Introduction
In the case of Navita S. Hetampuria v. Income-tax Officer[i], the Hon’ble Bombay High Court has critically examined the procedural aspects of issuing notice to the assessee under s. 148 read with ss. 151 and 151A of the Income-tax Act, 1961 (‘Act’). It observed that the assessing officer (‘AO’) ought to follow the assessment process established by law, and any deviation from the established procedure could render the outcome invalid and void under the law.
Brief Facts
Navita Hetampuria (‘Assessee’) had challenged the reassessment notice and the subsequent order of reassessment (‘reassessment proceedings’) issued by the AO for the assessment year (‘A.Y.’) 2018-19, under s. 148 of the Act.
The Assessee challenged the reassessment proceedings on the grounds of non-compliance with the procedure established by way of s. 151 of the Act, by the revenue department, whereby the Assessee had alleged that the notice was issued to him by a jurisdictional AO (‘JAO’) and not by a faceless AO (‘FAO’), which was in contravention to the statutory provisions mentioned under s. 151A of the Act.
Consequently, the Assessee filed the present writ petition, praying that the reassessment proceedings be considered invalid in light of the revenue’s non-compliance with the established statutory procedure.
Held
The High Court, while quashing the reassessment proceedings on the grounds of non-compliance with (i) s. 151 of the Act and (ii) s. 151 A of the Act observed:-
That issuance of notice under s. 148 of the Act must comply with s. 151A of the Act is a well-established principle in light of the observations made in the case of Hexaware Technologies Limited v. Assistant Commissioner of Income Tax & Others[ii].
The notice issued under s. 148 of the Act by the JAO and not by FAO is a violation of the procedural aspect of the Act and defeats the purpose of the statute. Further, it was clarified that the JAO and the FAO have concurrent jurisdiction with regard to the issuance of notice under s. 148 of the Act or even passing assessment or reassessment orders.
The scheme under s. 151A of the Act is clearly applicable for the issuance of a notice under s. 148 of the Act, and accordingly, the FAO can only issue such notice.
Considering it was unanimously agreed that the reassessment proceedings were initiated after the expiry of three years from the end of the relevant AY, the sanction for initiating such reassessment ought to have been granted by the authorities of the ranks referred to in s.151(ii) of the Act, and not by the lower-ranked authorities.
Our Analysis
The Bombay High Court's aforementioned decision highlighted that statutory compliance is mandatory, and no exemption is available, even for the revenue department. The High Court's decision firmly affirms that the procedure enumerated in the statute cannot be overlooked at any instance.
The reassessment process undertaken by the authority will be illegal if non-compliance with ss. 151 and 151A of the Act exist. The Bombay High Court emphasised that when an authority acts in contravention of the law, the resultant action of the Authority must be declared null and void. The petitioner seeking to annul such an action is not obligated to demonstrate that they have suffered prejudice as a result of the action. By adhering to the principles of equity, transparency, and legal compliance, the judgment enhances the predictability and fairness of the tax administration system.
End Notes
[i] [2024] 165 taxmann.com 424 (Bombay), [31-07-2024]
[ii] [2024] 162 taxmann.com 225 (Bom.)
Authored by Arjun Singh Tamang, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.
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