SimplifiTax - Tax, Accounting & Financial Advisory

CA Kamala Pulugundla Shethiya – [2024] 165 taxmann.com 749 (Article)

1. Introduction

The evolution of reassessment procedures under the Income Tax Act, 1961, (‘the Act’) especially following the introduction of the Faceless Assessment Scheme under Section 151A, has raised critical questions regarding the jurisdictional authority of the Jurisdictional Assessing Officer (JAO) to issue notices under Section 148 of the Act. Recent judicial pronouncements have provided significant clarity, particularly the landmark judgment in Hexaware Technologies Ltd. v. Asstt. CIT [2024] 162 taxmann.com 225/464 ITR 430, which has extensively analyzed the limitations of the JAO’s authority post the enactment of Section 151A. This article delves into the legal framework, examining the key judicial precedents that shape this discourse, with a detailed focus on the Hexaware judgment and the recent Telangana High Court ruling in Kankanala Ravindra Reddy v. ITO [2023] 156 taxmann.com 178/295 Taxman 652 (Telangana)

2. Legal Framework: Sections 148, 148A, and 151A of the Act

Section 148 of the Act, empowers the Assessing Officer (AO) to issue a notice for income escaping assessment. Section 148A, introduced later, mandates certain procedures, such as conducting an inquiry and providing an opportunity to the Assessee, prior to the issuance of a notice under Section 148.

With the enactment of Section 151A, the Central Government introduced the Faceless Assessment Scheme, fundamentally altering the traditional roles of the JAO and the newly established Faceless Assessing Officer (FAO). Section 151A mandates that all notices under Section 148 and proceedings under Section 148A be conducted through the faceless assessment system, thereby centralizing the process and limiting the direct involvement of the JAO.

3. Jurisdictional Authority Post Section 151A: The Role of JAO

Section 151A represents a significant shift towards a faceless, automated system aimed at increasing transparency and reducing the potential for arbitrary assessments. The Scheme, notified on March 29, 2022, designated the FAO as the primary authority for issuing notices under these sections, effectively sidelining the JAO’s role in such proceedings. This raises the crucial question of whether the JAO retains any authority to issue reassessment notices under Section 148 after the introduction of Section 151A.

4. Hexaware Technologies Ltd. (supra) and Kankanala Ravindra Reddy (supra)

The Hexaware Technologies Ltd. (supra) and Kankanala Ravindra Reddy (supra) are landmark rulings that extensively analyzed the jurisdictional limits of the JAO under the faceless assessment regime. The case involved a reassessment notice issued by the JAO, which was challenged by Hexaware Technologies Ltd. on the grounds that it was issued in violation of the faceless assessment mechanism introduced under Section 151A.
The JAO initiated reassessment proceedings under Section 148, alleging that certain components of Hexaware’s income had escaped assessment. The company challenged the notice, arguing that it was issued in violation of the faceless assessment scheme under Section 151A.