Justice Krishnan Ramasamy of the Madras High Court delivered a crucial judgment on December 20, 2024, shedding light on jurisdictional issues in faceless tax assessment procedures. The case, involving Mark Studio India Private Limited, revolved around the validity of notices issued under Sections 148 and 148A of the Income Tax Act, 1961, by Jurisdictional Assessing Officers (JAOs), despite the introduction of faceless schemes aimed at ensuring efficiency and transparency.
Case Background
The petitioner, Mark Studio India Private Limited, contested notices issued by the Jurisdictional Assessing Officer (JAO) under Sections 148 and 148A of the Income Tax Act. The notices pertained to the reassessment of income for the financial year 2017-18, alleging income escapement. The petitioner argued that these notices were invalid as they were not issued by the National Faceless Assessment Centre (NaFAC), contrary to the mandates of the E-Assessment of Income Escaping Assessment Scheme, 2022.
The petitioner contended that the faceless assessment schemes introduced in 2022 under Section 151A required that notices and all related processes under Sections 148 and 148A be carried out in a faceless manner, thus eliminating the role of JAOs. The jurisdictional overreach, according to the petitioner, violated Section 144B, which governs faceless assessment procedures.
Important Legal Issues
Authority to Issue Notices: Whether JAOs retained jurisdiction to issue notices under Sections 148 and 148A after the implementation of faceless assessment schemes.
Role of NaFAC: The extent of NaFAC’s jurisdiction in handling cases of reassessment and issuance of notices.
Compliance with Section 151A: Whether the Central Board of Direct Taxes’ (CBDT) guidelines on jurisdiction align with statutory provisions under Section 151A.
Court Observations
Justice Krishnan Ramasamy underscored the purpose of faceless assessments, observing, “Faceless assessments demand faceless notices; the procedural sanctity of the scheme must be upheld to eliminate the interface between tax authorities and taxpayers.”
The court analyzed Section 144B of the Income Tax Act and clarified that NaFAC’s jurisdiction is triggered only after notices under Section 148A are issued by JAOs. The guidelines from CBDT dated May 24, 2023, which permitted JAOs to initiate notices, were deemed limited in scope and procedural assistance. The court emphasized that these guidelines cannot override statutory mandates.
Additionally, the court noted that the E-Assessment of Income Escaping Assessment Scheme, 2022, mandates the use of automated allocation systems and randomization to ensure unbiased assessments. Justice Ramasamy remarked that procedural lapses erode taxpayer trust and undermine the objectives of faceless assessments.
Court’s Decision
The Madras High Court quashed the impugned notices issued by the JAO, declaring them ultra vires. It directed tax authorities to adhere strictly to the procedural framework outlined in the faceless assessment schemes. Justice Ramasamy reiterated that while JAOs may play a role in gathering initial information, the issuance of notices under Sections 148 and 148A must align with the faceless process.
Case Details
Petitioner: Mark Studio India Private Limited, Chennai.
Respondents: Income Tax Officer, Non-Corporate Ward 10(6), Chennai, and National Faceless Assessment Unit, New Delhi.
Petitioner’s Counsel: Ms. G. Vardhini Karthik.
Respondents’ Counsel: Dr. B. Ramaswamy and Mr. V. Mahalingam, with junior counsel Ms. S. Premalatha.
Writ Petition Nos.: 25223 & 25227 of 2024.
