
identity blind manner. The cases get selected only if they meet the
selection criteria based on the various risk parameters across
different income brackets.
(b) CASS 2022 with respect to Income-tax Returns (ITRs) for
Financial Year 2021-22 has not been executed yet as the parameter
finalisation is pending. The latest cycle for which counts are
available is CASS 2021 covering ITRs pertaining to Assessment
Year 2020-21(Financial Year 2019-20). Count of cases flagged for
scrutiny under CASS 2021 is 48,702 and percentage of cases flagged
based on ITR pool considered is 0.0725%.
(c) No sir. The cases are selected for scrutiny through a selection
process. The selection criteria include various risk parameters and
are not dependent on the income range of the taxpayers.
Accordingly, the cases from any income range may get selected if
they meet the selection criteria.
(d) Does not arise in view of the reply to part (c) above.
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(e) Does not arise in view of the reply to part (a) above.‖
41. The CBDT post the commencement of the Faceless Assessment
Scheme in 2019 issued one of its first instructions on 08 April 2021.
This was followed by an order under Section 119 of the Act dated 06
September 2021 and amending order dated 22 September 2021 which
chronicled various categories of cases which would stand excluded
from faceless assessment.
42. The order dated 06 September 2021 as amended by the order
dated 22 September 2021 is reproduced hereunder:-
―ORDER UNDER SECTION 119 OF THE INCOME-TAX
ACT, 1961 PROVIDING EXCLUSIONS TO SECTION 144B
OF THE ACT
ORDER F. NO. 187/3/2020-ITA-I, DATED 6-9-2021
AS AMENDED BY ORDER F. NO. 187/3/2020-ITA-1, DATED
22-9-2021
1. The Faceless Assessment Scheme, 2019 (the Scheme) has been
incorporated in the Act vide the Taxation and Other Laws
(Relaxation and Amendment of Certain Provisions) Act, 2020.
Section 144B of the Act pertaining to Faceless Assessment has been
inserted by the said amendment w.e.f. 1-4-2021.
2. The Central Board of Direct Taxes vide Order F.No. 187/3/2020-
ITA-I dated 13th August, 2020 (the Order) read with order under
section 119 of the Act regarding mutatis mutandis application of
Orders, Circulars etc. issued in order to implement the Scheme to
Faceless Assessment under section 144B of the Act, F.No.
187/3/2020-ITA-I dated 31st March, 2021 directed that all the
Assessment Orders shall be passed by the National Faceless
Assessment Centre (NaFAC) under section 144B of the Act except
as under:-
i. Assessment orders in cases assigned to Central
Charges.
ii. Assessment orders in cases assigned to International
Tax Charges.
iii. assessment order in cases where pendancy could not
be created on ITBA portal because of technical
reasons or cases not having a PAN, as the case may
be.
iv. Assessment orders in cases
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(a) set aside to be done de novo
or
(b) to be done u/s 147 of the act
For which the time limit for completion expires on 30.09.2021
pending with the jurisdictional Assessing officer as on 11.09.2021
on thereafter, which cannot be completed as per the procedure laid
down under section 144B of the act due to technical/ procedural
constraints in the givne period of limitation.]
3. In partial modification of the said Order, the Central Board of
Direct Taxes in exercise of powers under section 119 of the Act,
hereby directs that in addition to exceptions (i) & (ii) provided in
Para 2 of the Order, the following exception is also hereby added as
under:-
iii. Assessment Orders in cases where pendency could not be
created on ITBA because of technical reasons or cases not
having a PAN, as the case may be.
4. Further, the Central Board of Direct Taxes clarifies that
assessment in cases transferred by the Principal Chief Commissioner
or the Principal Director General in charge of National Faceless
Assessment Centre (NaFAC) under section 144B(8) of the Act shall
be handled as per the procedure specified in the letter F.No.
225/97/2021/ITA-II dated 6th September, 2021.
5. This order comes into effect immediately.‖
43. Insofar as the utilization of the Insight Portal and selection of
cases in accordance with the RMS as formulated, Mr. Chawla has
placed for our consideration the Instructions issued by the Directorate
of Systems dated 16 November 2023 and which is extracted in its
entirety hereinbelow:-
―Sir/Madam,
Sub – Dissemination of certain High Risk Non-filer cases
pertaining to the AV 2020-21 on Insight Portal selected under
Risk Management Strategy (RMS) Cycle 3 – reg. Kindly refer to
the above.
2. A taxpayer who is having income above the prescribed limit
or fulfils any other condition mentioned in section 139 of the Act is
required to file return of income. Non-filers with potential tax
liabilities are identified by analysing information received under,Signature Not Verified
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AIR/CIB data, TDS/TCS Statement etc. and overall taxpayer profile
based on the information available in the database.
3. RMS Cycle – 3 for non-filer category of cases has been
executed for AY 2020-21 on the basis of rules/parameters thereto
approved by the Board under RMS (Risk Management Strategy) for
identifying High Risk Non-filer cases with potential tax liabilities.
4. In respect of above, certain high-risk Non-filer cases for
relevant assessment year(s) as approved by the Board have been
made visible to the Jurisdictional Assessing Officers on Verification
module of the Insight Portal with following case type – ‘RMS – Non
filing of Return PAN cases’. The cases can be accessed on
INSIGHT portal using following path-
Insight Portal – Verification -Taxpayer – Verification – Case
type – RMS -Non filing of Return PAN cases’
For detailed description of Case View and underlying Info, User
may refer to the Annexure “A” enclosed.
5. Underlying information including various third-party
data/information related to PAN of assigned cases may also be
accessed on Profile Views of Insight Portal. Profile Views shows
various information related to taxpayer including:
a. Comparative ITR information under Return Profile (TRP)
b. Comparative key values, financial ratios etc. under Financial
Profile (TFP)
c. Details of various address, email, mobile numbers under,
Master Profile (TMP)
d. list of accounts, immovable assets etc under Asset Details
(TAD)
e. list of key persons, shareholders etc uncle, Relationship (TRL)
f. Third Party Information, Aggregated TDS Payments,
Aggregated GST Transactions, and other information under
Taxpayer Annual Summary (TAS)
6. Following activities are available on Case Detail screen
which can be accessed by clicking Initiate Activity drop down
button.
a. Mark case as untraceable: This generic functionality
allows user to mark such cases where the communications are not
getting delivered to the taxpayers untraceable for feedback
purpose.
b. Mark case as Non-Responsive: User can mark such crises
where the communications are getting delivered to the taxpayer
but the taxpayer is not responding to the queries sent on
Compliance Portal through this functionality.
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c. Enter Comments: User can record remarks at the case level.
d. Case Reassignment: The user can select multiple cases and
re-assign/ transfer them.
e. No Return Required: In Non-filing of Return (NMS): RMS
cases, the user can mark a case as ‘No Return Required’, if the
user comes to this conclusion post assessment of response
submitted by the taxpayer.
f. Initiate Proceedings u/s 148A/148: The dropdown provides
the user a generic technical functionality to initiate proceedings
for RMS cases related to issuance of notice u/s 148A or notice u/s
148 of the Income Tax Act, 1961. The user may use this
particular functionality for initiating proceedings related to
issuance of notice u/s 148A for cases under RMS.
7. Further, necessary action u/s 148A of the Income-tax Act.
1961 in respect of the above disseminated cases for AY 2020-21
under RMS Cycle-3 shall be taken after taking into account all
relevant applicable provisions of the Act.
8. The Assessing Officers may also further refer to relevant
Notifications/lnstructions/Circulars/S.O.Ps for cases disseminated
under Risk Management System issued by the CBDT front time to
time.
9. In case of any technical difficulty being observed, users my
immediately contact OR write to Insight helpdesk. (Helpdesk
number – 18001034216, Email id: [email protected]).
Yours faithfully,
(Ankit Verma)
Jt. DIT (Systems)- 2(3)
Copy to:
1. PPS to Chairperson, Member (Admin & Faceless
Scheme(s)). Member (A&J), Member (IT & R), Member (Inv.),
Member (L & S), Member (TPS), CBDT and DGIT(S), Delhi &
DGIT(S)-2, Bangalore, for Information.
2. Nodal officer of ITBA, Insight i-library,
https://www.irsofficersonline.gov.in.‖Signature Not Verified
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‖
44. Of significance is the Notification issued under Section 120 of
the Act dated 13 August 2020 and which designates the authorities
charged with the conduct of faceless assessment in respect of various
territorial areas and the relevant parts of the said notification are
reproduced hereunder:-
―NOTIFICATION
New Delhi, the 13th August, 2020
(INCOME TAX)
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S.O. 2756(E).-In pursuance of the powers conferred by sub-sections
(1 ), (2) and (5) of section 120 of the Income-tax Act, 1961 ( 43 of
1961) (hereinafter referred to as the said Act), the Central Board of
Direct Taxes hereby directs that the Income-tax Authorities of the
National e-Assessment Centre (hereinafter referred to as the NeAC)
specified in Column (2) of the Schedule below, having its
headquarters at the place mentioned in column (3) of the said
Schedule, shall exercise the powers and functions of Assessing
Officer concurrently, to facilitate the conduct of Faceless
Assessment proceedings in respect of territorial areas mentioned in
the column ( 4 ), persons or classes of persons mentioned in the
column (5) and cases or classes of cases mentioned in the column (6)
of the Schedule-I of the notification No. 50 of 2014 in S.O. 2752 (E)
dated the 22nd October, 2014 published in the Gazette of India,
Extraordinary Part II, Section 3, sub-section (ii):
SCHEDULE
S. No. Income Tax Authority Headquarters
(1) (2) (3)
1 Principal Chief Delhi
Commissioner of Income-
tax (NeAC), Delhi
2 Income – tax Officer Delhi
(NeAC)(HQ), O/o Principal
Chief Commissioner of
Income-tax (NeAC), Delhi
…………‖
45. Having noticed the rival submissions which were addressed, it
becomes apparent that the principal plank of the challenge raised by the
writ petitioners is that by virtue of the introduction of Section 144B, a
JAO stands completely denuded of the power to assess or reassess. The
petitioners would argue that once the faceless scheme of assessment
came to be promulgated and which encompassed the power to reassess
under Section 147, Section 144B is liable to be construed as ousting all
other modes and methodologies of assessment otherwise envisaged
under different provisions of the Act.
E. RATIONALE AND LEGISLATIVE INTENT UNDERLYING
THE FACELESS SCHEME OF ASSESSMENT
46. In light of the rapid onset of technological advancements, the
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Revenue, with the introduction of the faceless scheme of assessment,
seeks to collect relevant information relating to transactions undertaken
by assessees with third parties as also to aggregate information from
various other law enforcement agencies. Owing to the fast-evolving
technological advancements, the Revenue, appears to have set up a data
assimilation architecture enabling it to gather information concerning
transactions undertaken by assessees with third parties and to
consolidate information obtained from various other law enforcement
agencies. The Revenue on the basis of this exercise of data assimilation
and analysis is enabled to verify and cross check information with
respect to particular assessees in order to detect non-filers as well as
those who have failed to make a full and true disclosure of their
income. The entire schema of assessment, reassessment and
recomputation of income is thus based on the information so collected.
In view of the aforesaid, a burgeoning need was felt to reform the
system of assessment, reassessment and recomputation of income
aligning it with contemporary standards of efficiency and transparency.
47. The Hon’ble Finance Minister20 in her Budget Speech dated 05
July 2019 for the fiscal year of 2019-20, observed that the system of
scrutiny assessments prevalent at that time, involved a high degree of
direct interface and interaction between taxpayers and the officers of
the Department, which in her view could plausibly lead to ―certain
undesirable practices on the part of tax officials‖ and thus undermine
the transparency and integrity of the assessment process. To address
and eliminate these concerns, the FM expressed the intent of the
government to launch, in a phased manner, an electronic scheme of
20
FM
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faceless assessment ―involving no human interface‖ which, to begin
with, would involve such assessments being carried out in select cases
―requiring verification of certain specified transactions or
discrepancies‖ with the purported aim being for the centralised body
initiating faceless assessment to be the singular point of contact
between the taxpayer and the Department. The relevant extracts of the
Budget Speech dated 05 July 2019 are accordingly reproduced
hereinbelow:
―Faceless e-assessment
124. The existing system of scrutiny assessments in the Income-tax
Department involves a high level of personal interaction between the
taxpayer and the Department, which leads to certain undesirable
practices on the part of tax officials. To eliminate such instances,
and to give shape to the vision of the Hon’ble Prime Minister, a
scheme of faceless assessment in electronic mode involving no
human interface is being launched this year in a phased manner. To
start with, such e-assessments shall be carried out in cases requiring
verification of certain specified transactions or discrepancies.
125. Cases selected for scrutiny shall be allocated to assessment
units in a random manner and notices shall be issued electronically
by a Central Cell, without disclosing the name, designation or
location of the Assessing Officer. The Central Cell shall be the
single point of contact between the taxpayer and the Department.
This new scheme of assessment will represent a paradigm shift in
the functioning of the Income Tax Department.‖
48. As a result, the faceless scheme of assessment thus came to be
introduced, for the first time on 12 September 2019 through the ‗E-
assessment Scheme, 2019′, which thereafter came to be referred to as
the ‗Faceless assessment scheme, 2019′ vide the amending Notification
dated 13 August 2020. It is these measures which constituted the launch
of the scheme of faceless assessment in the country. As noticed
hereinabove, Section 144B of the Act thereafter came to be introduced
vide TOLA and with effect from 01 April 2021. The Finance Act of
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2022 subsequently expanded the ambit of Section 144B to cover
assessments as well as reassessments under Sections 143(3), 144 and
147 of the Act.
49. The common thread underlying the various facets of the evolving
faceless assessment regime from its inception till the present, has been
the felt need to enhance efficiency, transparency and accountability in
the process of assessment and reducing the human interface between
the AO and the assessee. However, and despite the expressed intent to
altogether eliminate the interface between the AO and the assessee,
both the Notifications of 12 September 2019 as well as of 13 August
2020 had not excluded the involvement of the JAO completely and in
the course of the faceless assessment process. As would be manifest
from the discussion which ensues, the respondents appear to have been
at all times, cautious of not precluding the involvement of JAO within
the faceless assessment process. The retention of the JAO in certain
phases of the assessment process reflects a balanced approach, aiming
to preserve transparency and efficiency while ensuring that complex
issues receive appropriate attention from a qualified and experienced
assessing officer.
50. For instance, the Notification of 12 September 2019 mandated
that NFAC, after the completion of assessment, would transfer all
electronic records of the case to the JAO in the following
circumstances:
―6. Procedure for assessment. —
xxxx xxxx xxxx
(xx) The National e-assessment Centre shall, after completion of
assessment, transfer all the electronic records of the case to the
Assessing Officer having jurisdiction over such case., for –
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(a) imposition of penalty;
(b) collection and recovery of demand;
(c) rectification of mistake;
(d) giving effect to appellate orders;
(e) submission of remand report, or any other report to be furnished,
or any representation to be made, or any record to be produced
before the Commissioner (Appeals), Appellate Tribunal or Courts,
as the case may be;
(f) proposal seeking sanction for launch of prosecution and filing of
complaint before the Court;‖
51. Similarly, the Notification dated 13 August 2020, which had
introduced amendments to the previous Notification of 12 September
2019 had contemplated the role of the JAO in the faceless assessment
scheme as follows:
―(2) for clause 1, the following clause shall be substituted,
namely:–
xxxx xxxx xxxx
(xxvi) The National e-assessment Centre shall, after completion of
assessment, transfer all the electronic records of the case to the
Assessing Officer having jurisdiction over the said case for such
action as may be required under the Act;
(2) Notwithstanding anything contained in sub-paragraph (1), the
Principal Chief Commissioner or the Principal Director General, in
charge of National e-assessment Centre, may at any stage of the
assessment, if considered necessary, transfer the case to the
Assessing Officer having jurisdiction over such case, with the prior
approval of the Board.
xxxx xxxx xxxx
(5) in clause 4, within quotes, for the portion beginning with the
words ―The National e-assessment Centre shall levy the penalty‖
and ending with the words ―as the case may be‖, the following shall
be substituted, namely:–
―The National e-assessment Centre shall levy the penalty as
per the said draft order of penalty and serve a copy of the
same along with demand notice on the assessee or any other
person, as the case may be, and thereafter transfer electronic
records of the penalty proceedings to the Assessing Officer
having jurisdiction over the said case for such action as may
be required under the Act.‖Signature Not Verified
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52. It becomes relevant to note that Section 144B came to be
introduced in the statute for the first time by virtue of TOLA and as that
provision originally stood, the faceless assessment scheme was
confined to assessments liable to be made under Section 143(3) which
deals with regular assessments and Section 144, which is concerned
with best judgment assessment. It was in terms of Finance Act, 2022,
that sub-section (1) of Section 144B came to be amended to include
―reassessment‖ or ―recomputation‖ under Sections 143(3), Section 144
or Section 147, as the case may be. The principal question which
therefore arises for our consideration is whether Section 144B
precludes the JAO from initiating proceedings for reassessment in
terms as contemplated under Section 148 and in accordance with the
procedure prescribed in Section 148A.
53. It is pertinent to note that Finance Act, 2021 fundamentally
altered the procedure for reassessment. These were measures statutorily
adopted undisputedly while Section 144B had already come to be
inserted in the Act. The reassessment provisions made no specific
reference to the faceless scheme of assessment at this stage since the
subject of reassessment undisputedly was brought within the ambit of
Section 144B only in 2022. It is also relevant to note that the family of
provisions dealing with reassessment continued to use the expression
―Assessing Officer‖ throughout.
54. Alongside the introduction of Section 144B by TOLA, Section
151A also came to be inserted in the Act. This provision empowered
the Union Government to formulate a scheme for the purposes of
assessment, reassessment or recomputation, as the case may be, under
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Section 147 as well as the issuance of notices under Section 148. As is
manifest from the plain language of that provision, the underlying
objective of such a scheme was to meet the legislative objective of
eliminating the interface between an income tax authority and the
assessee, optimal utilization of resources through economies of scale
and functional specializations, the introduction of team based
assessment, reassessment, recomputation as well as issuance or
sanction of notices. Such team based assessment was intended to be in
accordance with the randomized allocation of cases and thus the usage
of the expression ―dynamic jurisdiction‖.
55. Thus, both Sections 144B as well as Section 151A sought to
introduce a system in terms of which assessment or reassessment
proceedings could be entrusted to Assessment Units which would be
randomly identified. Section 144B and the Explanation appended
thereto defined an ―automated allocation system‖ to mean an algorithm
for randomized allocation of cases with the aid of suitable technological
tools and which were envisaged to extend to the employment of
artificial intelligence and machine learning. While the first E-Faceless
Assessment Scheme came to be promulgated on 12 September 2019,
the Union Government formulated a scheme referable to Section 151A
on 29 March 2022 which is the Faceless Reassessment Scheme, 2022.
56. As is manifest from a reading of Clause 3 of the Faceless
Reassessment Scheme, 2022, assessment, reassessment or
recomputation under Section 147 of the Act as well as issuance of
notice under Section 148 was to be by way of an automated allocation
and in a faceless manner to the extent provided in Section 144B. Clause
3 also uses the expression ―…..in accordance with risk management
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strategy formulated by the Board as referred to in Section 148 of the
Act……‖. The reference to RMS in the scheme was clearly intended to
align with the concept of information which was spoken of in
Explanations 1 and 2 of Section 148. Both Explanations 1 and 2 of
Section 148 are of critical importance as would become apparent from
the discussion which ensues.
F. RMS AND OTHER MODES OF SELECTION OF CASES
57. However, and before we proceed to examine and interpret the
scope of those two Explanations, this would be an appropriate juncture
to elaborate upon the underlying scheme and objective of the RMS
which came to be formulated by the Board as well as other data
analytical measures which came to be adopted for the purposes of
assessment under the Act. The RMS was preceded by the adoption of
various technological tools by the Income Tax Department for the
purposes of analysing returns, extracting data and information
pertaining to the constituents of the tax base of the country and the
selection of appropriate cases for scrutiny and other measures
contemplated under the Act. These developments as per the material
placed for our consideration by Mr. Chawla, first stood mirrored in a
system titled CASS and which finds mention in a communication of the
CBDT dated 26 September 2014. The aforesaid system of scrutiny, and
where cases came to be selected with the aid of information and data
analytical tools, was aided by the creation of AIR, CIB and 26AS data
collected by the respondents. Instructions for purposes of scrutiny with
the aid of CASS were also issued by the CBDT in terms of its
communications dated 29 December 2015 and 14 July 2016.
58. Of equal significance is the response made by the Minister of
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State in the Ministry of Finance in the Rajya Sabha on 07 December
2021. The Hon’ble Minister stated that for the purposes of scrutiny,
cases are selected randomly through the CASS process and “in an
identity blind manner”. It would thus appear that by this time the
Income Tax Department clearly had in place a selection criteria which
took into consideration various risk parameters and which would
operate as red flags enabling and assisting the respondents to assess or
reassess as well as to scrutinize in a more effective and efficient
manner. This process uses data analytics and algorithms to identify
cases that may need closer inspection based on specific risk parameters,
such as unusual financial activity, discrepancies in tax returns, or high-
value transactions. The CASS process minimizes human intervention in
the selection phase, aiming to make the scrutiny process more
objective, efficient, and unbiased by focusing on risk-based criteria
rather than manual selection.
59. Turning then to the concept of RMS which is frequently
referenced and finds repeated mention in the statute as well as the
instructions issued by the CBDT, we take note of the Insight Instruction
No. 71 issued by the Directorate of Income Tax (Systems) specifically
addressing this approach. The aforesaid Insight Instruction appears to
suggest that RMS and the creation of an Insight Portal were digital
tools created internally by the respondents in order to enable an AO to
holistically evaluate individual returns, map returns that may be found
to be connected and a data set thus becoming available to be used for
exploratory, statistical and perhaps even inferential analysis. The
Insight Portal thus assimilated data pertaining to each individual
assessee across broad parameters, stretching from comparative income
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tax return information, financial profiles and asset details amongst
various other factors. The Insight Portal thus integrates a
comprehensive dataset for each individual assessee, encompassing a
wide range of parameters. These include comparative analyses of
income tax return histories, detailed financial profiles, asset holdings,
and additional relevant financial and transactional information. This
data assimilation allows for a nuanced view of each taxpayer’s financial
standing and reporting consistency across multiple dimensions .The
Insight Instruction dated 16 November 2023 discloses that the data so
collected was made visible to the JAOs’ on the verification module of
the Insight Portal. This enabled the JAO to test the completeness of
disclosures made by an individual assessee against material aggregated
by the system.
60. In addition to the above, the Insight Portal enabled the JAO to
access a Transaction Number Sequence21 hyperlink and which would
disclose the following information pertaining to that particular
assessee:- (a) bank account (b) aggregate gross amount related to the
account (c) cash deposits in that account and (d) information with
respect to immovable property transactions and other relevant details.
This feature allows JAOs to verify if a taxpayer’s information is
complete and consistent with the data gathered by the system, making it
easier to catch any missing links or inaccurate information.
61. What we seek to emphasise and highlight is that the extensive
framework of information which is collected, structured and made
available on the Insight Portal represents data which is made visible
solely to the JAO. This entire spectrum of data, information and
21 TNS
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comprehensive insight is not digitally pushed to the NFAC in the first
instance. From the additional affidavit which has been filed by the
respondents and which explains the working and the implementation of
RMS, the following position emerges.
62. The deponent discloses that the Directorate of Income Tax
(Systems) is accorded the ability to randomly select cases which may
have been cross referenced on the basis of the criteria and factors on
which the RMS is founded. Upon such cases coming to be randomly
selected and flagged, the cases so identified are then forwarded to the
concerned JAO. What the respondents seek to emphasize is that the
cases which are selected by the Directorate of Income Tax (Systems)
based on the RMS is an exercise independently undertaken with the
JAO having no control over the selection process. It is in that light that
the respondents assert that the JAO can neither predict nor determine
beforehand whether a case would be flagged by the Directorate of
Income Tax (Systems).
63. Apart from the aforenoted technological aspects and the
analytical tools which appear to have been adopted by the Income Tax
Department, the Act enables the JAO itself to select cases which may
merit further inquiry or investigation on the basis of information as
defined. This becomes apparent from the following discussion.
64. As we view Explanation 1 of Section 148 of the Act, it becomes
apparent that an assessing officer could form an opinion that income
chargeable to tax had escaped assessment on the basis of (a)
information which comes to light through the RMS (b) an audit
objection (c) information received under agreements with nations (d)
information made available to the JAO in terms of a scheme notified
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under Section 135A or (e) information on which further action is
warranted in consequence to an order of a Tribunal or a Court. It is thus
manifest that apart from information which is made available to the
JAO pursuant to the RMS, the Act contemplates a decision to
commence reassessment also being founded or based upon other inputs
which are noticed in clauses (a) to (e) of Explanation 1. In essence, the
Act permits reassessment not only on RMS data but also on a variety of
other specified inputs ensuring a broader foundation for initiating
reassessment.
65. In terms of Explanation 2 to Section 148, information that may
come to the fore consequent to a search or survey, is also, by virtue of
the legal fiction incorporated therein, deemed to be that which would
constitute ―information‖ and be viewed as suggestive of income
chargeable to income having escaped assessment. The material that
may be gathered in the course of a search or survey also thus constitutes
information which comes to be placed in the hands of the JAO and
which may form the basis for formation of opinion of whether
reassessment is merited.
G. ―INFORMATION‖ RELEVANT FOR ASSESSMENTS
66. It would at this stage be also relevant to take note of the
following additional provisions of the Act and which broadly identify
sources from which information may be gathered by an AO for the
purposes of assessment. An AO, by virtue of Section 133, stands
empowered to require any firm or person to furnish information and
which may be used in aid of its statutory obligation to discharge the
various functions entrusted to it. In terms of Section 133A, an income
tax authority, is conferred with the power to survey any place or
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premises at which a business, profession or activity for charitable
purposes is carried out. Section 133A also empowers the income tax
authority to inspect books of account, check or verify cash, stock or
other valuable articles as well as require the surveyed entity to furnish
such information as may be warranted. Similar powers for the purposes
of collection of information stand conferred on an income tax authority
in terms of Sections 133B and 133C of the Act.
67. Section 135A enables the Union Government to frame a scheme
for the purposes of calling for information in terms contemplated under
Sections 133, 133B and 133C. Such a scheme has in fact come to be
formulated and published on 13 December 2021. It would be relevant
for our purposes to take note of the provisions contained in Clauses 3
and 4 of that scheme and which are reproduced hereinbelow:-
―3. Scope of the Scheme.- (1) The scope of the Scheme shall be in
respect of:
(i) calling for information under section 133 of the Act;
(ii) collecting certain information under section 133B of the
Act;
(iii) calling for information by the prescribed income-tax
authority under section 133C of the Act;
(iv) exercise of power to inspect registers of companies
under section 134 of the Act; and
(v) exercise of power of Assessing Officer under section
135 of the Act.
(2) The Scheme shall be applicable to exercise the functions referred
to in sub-paragraph (1) for processing or utilisation of the
information which is,―
(i) in possession of the Principal Director General of
Income-tax (Systems) or Director General of Income-tax
(Systems), as the case may be; or
(ii) made available to the Principal Director General of
Income-tax (Systems)or Director General of Income-tax
(Systems), as the case may be, by-
(a) the Director General of Income-tax (Intelligence and
Criminal Investigation);
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(b) the Commissioner of Income-tax in charge of the
Centralised Processing Centre for processing of
returns;
(c) the Commissioner of Income-tax in charge of the
Centralised Processing Centre (TDS) for processing
of statement of tax deducted at source; or
(d) any other authority, body or person.
4. Electronic Collection and Verification.― (1) The
Commissioner of Income-tax (e-Verification) shall collect the
information referred to in sub-paragraph (1) of paragraph 3, in
accordance with the procedure laid down by the Principal Director
General of Income-tax (Systems) or Director General of Income-tax
(Systems), as the case may be.
(2) The Principal Director General of Income-tax (Systems) or
Director General of Income-tax (Systems), as the case may be, shall
make available the information referred to in sub-paragraph (2) of
paragraph 3, to the Commissioner of Income-tax (e-Verification)-
(i) which was uploaded to the registered account or sent on
the registered mobile number, wherever available, of the
assessee and not accepted by him or in a case where no
response has been received from the assessee within
ninety days;
(ii) in respect of which no registered e – mail account or
mobile number is on record.
(3) The Commissioner of Income-tax (e-Verification) shall process
the information made available to it for initial e-verification.
(4) The initial e-verification by the Commissioner of Income-tax (e-
verification) shall be through an automated issuance of
communication to the source from where the information is received
and the Principal Director General of Income-tax (Systems) or
Director General of Income-tax (Systems), as the case may be, shall
enable such automated communication.
(5) In cases where the mismatch between the amount accepted by
the assessee and the amount reported by the reporting entity persists,
the information after such initial e-verification shall be run through a
risk management strategy laid down by the Board and the
information found to be no or low risk on such risk criteria, where
no further action is required, shall be processed for closure.
(6) The remaining information shall be transferred electronically by
the Principal Director General of Income-tax (Systems) or Director
General of Income-tax (Systems), as the case may be, to the
Prescribed Authority through a process of automated allocation
system.
(7) The verification of the information so allocated, shall be
completed by the Prescribed Authority in the manner as per the
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procedure laid down in this regard by the Director General of
Income-tax (Intelligence and Criminal Investigation),with the prior
approval of the Board.
(8) The information verified as above, shall be sent back
electronically in the form of a preliminary verification report for
verification to the Commissioner of Income-tax (e-Verification).
(9) The Commissioner of Income-tax (e-Verification) shall match
the preliminary verification report with the information in the return
of income of the respective assessee, where such return is available
electronically and prepare a final verification report.
(10) Based on the final verification report, the information found to
be low risk in accordance with the criteria approved by the Board
shall be considered for closure.
(11) The remaining information in the form of final verification
report shall be processed in accordance with sub-paragraph 12.
(12) If the information referred to in sub-paragraph (11), ―
(i) pertains to a pending scrutiny assessment, it shall be
made available electronically to the Faceless Assessing
Officer or Jurisdictional Assessing Officer, as the case
may be.
(ii) does not pertain to a pending scrutiny assessment, it shall
be utilised for further necessary action in accordance
with the provisions of the Act.‖
68. In cases where questions of capital gains are at issue, the AO
stands conferred with the power to make a reference to a Valuation
Officer for an estimation of value, including the fair market value of
any asset, property or investment. This power which stands individually
conferred upon the AO stands enshrined in Section 142A of the Act.
TOLA also introduced Section 142B and which in turn empowered the
Union Government to frame a scheme for the purposes of faceless
inquiry or valuation. In exercise of that power, the Union Government
has framed a scheme which came to be notified on 30 March 2022.
Clauses 2 and 3 of that scheme are extracted hereinbelow:-
―2. Definitions.– (1) In this Scheme, unless the context otherwise
requires, —
(a) ―Act‖ means the Income-tax Act, 1961 (43 of 1961);
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(b) ―automated allocation‖ means an algorithm for
randomised allocation of cases, by using suitable
technological tools, including artificial intelligence and
machine learning, with a view to optimise the use of
resources.
(2) Words and expressions used herein and not defined, but
defined in the Act, shall have the meaning respectively assigned to
them in the Act.
3. Scope of the Scheme.– For the purpose of this Scheme, —
(a) issuing notice under sub-section (1) of section 142 of the
Act,
(b) making inquiry before assessment under sub-section (2)
of section 142 of the Act,
(c) directing the assessee to get his accounts audited under
sub-section (2A) of section 142 of the Act,
(d) estimating the value of any asset, property or investment
by a Valuation Officer under section142A of the Act,
shall be in a faceless manner, through automated allocation, in
accordance with and to the extent provided in section 144B of the
Act with reference to making faceless assessment of total income or
loss of assessee.‖
H. THE CONCURRENT CONFERRAL OF JURISDICTION
69. We then take note of the elaborate provisions which the Act
incorporates for the purposes of delineating jurisdictional boundaries
and conferment of powers amongst income tax authorities. This
becomes evident from a reading of Section 120 which enables the
CBDT to issue directions specifying the territorial area, persons or
classes of persons, incomes or classes of income, as well as cases or
classes of cases which may be placed under the jurisdiction of income
tax authorities. Notwithstanding such a distribution of cases and
territories, Section 127 enables the authorities prescribed therein to
transfer any case for the purposes of centralized assessment. That
power to transfer can be exercised so as to place a particular batch of
cases before any AO irrespective of whether it had been empowered to
exercise concurrent jurisdiction. Of equal significance are the
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notifications issued by the CBDT for the purposes of facilitating
conduct of faceless assessment and which in ambiguous terms provide
that the authorities so designated in those notifications would exercise
powers and discharge functions of an AO ―concurrently‖.
70. Despite these assigned areas and responsibilities, Section 127
allows certain tax authorities to transfer cases for centralized
assessments. This means that cases originally assigned to one officer or
jurisdiction can be reassigned, grouping similar cases together for
efficient handling. This power to transfer cases can allow a group of
cases to be examined by a particular AO, regardless of whether that
officer had authority over the cases initially. The CBDT has also issued
notifications to facilitate faceless assessments, where assessments are
handled without in-person interaction between the tax official and the
taxpayer. These notifications allow designated tax authorities to share
the powers and duties of an AO in a ―concurrent‖ manner, meaning
multiple officers or authorities can simultaneously exercise the
functions of an AO, especially in a faceless system.
71. It is also pertinent to note that Section 144B itself confers a
power upon the Principal Chief Commissioner or the Principal Director
General to transfer cases to the JAO. This authority stands mirrored in
sub-section (7) and (8) of Section 144B. We had in the earlier parts of
the judgment, also noticed sub-section (9) as it existed in Section 144B
prior to its deletion by virtue of Finance Act, 2022. It would be
pertinent to briefly advert to the Memorandum which explained the
various clauses of Finance Act, 2022 and which discloses the reasons
which weighed upon the Union to ultimately move for the deletion of
sub-section (9). The relevant part of that Memorandum is reproduced
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hereunder:-
―(II) Sub-section (9) of section 144B of the Act provides that the
assessment proceedings shall be void if the procedure mentioned
in the section was not followed. The said sub-section refers to
violation of the procedure laid down by the law whereas a large
number of disputes have been raised under this sub-section
involving technical issues arising due to use of information
technology, leading to unnecessary litigation. It is, therefore,
proposed to omit this sub-section i.e., sub-section (9) of section
144B from its date of inception.
This amendment will take effect retrospectively from 1st April,
2021.‖Overall, this section captures the legislative intent to create an effective,
fair, and flexible tax assessment process that balances structured
jurisdictional roles with the adaptability needed for centralized, faceless
assessments. Notably, among the various factors that influenced this
decision, what is not lost is the delicate balance sought to be struck by
the Legislature between procedural adherence and practical efficiency.
The Legislature recognised that while strict procedural compliance is
fundamental to maintaining fairness and transparency in the assessment
process, an inflexible adherence to procedure–especially in a digital
and faceless assessment environment–could inadvertently lead to
administrative bottlenecks and a surge in litigation. The legislature
sought to ensure that the intent of the law is not overshadowed by
technicalties.
I. ASSESSMENT AND RE-ASSESSMENT ACTION IN LIGHT
OF THE FACELESS ASSESSMENT REGIME
72. Having noticed the origins of faceless assessment and how it
came to evolve over a period of time, it becomes apparent that the
procedure formulated and introduced by virtue of Section 144B of the
Act while undeniably transformative and disruptive and
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transformational, was also in many ways transitional and representative
of a phased and evolving process. Various categories of cases were
from inception excluded specifically from the ambit of faceless
assessment. These included cases assigned to central charge, those
pertaining to international tax, assessment in cases whose pendency
could not be created on the Income Tax Business Application portal on
account of technical reasons as well as assessments to be undertaken
under Section 147. This becomes evident from a reading of the orders
dated 06 September 2021 and 22 September 2021 which have been
extracted hereinabove. We also had an occasion to note that Section
144B when it originally came to be inserted in the statute, stood
confined to assessments under Sections 143(3) and 144. The words
―reassessment‖, ―recomputation‖ came to be added subsequently by
virtue of Finance Act, 2022. It was this Amending Act which also
added the words ―Section 147‖ specifically in Section 144B. As we
read the various clauses of Section 144B, the focal point and the
nucleus of faceless assessment primarily appears to be the assessment
and analysis of returns which have been filed electronically and are to
go through the rigors of regular assessment. This position clearly
emerges from a reading of the elaborate provisions contained therein
and which in minute detail provide how returns are, generally under the
faceless scheme, liable to be scrutinised and assessed, the random
allocation of those cases to different Assessment Units, the conferment
of dynamic jurisdiction upon Assessment Units, the internal review
procedure pertaining to draft orders, issuance of notices and a host of
other facets pertaining to assessment in general.
73. However, of critical significance is the absence of any provision
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of Section 144B seeking to regulate the commencement of
reassessment action as contemplated under Sections 147, 148 and 148A
of the Act. The provision is conspicuously silent with respect to
commencement of action under Section 147. Of equal importance is the
fact that although Section 144B describes the various steps to be taken
in the course of assessment and assigns roles to different constituents of
the NFAC, it does not, at least explicitly, incorporate any machinery
provisions which may be read as intended to regulate the pre-issuance
stages of a notice under Section 148. While it is true that Section 144B
does specifically refer to reassessment, the significance of that insertion
would perhaps have to adjudged bearing in mind the interpretation of
the scheme for reassessment which has been advocated for our
consideration by the respondents and which not only appeals to reason
but may also be the more sustainable view to adopt if one were to
harmoniously interpret the provisions of the Act alongside the schemes
for faceless assessment coupled with the underlying objectives of
reducing human interface.// While it is indeed acknowledged that
Section 144B expressly includes a reference to reassessment, the true
import and scope of this inclusion must be interpreted in a manner that
aligns with the overarching framework advocated by the respondents.
74. The respondents’ interpretation, which has been advanced for our
consideration, not only presents a logical approach but also offers a
more sustainable understanding if one is to engage in a harmonious
construction of the provisions of the Act. This approach seeks to ensure
that the reassessment scheme functions in concert with the faceless
assessment framework, .However, before we elaborate upon the reasons
which have weighed upon us in this respect, this would be an
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appropriate juncture to advert to the various streams and sources of
information which enables an AO to discharge its obligation of
investigation and enquiry.
75. It is important, at the outset, to note that a reassessment need not
and in all conceivable contingencies be triggered by a return that an
assessee may choose to lodge electronically. Reassessment, as
contemplated within the framework of the Act, is a complex process
driven by multiple factors that extend far beyond the initial filing of a
return. As is manifest from a reading of Explanations 1 and 2 of Section
148, reassessment may be commenced on the basis of information that
may otherwise come to be placed in the hands of the JAO. A
reassessment may also be considered being initiated if an audit
objection were to be flagged and placed for the consideration of the
JAO. In terms of Explanation 2, and post Sections 153A/153C fading
into the sunset, we could also conceive of material unearthed in the
course of a search or material, books of accounts or documents
requisitioned under Section 132A as constituting the basis for initiation
of reassessment. Explanation 2 also alludes to a survey that may be
conducted in exercise of powers comprised in Section 133A and the
material gathered in the course thereof being relevant for the purposes
of formation of opinion as to whether income had escaped assessment.
76. Thus all the contingencies and situations which are spoken of in
Explanations 1 and 2 are not founded on the material or the data which
may be available with NFAC. The statute thus clearly conceives of
various scenarios where the case of an individual assessee may be
selected for examination and scrutiny on the basis of information and
material that falls into the hands of the JAO directly or is otherwise
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made available with or without the aid of the RMS. It would, therefore,
in our considered opinion, be erroneous to view Section 144B as
constituting the solitary basis for initiation of reassessment. We also, in
this regard, bear in consideration the indubitable fact that Section 144B
is primarily procedural and is principally concerned with prescribing
the manner in which a faceless assessment may be conducted as
opposed to constituting a source of power to assess or reassess in itself.
77. Consequently, to ascribe substantive value to Section 144B as the
primary basis for reassessment would be to misinterpret its intended
meaning. Section 144B is not intended to establish a substantive basis
for the exercise of reassessment powers; rather, it is inherently
procedural. Its function is confined to outlining the processes through
which faceless assessments are to be conducted, ensuring efficiency
and consistency in the manner of assessment rather than determining
the substantive grounds upon which reassessment is founded.
Therefore, Section 144B must be rightly and necessarily conceived as
procedural, forming part of the broader legislative framework aimed at
structuring the assessment process without encroaching upon the
substantive grounds for reassessment itself
78. As noted above, Section 144B is fundamentally concerned with
the assessment of returns duly filed and their distribution by way of
randomized allocation to different Assessment Units. We, for reasons
aforenoted, find ourselves unable to view that provision as being the
singular and exclusive repository of the power to assess as
contemplated under the Act. This would appeal to reason additionally
in light of the provisions contained in sub-sections (7) and (8) of
Section 144B and which enable the Principal Chief Commissioner or
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the Principal Director General to relegate assessment back to the JAO.
The randomized allocation of cases based on the adopted algorithm and
the use of technological tools including artificial intelligence and
machine learning would appear to be primarily aimed at subserving the
primary objective of faceless assessment, namely, of reducing a direct
interface, for reasons of probity and to obviate allegations of individual
arbitrariness. However, it would be wholly incorrect to view the
faceless assessment scheme as introduced by virtue of Section 144B as
being the solitary route which the Act contemplates being tread for the
purposes of assessment and reassessment.
79. The core attributes of the faceless assessment system revolve
around the principle of randomized allocation, where ‘random’ in its
literal sense means that case assignments are made without any
predetermined or controlling factor. This principle is a deliberate
feature of the faceless assessment framework, aimed at reducing direct
human interaction–a facet historically susceptible to biases and
potential misconduct. By substituting the human element with a
carefully designed algorithm, the system restricts human involvement
to only those essential stages, thereby enhancing fairness and
accountability.
80. Section 144B, therefore, plays a crucial role by establishing the
procedural mechanisms for faceless assessments, specifically through
the random allocation of cases to different Assessment Units. However,
to read into Section 144B a substantive basis for assessments and
reassessments would extend its role beyond its intended design. The
section’s true function lies in facilitating an unbiased, algorithm-driven
distribution of cases, supporting the overarching objective of
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minimizing direct human interaction in the assessment process.
81. Additionally, provisions within sub-sections (7) and (8) of
Section 144B authorize the Principal Chief Commissioner or the
Principal Director General to transfer cases back to the Jurisdictional
Assessing Officer (JAO) when appropriate. This flexibility further
emphasises that Section 144B cannot be viewed as the exclusive basis
for all assessment and reassessment procedures. The randomised
allocation, reinforced by tools such as artificial intelligence and
machine learning, is intended to reduce direct human interface for
reasons of integrity and to prevent individual arbitrariness.
Nevertheless, it would be incorrect to interpret Section 144B as the sole
pathway envisioned by the Act for conducting assessments or initiating
reassessments. Instead, it should be recognized as one component
within a broader statutory framework that provides multiple avenues for
the lawful assessment and reassessment of returns.
82. As was noticed by us hereinbefore, the conferred jurisdiction
upon authorities for the purposes of faceless assessment itself uses the
expression ―concurrently‖. That word would mean contemporaneous or
in conjunction with as opposed to a complete ouster of the authority
otherwise conferred upon an authority under the Act. This too is clearly
demonstrative of the Act not intending to deprive the JAO completely
of the power to reassess. In understanding the concept of concurrent
jurisdiction, it is essential to recognise that the retention of a human
element within the broader framework of the National Faceless
Assessment Centre (NeAC) does not conflict with the powers held by
the JAO. Rather, this setup must be viewed as complementary,
reinforcing both accountability and adaptability within the assessment
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process.
83. In Sanjay Gandhi Memorial Trust v. Commissioner of
Income Tax (Exemption)22, the Court directly addressed whether the
JAO could exercise assessment authority alongside the faceless
assessment system. The Court concluded that, while the faceless system
centralizes case handling through the NFAC, this framework does not
completely replace or nullify the JAO’s role. The CBDT notifications
further affirm this shared responsibility, specifying that the NFAC and
the JAO hold concurrent jurisdiction, thereby allowing the faceless
system to conduct assessments without stripping the JAO of its
foundational authority.
84. In this way, the JAO’s retention of original jurisdiction provides
a critical balance, ensuring that human oversight remains available
within the faceless assessment structure when needed. Importantly, the
Court highlighted that the JAO’s authority is not merely residual but an
active, complementary role that reinforces the flexibility of the
assessment system. For instance, the NFAC retains the capacity to
transfer cases back to the JAO during assessment proceedings if
circumstances require a return to jurisdictional assessment. This
adaptability affirms that faceless and jurisdictional assessments are not
mutually exclusive; instead, they are interwoven aspects of the Act’s
broader design, intended to operate in tandem to achieve fairness and
procedural integrity.
85. The issue of the JAO having concurrent jurisdiction arose
directly for the consideration of this Court in Sanjay Gandhi Memorial
Trust. One of the arguments which appears to have been addressed
22 2023 SCC OnLine Del 3161
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before the Court in that case was of the JAO having no authority or
jurisdiction to assess. Dealing with the aforesaid, our Court held:-
―48. This Court is of the view that though in the year 2019, the
concept of e-assessment and in 2020, the concept of faceless
assessment were introduced, yet the jurisdictional assessing officer
continues to exercise concurrent jurisdiction with faceless assessing
officer. In fact, pursuant to exercise of power under Section 120(5)
of the Act which empowers CBDT to confer concurrent jurisdiction
on two or more assessing officers for proper management of the
work, the CBDT has vide Notification No. 64/2020 dated 13-8-2020
conferred power upon the income tax authorities of the National e-
Assessment Centre to exercise the power and function of assessment
―concurrently‖ while the original jurisdiction continues with the
jurisdictional assessing officer. The relevant portion of the said
notification is reproduced hereinbelow:
―S.O. 2756(E).- In pursuance of the powers conferred by
subsections (1), (2) and (5) of Section 120 of the Income
Tax Act, 1961 (43 of 1961) (hereinafter referred to as “the
said Act”), the CBDT hereby directs that the Income Tax
Authorities of the National e-Assessment Centre
(hereinafter referred to as “the NeAC”) specified in column
(2) of the Schedule below, having its headquarters at the
place mentioned in column (3) of the said Schedule, shall
exercise the powers and functions of assessing officer
concurrently, to facilitate the conduct of faceless
assessment proceedings) ….
(emphasis supplied)‖
49. It is clarified in the e-assessment and faceless assessment scheme
that once a case is selected for scrutiny, for the limited purpose of
passing assessment order for a particular assessment year, the case is
assigned to National e-Assessment Centre and after assessment, the
electronic records of the case are to be transferred back to the
jurisdictional assessing officer.
50. Further, the E-assessment Scheme, 2019 and faceless assessment
scheme issued vide two notifications each dated 12-9-2019 and 13-
8-2020 under Sections 143(3-A) and (3-B) of the Act clearly
stipulate that the provision of Section 127 of the Act shall apply
subject to exceptions, modifications and adaptations as stipulated
therein. In other words, if the faceless assessment scheme has not
modified Section 127 of the Act, the powers under the said section
would continue to apply to all cases in an unmodified manner.
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51. Clause (xxi) of the Notification Nos. 61/2019 and 62/2019 dated
12-9-2019 issued in exercise of powers under Sections 143(3-A) and
(3-B) of the Act in order to give effect to the e-assessment scheme
authorises the National e-Assessment Centre to transfer the case of
the assessee at any stage of the assessment (i.e. only when the
assessment proceeding is pending before the National e-Assessment
Centre) to the assessing officer having jurisdiction over such case, as
the scope of power and functions of National e-Assessment Centre is
limited to facilitating the conduct of e-assessment.
52. Consequently, this Court is of the view that the two Notifications
dated 12-9-2019 enlarge and supplement the power of transfer by
authorising the National e-Assessment Centre to transfer at any stage
of assessment the case of the assessee to the assessing officer having
jurisdiction over such case i.e. from faceless assessing officer to
jurisdictional assessing officer (an assessing officer always having
concurrent jurisdiction).
53. To the same effect are the Notifications dated 13-8-2020, which
clarify, “The provisions of …. Section 127 of the Act shall apply to
the assessment made in accordance the said Scheme subject to the
following exceptions, modifications and adaptations …. ” Clause (2)
of the Notification Nos. 60 and 61 of 2020 dated 13-8-2020 enable
the Principal Chief Commissioner or Principal Director General in
charge of National e-Assessment Centre, at any stage of the
assessment i.e. during assessment, to send back the case to the
assessing officer having jurisdiction over such case, with prior
approval of the Board. Clause (2) of the Scheme only authorises a
transfer back to the jurisdictional assessing officer holding original
jurisdiction, which he never loses as it is only the function of
assessment that is to be carried out by the faceless assessing officer
having concurrent jurisdiction. Consequently, clause (2) of the
Scheme only retransfers the function of assessment to the
jurisdictional assessing officer holding concurrent jurisdiction.
Further, the said clause confers power of transfer upon Principal
Chief Commissioner or Principal Director General of National e-
Assessment Centre and not upon any other Principal Director
General or Director General or Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or Commissioner.‖
As is evident from the above, the Court came to the firm conclusion
that irrespective of the system of faceless assessment that had come to
be introduced and adopted, it would be wholly incorrect to hold or
construe the provisions of the Act as denuding the JAO of the authority
to undertake an assessment or of the said authority being completely
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deprived of authority and jurisdiction. The judgment in Sanjay Gandhi
Memorial Trust is thus a resounding answer to the challenge as raised
by the writ petitioners. That decision reinforces our conclusion of the
two permissible modes of assessment being complimentary and the Act
envisaging a coexistence of the two modes.
86. This quite apart from we having discerned the various sources of
information which the JAO stands independently enabled to access and
which could constitute material justifying initiation of reassessment. If
the position as canvassed by the writ petitioners were to be accepted,
those provisions would be rendered a complete dead letter and the
information so gathered becoming worthless and incapable of being
acted upon. This since, as we have found, such information is firstly
provided to the JAO and it is that authority which is statutorily obliged
to assess and evaluate the same in the first instance.
87. Within the framework of the faceless assessment system, the
JAO retains powers that do not conflict with, but rather complement,
the objectives of neutrality and efficiency. The faceless assessment
scheme centralizes processes under the Faceless Assessing Officer
(FAO) to reduce direct interaction. However, this structure does not
diminish the JAO’s authority. Instead, the JAO’s retained jurisdiction is
vital for ensuring continuity and accountability, acting as a
complementary element to the faceless assessment framework. Even
beyond this concurrent jurisdiction, the JAO independently wields
powers under various provisions, is granted access to distinct sources of
information that may substantiate grounds for reassessment. Accepting
the position advocated by the petitioners–that the JAO’s role is
entirely overridden by the faceless system–would effectively nullify
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these provisions, rendering such information inaccessible and
unactionable. The Act specifically channels this information to the
JAO, who is then statutorily responsible for the initial assessment and
evaluation of this data.
88. Therefore, 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.
89. Regard must also be had to the fact that an Assessing Unit of the
NFAC derives no authority or jurisdiction till such time as a case is
randomly allocated to it and which triggers the assessment process in
accordance with the procedure prescribed by Section 144B. The
evaluation of data and information would indubitably precede the actual
process of assessment. If the interpretation which is advocated by the
writ petitioners were to be countenanced, the appraisal and analysis of
information and data functions which the Act entrusts upon the JAO
would be rendered wholly unworkable and clearly be contrary to the
purpose and intent of the assessment power as constructed under the
Act.
90. The notion of entirely ousting the JAO from the assessment
process is both impractical and misaligned with the objectives of the
faceless assessment system. The faceless framework was established to
reduce direct human interaction in assessments thereby enhancing
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objectivity, transparency, and efficiency. However, eliminating the
JAO’s role altogether would not only fail to further these goals but
could actually compromise the system’s functionality and flexibility.
The JAO’s retained powers, particularly in accessing and evaluating
specific information sources for reassessment, play a critical role in
supplementing the centralized, algorithm-driven processes of faceless
assessment. By allowing the JAO to operate in conjunction with the
FAO, the Act ensures that both roles work complementarily to deliver
comprehensive and balanced assessments. Far from conflicting with the
faceless system, the JAO’s role enhances it, ensuring that assessments
remain grounded in thorough investigation.
91. The decisions of various High Courts which have taken a
contrary view, have proceeded on the basis that consequent to faceless
assessment coming into force by virtue of Section 144B, the JAO
stands completely deprived of jurisdiction. This becomes apparent from
the conclusions which the Telangana High Court came to record in
Kankanala Ravindra Reddy when it held that after the introduction of
the scheme on 29 March 2022, it becomes mandatory for the Revenue
to conduct proceedings of reassessment in a faceless manner. It was this
line of reasoning which appears to have been adopted by High Courts
in the various decisions cited for our consideration by Mr. Goel.
92. The principal judgment which most of the High Courts have
chosen to follow and reiterate is of Hexaware Technologies. In
Hexaware Technologies, a specific issue with respect to the validity of
the notice came to be raised with it being argued that once the scheme
of faceless reassessment had come to be promulgated, the JAO would
stand denuded of jurisdiction. It must at the outset be noted that apart
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from the Faceless E-Assessment Scheme 2022 itself and the
instructions which were provided to counsel appearing for the Revenue,
most of the High Courts do not appear to have had the benefit of
reviewing the copious material which Mr. Chawla has so painstakingly
assimilated and placed for our consideration. They also do not appear to
have had the advantage of a principled stand of the respondents having
been placed on the record of those proceedings.
93. In Hexaware Technologies, the Bombay High Court ultimately
came to conclude that there could be no question of a concurrent
jurisdiction of the JAO and the FAO for issuance of notice under
Section 148. From a reading of the record, it is unclear whether the
notifications conferring jurisdiction on authorities of the NFAC for the
purposes of conducting faceless assessment was placed before the High
Court. At least the decision makes no reference to the notification of 13
August 2020 which has been produced in these proceedings and which
in clear and unambiguous terms declares that the officers empowered to
conduct faceless assessment were being conferred concurrent powers
and functions of the AO. We, with respect, also find ourselves unable to
concur with Hexaware Technologies bearing in mind the various
sources of information and material which may assist a JAO in forming
an opinion as to whether income had escaped assessment and have been
noticed herein above. Those aspects clearly do not appear to have been
either taken into consideration or engaged with by the High Court in
Hexaware Technologies. The view expressed in Hexaware
Technologies then came to be reiterated by the Bombay High Court in
Kairos Properties. This decision too fails to advert or allude to the
notifications in terms of which authorities forming part of the various
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assessing units of NFAC were conferred concurrent jurisdiction.
94. The High Court of Gauhati in Ram Narayan Sah has essentially
followed the view taken by the Bombay High Court in Hexaware
Technologies. Although the decision of our Court in Sanjay Gandhi
Memorial Trust appears to have been cited, the judgment neither enters
any reservation nor does it record any reasons which may have assisted
us in discerning what weighed with that High Court to brush aside the
aspect of concurrent jurisdiction. In Jatinder Singh Bhangu, the Punjab
and Haryana High Court too does not appear to have had the advantage
of reviewing and analysing the material that has been placed by the
respondents in these proceedings. Here too, the Court was constrained
to proceed merely on the basis of the instructions and letters issued to
counsels appearing for the Revenue. It was perhaps in light of the state
of the record as it existed that those High Courts ultimately observed
that in the absence of any ambiguity in the language of the scheme,
instructions and circulars can neither supplement nor supplant the
statutory provisions.
95. The comprehensive material presented on the record by the
respondents has afforded a holistic understanding of the nuanced
aspects of the faceless assessment scheme enabling us to appreciate its
intent and purpose in greater depth. Unlike prior cases where certain
High Courts, including in Hexaware Technologies, were not provided
with the full spectrum of relevant notifications and contextual
information, the extensive documentation in this matter has helped
clarify ambiguities in both law and fact. This record has allowed for a
deeper analysis, addressing key points left unexamined in previous
judgments, and has illuminated the legislative and procedural intentions
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behind the faceless assessment scheme, particularly the concurrent
jurisdiction between the JAO and FAO.
96. Although we had reserved judgment on this batch of writ
petitions on 04 October 2024, we find that in a recent decision rendered
by the Gujarat High Court on 01 October 2024, a view has been
expressed which appears to be in tune with the conclusions which we
have reached. We thus deem it apposite to refer to the decision of that
High Court in Talati and Talati LLP v. Office of Assistant
Commissioner of Income Tax, Circle 4(1)(1), Ahmedabad23.
97. The solitary question which arose for consideration in the
aforesaid matter was whether the Section 148 notice was rendered
invalid on the ground of having been issued by the JAO. In a judgment
penned by the learned Chief Justice of that High Court in Talati and
Talati LLP, it was held as follows:-
―(22) From a further reading of Explanation 1 and Explanation 2
attached to Section 148, it is clear that the provisions under Section
148 for issuance of notice before making assessment, re-assessment
or re-computation under Section 147 operate in two different ways.
For the purpose of Section 148, where Section 148A is applicable,
Explanation 1 provides:
xxxx xxxx xxxx
(23) The provisions contained in Explanation 1 shows that the
information with the Assessing Officer for the purpose of Section
148, which suggests that the income chargeable to tax has escaped
assessment under the Explanation would mean:
(i) any information in the case of the assessee, for the relevant
assessment year, in accordance with the risk management
strategy formulated by the Board from time to time; or
(ii) any audit objection to the effect that the assessment in the
case of the assessee for the relevant assessment year has not
been made in accordance with the provisions of this Act; or23
2024: GUJHC: 54567-DB
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(iii) any information received under an agreement referred to
in Section 90 or Section 90A of the Act; or
(iv) any information made available to the Assessing Officer
under the scheme notified under Section 135A; or
(v) any information which requires action in consequence of
the order of a Tribunal or a Court.
On the contrary, Explanation 2 which deals with the
information received during search and seizure operations
under Section 132 requires fulfillment of pre-requisites
conditions, noted hereinbefore, in the submission of the
learned counsel appearing for the Revenue.
(24) The concept of Risk Management Strategy formulated by the
Board is incorporated in Clause (i) of Explanation 1, as also
specified in Clause 3 of the notification dated 29.03.2022 issued by
the Central Government in accordance with the provisions of
Explanation 1 clause (i) to Section 148, which is not applicable in
the case of information received during the course of search and
seizure under Section 132.
(25) From the language employed in the Explanation 1 and
Explanation 2 to Section 148 of the Act’ 1961, we reach at an
opinion that the method of automated allocation, i.e. for random
allocation of cases through algorithm, or by using suitable
technological tools, including artificial intelligence and machine
learning, in accordance with risk management strategy formulated
by the Board, as referred to in Explanation 1 clause (i) to Section
148 of the Act, for issuance of notice under Section 148 in a faceless
manner, as per the scheme framed vide notification dated
29.03.2022, cannot be applied to the case of Search and Seizure
under Section 132, where the Jurisdictional Assessing Officer (JAO)
is required to record his satisfaction on the basis of the material for
affirmation of opinion in an honest and bona fide manner.
(26) We find substance in the submission of the learned counsel
for the Revenue that recording of satisfaction by the Assessing
Officer on a perusal of the information received by him as a result of
search and seizure operation under Section 132 of the Income Tax
Act’ 1961, requires application of human mind, inasmuch as,
reasons affirmed on the part of the Satisfaction Note may also
become subject matter of scrutiny by the Court in a case of
challenge, where the Court in exercise of power of judicial review
may examine as to whether they are actuated by mala fides or passed
on extraneous or irrelevant considerations.
(27) The decision of the Division Bench of the Bombay High
Court in the case of Hexaware Technologies Ltd. (supra) has been
rendered in a case, which falls within the arena of Explanation 1 to
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Section 148 and not where Explanation 2 to Section 148 of the
Income Tax Act’ 1961, would be attracted.
(28) From the above, by reading all the relevant provisions of the
Income Tax Act’ 1961 as also the notification dated 29.03.2022
issued by the Central Government framing scheme for “E-
Assessment of Income Escaping Assessment” under sub-sections (1)
and (2) of Section 151 A of the Act’ 1961, we reach at an irresistible
conclusion that the challenge to the notice under Section 148 dated
22.03.2024 for A.Y. 2021 – 2022 on the sole premise that the said
notice could have been issued only through automated allocation in
faceless manner and not by Jurisdictional Assessing Officer (JAO),
cannot be sustained.‖
98. Proceeding further to notice the scheme of faceless reassessment
itself, the High Court in Talati and Talati LLP further observed:-
― (30) Moreover, Section 151A contemplates framing of the scheme
by the Central Government by notification in the official Gazette,
even for the purpose of issuance of notice under Section 148 in the
case of re-assessment or sanction for issue of such notice under
Section 151, with the aim to impart greater efficiency, transparency
and accountability by eliminating the interface between the income
tax authority and the assessee or any other person to the extent
technologically feasible.
(31) The feasibility of implying technology for the process,
therefore, would be relevant. There may be a situation, where a
scheme may be framed by the Central Government for issuance of
the notice under Section 148 even in the case of Search and Seizure
under Section 132 of the Act’ 1961, so as to meet out the
expectations of the legislature under Section 151A, to impart greater
efficiency, transparency and accountability by applying artificial
intelligence, technological innovations, etc., but as of now, from a
careful reading of the notification dated 29.03.2022, along with the
statutory provisions, we find that the aforesaid notification does not
cover a case where notice under Section 148 is issued by the
Jurisdictional Assessing Officer (JAO) the information received by
him in the matter of Search and Seizure under Section 132 of the
Act’ 1961, or requisitioned under Section 132A.‖
99. Returning then to the Faceless Reassessment Scheme 2022 itself,
we find sufficient merit in the interpretation of its clauses as has been
commended for our consideration by the respondents. Clause 3 of the
said scheme provides that assessment, reassessment or recomputation
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under Section 147 of the Act as well as issuance of notice under Section
148 would be through automated allocation in accordance with the risk
management strategy and in a faceless manner. The respondents rightly
draw our attention to the usage of punctuation at various places in
Clause 3. A careful reading of that clause shows that the draftsman has
used a comma immediately after the phrase “shall be through
automated allocation”. Yet another comma appears after the phrase
“for issuance of notice”. It thus appears to have been the clear intent of
the author to separate and segregate the phases of initiation of action in
accordance with RMS, the formation of opinion whether circumstances
warrant action under Section 148 of the Act being undertaken by
issuance of notice and the actual undertaking of assessment itself.
100. Beyond the specific use of punctuation within Clause 3, a
comprehensive reading of the Faceless Reassessment Scheme 2022,
supported by the extensive material presented by the respondents,
bolsters the clear intent underlying each phase of the faceless
assessment process//
101. As we had noticed in the preceding parts of this decision, the
RMS and the Insight Portal pushes information to the JAO and is
principally not concerned with faceless assessment at all. The RMS
essentially enables the JAO to firstly examine the veracity of
disclosures made and examine the return against various parameters
and information which has been collated by the Directorate of Systems.
It thus provides the JAO with an insight in respect of various
transactions to which the assessee may be connected as well as data
pertaining to that assessee which has otherwise been aggregated and
mapped on the basis of material existing on the system of the
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respondents. The respondents would, therefore, appear to be correct in
their submission that when material comes to be placed in the hands of
the JAO by the RMS, it would consequently be entitled to initiate the
process of reassessment by following the procedure prescribed under
Section 148A. If after consideration of the objections that are preferred,
it stands firm in its opinion that income was likely to have escaped
assessment, it would transmit the relevant record to the NFAC. It is at
that stage and on receipt of the said material by NFAC that the concepts
of automated allocation and faceless distribution would come into play.
The actual assessment would thus be conducted in a faceless manner
and in accordance with an allocation that the NFAC would make. This,
in our considered opinion, would be the only legally sustainable
construction liable to be accorded to the scheme. Our conclusion would
thus strike a harmonious balance between the evaluation of information
made available to an AO, the preliminary consideration of information
for the purposes of formation of opinion and its ultimate assessment in
a faceless manner.
102. We are also, in this regard, guided by the principles of beneficial
construction and thus avoiding an interpretation that would render
portions of the Act or the Faceless Assessment Scheme superfluous or
ineffective should be avoided//. To assert that the JAO’s powers
become redundant under the faceless assessment framework would
conflict with beneficial construction, as it would undermine provisions
specifically established to support comprehensive data analysis and
informed decision-making, such as the JAO’s access to RMS and
Insight Portal information.
103. We are fully cognizant of the contrarian view which was
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expressed in this respect in Hexaware Technologies and which stands
reflected in para 36 of the report which has been extracted hereinabove.
However, for reasons assigned in the preceding parts of this decision,
we find ourselves unable to concur with the interpretation accorded by
the Bombay High Court upon Clause 3 of the Faceless Reassessment
Scheme 2022. As was noted by us earlier, Clause 3 clearly
contemplates 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
distribution of functions between the JAO and NFAC is complimentary
and concurrent as contemplated under the various schemes and the
statutory provisions. This balanced distribution underscores the
legislative intent to create a seamless integration of traditional and
faceless assessment mechanisms within a unified statutory framework.
This we so hold and observe since we have, principally, been unable to
countenance a situation where the JAO stands completely deprived of
the jurisdiction to evaluate data and material that may be placed in its
hands.
J. DISPOSITION
104. We, accordingly and for all the aforesaid reasons find ourselves
unable to sustain the challenge as addressed. The contention that the
impugned notices are liable be quashed merely on the ground of the
same having been issued by the JAO is thus negated.
105. Accordingly, while we dismiss these writ petitions, we clarify
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that any other objection that the petitioners may have to the initiation of
reassessment proceedings would be open to be addressed in
independent proceedings.
YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
OCTOBER 28, 2024/neha/RW
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