ITAT Hyderabad Rules Section 148 Notices Issued by Jurisdictional AO Void Post-Faceless Scheme Implementation

In a significant ruling that reinforces the sanctity of the Faceless Assessment Scheme, the Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has invalidated reassessment proceedings initiated by a Jurisdictional Assessing Officer (JAO) after the mandatory implementation of the faceless regime.

The decision was rendered in the case of Sukesini Kumili Vs ITO, where the Tribunal held that notices issued under Section 148 and orders passed under Section 148A(d) of the Income Tax Act 1961 by a local officer, rather than a Faceless Assessing Officer (FAO), after March 29, 2022, are without jurisdiction and void ab initio.

The Government of India introduced the Faceless Assessment Scheme to eliminate the human interface between the Revenue and the assessee, thereby reducing the scope for harassment and corruption while increasing efficiency. To operationalize this for income escaping assessment, the Central Board of Direct Taxes (CBDT) issued Notification No. 18/2022 on March 29, 2022, exercising powers conferred under Section 151A.

This notification mandated that all assessment, reassessment, or re-computation proceedings under Section 147, and the issuance of notices under Section 148, must be conducted through the Faceless Assessment mechanism. The ruling in Sukesini Kumili Vs ITO serves as a critical reminder that procedural mandates regarding jurisdiction are not merely technical formalities but substantive legal requirements.

Case Background: Sukesini Kumili Vs ITO

The dispute arose from appeals filed by the assessee, Smt. Sukesini Kumili, against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] for the Assessment Years (AY) 2015-16 and 2016-17.

The Core Controversy

The primary contention raised by the assessee was legal in nature. The assessee argued that the reassessment proceedings were legally unsustainable because the foundational notices were issued by the wrong authority.

The timeline of events established the following:

  1. Notification Date: The CBDT mandated the Faceless Scheme for reassessment effective from March 29, 2022.
  2. Action by JAO: Despite this notification, the Jurisdictional Assessing Officer (JAO) proceeded to issue orders under Section 148A(d) and notices under Section 148 on dates falling after the cutoff.
    • For one appeal, the order and notice were dated 06.04.2022.
    • For another appeal, the order was passed on 20.03.2023, and the notice was issued on 25.03.2023.