Karnataka High Court
Adarsh Developers vs The Deputy Commissioner Of Income Tax on 13 December, 2023
Author: B. M. Shyam Prasad
Bench: B. M. Shyam Prasad
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF DECEMBER 2023
BEFORE
THE HON'BLE MR. JUSTICE B. M. SHYAM PRASAD
WRIT PETITION NO.1109/2023 [T-IT]
BETWEEN :
ADARSH DEVELOPERS
REP BY ITS MANAGING PARTNER
SRI B M JAYESHANKAR
S/O LATE SRI B M MADAIAH
AGED ABOUT 67 YEARS
OFFICE AT 2/4, LANGFORD GARDENS,
RICHMOND TOWN,
BANGALORE- 560 025
PAN AAGFA3674G
Digitally ... PETITIONER
signed by (BY SRI. A SHANKAR, SENIOR ADVOCATE FOR
ANAND N
Location: SRI. ANNAMALAI S, ADVOCATE)
HIGH
COURT OF AND :
KARNATAKA
1. THE DEPUTY COMMISSIONER
OF INCOME TAX
CENTRAL CIRCLE 2 (1 )
3RD FLOOR, C R BUILDINGS,
QUEENS ROAD,
BANGALORE- 560 001
2. NATIONAL FACELESS
ASSESSMENT CENTRE
REP. BY ADDITIONAL/JOINT/
DEPUTY/ADDITIONAL COMMISSIONER
OF INCOME-TAX/
INCOME-TAX OFFICER
2
INCOME-TAX DEPARTMENT
MINISTRY OF FINANCE
ROOM NO. 401, 2ND FLOOR,
E- RAMP, JAWAHARLAL NEHRU
STADIUM, DELHI- 110 003
... RESPONDENTS
[BY SRI N VENKATARAMAN, Addl. SGI FOR
SRI. M DILIP, ADVOCATE]
THIS WRIT PETITION IS FILED UNDER ARTICLE 227
OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
THE ASSESSMENT ORDER PASSED BY THE R1 UNDER
SECTION 143(3) OF THE INCOME TAX ACT, 1961 DATED
20.09.2022 BEARING DIN NO. ITBA//AST/S/143(3)/2022-
23/1045739577 (1) FOR THE ASSESSMENT YEAR 2020-21
HEREIN MARKED AS ANNEXURE-A1;
QUASH THE COMPUTATION SHEET ISSUED BY THE R1
DATED 20.09.2022 BEARING DIN AND DOCUMENT NO.
ITBA/AST/S/530/2022-23/1045740084(1) IN RESPECT OF
THE ASSESSMENT YEAR 2020-21 HEREIN MARKED AS
ANNEXURE - A2.
THIS WRIT PETITION COMING ON FOR
PRONOUNCEMENT OF ORDERS, THIS DAY, THE COURT
MADE THE FOLLOWING:-
ORDER
The petitioner has impugned the first respondent's
Assessment Order dated 20.09.2022 in DIN No.ITBA
/AST/S/143(3)/2022-23/1045739577(1) [Annexure-A1]
under Section 143[3] of the Income Tax Act, 1961 [for
short 'the IT Act']. In addition, the petitioner has
impugned the consequential Computation and Demand
Notice [Annexures-A2 and A3] as also Show Cause
Notice dated 20.09.2022 [Annexure-A4] issued under
Section 270A of the IT Act for the assessment year
2020-21.
2. The petitioner, a partnership firm engaged in
the business of real estate development, has filed
Returns of Income [ROI] under Section 139[1] of the IT
Act for the Assessment Year 2020-21. The petitioner's
case is selected for scrutiny, and the Additional
Commissioner of Income Tax, NaFAC-1[1][2], Delhi [the
second respondent as the Prescribed Income Tax
Authority] [for short, 'the NaFAC'] has issued Notice
dated 29.06.2021 [Annexure-C] to the petitioner under
Section 143[2] of the IT Act. Subsequently, the first
respondent has served Notices dated 23.11.2021,
09.12.2021, 03.01.2022, 11.01.2022, 19.02.2022,
28.04.2022 27.05.2022 and 12.08.2022 [the copies of
these Notices are appended to the writ petition as
different annexures] under Section 142[1] of the IT Act
calling upon the petitioner to furnish details such as
computation of income, financial statements along with
all the detailed schedules with party-wise and item-wise
contents, the party-wise details of sundry advances that
are written off and the reasons for writing off such
advances, a brief note on various receipts shown in
profit and loss account with the various activities
carried on during the financial year 2019-20. The
petitioner has filed certain responses to each of these
notices, including the response dated 20.07.2022.
3. The first respondent has passed the
impugned Assessment Order dated 20.09.2022 with
certain additions and disallowances. The petitioner has
filed its appeal against the first respondent's
Assessment Order dated 20.09.2022 with the
Commissioner of Income Tax [Appeals]-11 Bengaluru.
The petitioner has also filed separate applications for
rectification under Section 154 of the IT Act with the
first respondent on 18.10.2022 and 06.12.2022. The
aforesaid appeal and the applications for rectification
are pending consideration.
4. The Principal Commissioner of Income Tax
[Central], Bengaluru by the order dated 20.12.2022 has
granted stay of recovery in terms of the Assessment
Order subject to the petitioner depositing the disputed
amount in ten installments of Rs.1,96,28,424/-. This
Court, in the light of the submission that the first of the
installments in Rs.1,96,28,424/- is paid under protest,
and because of the question that is canvassed, has
recorded that the respondents are expected not to be
precipitative. It is placed on record that in due
deference to this observation, the respondents have not
taken any action. Presently, the pleadings are complete.
The respondents have requested for early disposal of the
petition emphasizing that a large number of notices
have been issued by the Prescribed Income Tax
Authority, and if the question for consideration remains
pending for long there could be ramifications. Sri. A
Shankar, the learned Senior Counsel for the petitioner,
and Sri. N Venkataraman, the learned Additional
Solicitor General of India, were initially heard on the
following question for final disposal of the petition.
Whether the Additional Commissioner of
Income Tax NaFAC-1(1)(2) could have
assumed jurisdiction in respect of the
petitioner's case which belongs to central
charge for issuance of notice under Section
143(2) of the Income Tax Act, 1961; and if the
aforesaid officer could not have so assumed
jurisdiction, whether the proceedings must
fail for want of due notice under Section
143(2) of the Income Tax Act, 1961.
5. The petitioner's case is that its jurisdictional
Assessing Officer is the Deputy Commissioner of Income
Tax, Central Circle 2(1), Bangalore [the first respondent]
and as such, the Additional Commissioner of Income
Tax, NaFAC-1(1)(2), Delhi [the second respondent] could
not have assumed jurisdiction to issue notice dated
29.06.2021 [Annexure-C under Section 143[2] of the IT
Act because the jurisdiction of the first respondent has
not been decentralized insofar as the petitioner. The
petitioner contends that because notice dated
29.06.2021 is issued by an officer without jurisdiction,
the entire proceedings culminating with the impugned
Assessment Order dated 20.09.2022 are without
jurisdiction, and hence, this Court must interfere
notwithstanding the fact that the petitioner has availed
statutory remedy against the Assessment Order.
6. The respondents, who assert that the second
respondent is vested with the jurisdiction to issue notice
in view of the amendment to Section 143[2] of the IT Act
with effect from 01.06.2016 and the insertion of Section
144B with effect from 01.04.2021, question the
petitioner's locus to maintain the writ petition relying
upon the provisions of Section 124[3] of the IT Act. On
the question of jurisdiction to issue notice under
Section 143[2] of the IT Act, the respondents assert that
the Central Board of Direct Taxes [CBDT] has
authorized the second respondent to act as the
'Prescribed Income Tax Authority' for the purposes of
Section 143[2] of the IT Act in exercise of the powers
conferred thereunder and Rule 12A of the Income Tax
Rules, 1962 read with Section 143[2], and that the
'Prescribed Income Tax Authority' is vested with
jurisdiction to issue notice under Section 143[2] of the
IT Act for cases to be assessed under the provisions of
Section 144B of the IT Act or outside such assessment
in appropriate cases.
7. The respondents, to vindicate their case that
the second respondent is vested with jurisdiction in law
to issue notice under Section 143[2] of the IT Act, have
also, as part of their Statement of objections and
convenience compilation filed during the course of
hearing, given a historical background to bring out the
evolution in the assessment proceedings with the
elimination of the interface between Assessing Officers
and Assessees by utilizing technology and the
introduction of a team based assessment with dynamic
jurisdiction.
8. If these are the elementary pleadings and
contentions for and against the question that is framed
for consideration, both Sri A Shankar and Sri. N
Venkataraman have elaborated the respective
contentions with detailed submissions. In the early
stages of hearing, Sri. A Shankar had urged multiple
grounds to vindicate the petitioner's case that the
second respondent lacked jurisdiction to issue the
Notice under Section 143[2] of the IT Act, but with the
completion of the pleadings and with the submissions
by Sri N. Venkataraman, Sri A. Shankar acknowledges
that the grounds are narrowed down substantially.
9. Sri A Shankar's submissions in support of
the petitioner's case that the assessment proceedings
are commenced with issuance of notice under Section
143[2] of the IT Act by an officer who could not have
assumed such jurisdiction and therefore the entire
proceedings culminating with the impugned assessment
order dated 20.09.2022 [Annexure-A1] are summarized
thus:
9.1 The Parliament with effect from 01.06.2016
has amended Section 143[2] of the IT Act stipulating
that when an Assessing Officer or a Prescribed Income
Tax Authority, as the case may be, considers it
necessary or expedient to ensure that an assessee has
not understated the income or has not computed
excessive loss or has not under-paid the tax in any
manner, shall serve on the assessee a notice requiring
him on a date specified either to attend or to produce or
cause to be produced any evidence to explain the
declarations in ROI. The provisions of Section 143[2] of
the IT Act recognize that there will be more than one
classes of cases [or incomes or businesses] for
assessment, and in respect of these classes either the
concerned Assessing Officer or the Prescribed Income
Tax Authority, as the case may be, shall issue notice
under Section 143[2] of the IT Act. As such, either the
concerned Assessing Officer or the Prescribed Income
Tax Authority, depending on the class of a case or
income or business must issue notice.
9.2 The CBDT, with introduction of the
Faceless Assessment Scheme [as e-Assessment Scheme]
in the year 2019, has issued Notification dated
13.08.2020 classifying the assessment cases in two
classes viz., [a] the assessments in the matters of
Central Charge and International Tax Charge and [b] the
scrutiny assessment otherwise with the stipulation that
all the assessment orders shall be passed by the
National e-Assessment Centre through the Faceless
Assessment Scheme except in cases assigned to Central
Charge and International Tax Charge. The CBDT has
further stipulated that any assessment which is not in
conformity with the afore shall be treated as non-est.
The CBDT, even after the incorporation of the National
Faceless Assessment Scheme under Section 144B in the
IT Act, has issued orders under Section 119 of the IT
Act on 31.03.2021 specifying that all assessment
proceedings pending as on 31.03.2021 and the
assessment proceedings initiated on or after 01.04.2021
[other than those in Central charges and International
Taxation charges] shall be completed under Section
144B of the IT Act.
9.3 The CBDT, which had issued order dated
13.08.2020 in exercise of its powers under Section
119[2] of the IT Act, classifying Central Charges and
International Taxation Charges as separate classes
when Faceless Assessment Scheme, 2019 was in vogue,
has not issued a similar order with the introduction of
National Faceless Assessment Scheme with the
insertion of the Section 144B of the IT Act. This order
dated 13.08.2020 cannot continue with the introduction
of the later Scheme, and the order dated 31.03.2021,
issued under Section 119[1] of the Act, which is
essentially an internal communication, cannot be
effective, and as such, the arrangement under the
previous Scheme ceased to operate.
9.4 The Parliament's intent in stipulating that
the concerned Assessing Officer or the Prescribed
Income Tax Authority, as the case may be, shall issue
notice under Section 143[2] of the IT Act is to enable
separate commencement of assessment proceedings in
different classes of cases. Therefore, the CBDT, both
with the notification of the Faceless Assessment Scheme
2019 and incorporation of the National Faceless
Assessment Scheme incorporated into the Act under
Section 144B, has issued orders/notifications treating
assessment under Central Charge and International
Taxation Charge as separate classes of cases and
excluding them from faceless assessment. In which
event, the notice under Section 143[2] of the IT Act in
the cases of Central Charge [and International Taxation
Charge] will have to be issued by the concerned
Assessing Officer and in the other cases there will have
to be faceless assessment with the prescribed authority
issuing such notices.
9.5 The settled law is that it must be presumed
that every word in a statute is deliberately and
consciously incorporated by the legislature and has to
be given effect accordingly. If the expression 'the
assessing officer or the prescribed authority as the case
may be' is not accordingly read, the Parliament's intent
in enabling different classes of cases with the
stipulation that the assessing officer or the prescribed
authority, as the case may be, shall issue notice under
Section 143[2] of the IT Act will be ignored doing
violence to the statutory provision despite the settled
proposition.
10. Sri N. Venkataraman submits at the outset
that the petition must be dismissed on the ground of
maintainability because the petitioner cannot call in
question the Assessing Officer's jurisdiction to pass the
impugned Assessment Order dated 20.09.2022
[Annexure - A1] when the petitioner, upon receipt of
Notice dated 29.06.2021 under Section 143[2] of the IT
Act, has filed reply to such notice and to different
notices issued thereafter under Section 142[1] of the IT
Act leading to the culmination of the assessment
proceedings with the assessment order dated
20.09.2022 [Annexure-A1].
11. Sri N. Venkataraman canvasses that, even if
the petitioner could have challenged the jurisdiction to
issue notice dated 29.06.2021 [Annexure-C] under
Section 143[2] of the IT Act, it would have to be within
one month from the date on which the petitioner was
served with the aforesaid notice. In this regard, the
learned Additional Solicitor General, drawing support
from the Division Bench Judgment of the Delhi High
Court in Commissioner of Income Tax vs. Kapil
Jain1, relies upon the provisions of Section 124[3] of
the IT Act and emphasizes that the provisions of this
Section stipulate that no person shall be entitled to call
in question the jurisdiction of the assessing officer after
the expiry of one month from the date of receipt of the
1 2010 SCC Online Delhi 2596
notice under Section 143[2] or after the completion of
the assessment, whichever is earlier.
12. Sri N. Venkataraman submits that going by
the history of the law, it is self-evident that, post
01.06.2016, either the concerned Assessing Officer or
the Prescribed Income Tax Authority can issue notice
under Section 143[2] of the IT Act, and insofar as the
history of the law, the learned Additional Solicitor
General submits that the history must be seen in four
phases and elaborates thus.
THE FIRST PHASE:
This phase is prior to 31.05.2016 i.e., before the
amendment of Section 143[2] with effect from
01.06.2016. During this phase, the notice under
Section 143[2] of the IT Act could be issued only by the
concerned Assessing Officer and the Assessing Officer
alone could complete the assessment.
THE SECOND PHASE:
This phase is with the amendment of Section
143[2] of the IT Act with effect from 01.06.2016. In this
phase the notice under Section 143[2] of the IT Act
could be issued either by the concerned Assessing
Officer or the Prescribed Income Tax Authority but the
assessment must only be completed by the Assessing
Officer. Though this arrangement was put in place with
the amendment to Section 143[2] of the IT Act, it was
not given effect to.
THE THIRD PHASE:
The third phase is when Sections 143 [3A] to [3C]
are inserted with effect from 01.04.2018 vide the
Finance Act of 2018. These amendments empowered
the Central Government to make a Scheme through
notification in the Official Gazette to impart greater
efficiency, transparency and accountability in
assessment by
eliminating the interface between the Assessing
Officer and the Assessee by using technology to
the extent feasible;
optimizing utilization of resources through
economies of scale and functional
specialization; and
introducing a team-based assessment with
dynamic jurisdiction.
The Central Government has issued notifications
notifying e-Assessment Scheme. This Scheme was in
place only for a short period between 01.04.2018 and
31.03.2021 except in cases falling under Section 144[3]
of the IT Act.
THE FOURTH PHASE
The fourth phase is with the introduction of
faceless assessment into the IT Act by the Taxation and
Other Laws [Relaxation and Amendment of Certain
Provisions] Act, 2020 with effect from 01.04.2021. With
this amendment, Section 144B is brought into the IT
Act stipulating that, notwithstanding anything to the
contrary contained in any other provisions of the IT Act,
the assessment under Section 143[3] or under Section
144 shall be made in the faceless manner. The golden
rule in this phase is for faceless assessment with the
Prescribed Income Tax Authority issuing notice under
Section 143[2] of the IT Act subject to exception in the
cases of Central Charges and International Taxation
Charges. In these cases of exception notice under
Section 143[2] of the IT Act must be issued by the
Prescribed Income Tax Authority and served by National
e-Assessment Centre and subsequently, directly
displayed to the concerned jurisdictional Assessing
Officer for carrying out further assessment proceedings.
13. Sri N. Venkataraman canvasses that the
CBDT, in consonance with this evolving change, has
issued notifications under Section 143[2] of the IT Act
authorizing the Additional Commissioner/ Deputy
Commissioner of Income Tax [National E-Assessment
Centre] to act as the Prescribed Income Tax Authority
for the purposes of this Section. The CBDT has issued
the first notification on 25.09.2020, and this is
continued by the subsequent notification dated
31.03.2021. The CBDT has also notified Computer
Assisted Scrutiny Selection [CASS, 2020] on 17.05.2021
stipulating that the Prescribed Income Tax Authority
shall issue notice under Section 143[2] of the IT Act,
such notice shall be served by National e-Assessment
Centre and subsequently the cases shall be assigned to
a specific Assessment Unit in a Regional e-Assessment
Centre through an automated allocation system for the
purposes of e-Assessment. Insofar as the cases
relating to Central and International Taxation Charges,
the instructions under CASS, 2020 are that the
Prescribed Income Tax Authority shall issue notices and
the cases subsequently directly displayed to the
concerned jurisdictional Assessing Officer for carrying
out further assessment proceedings. Sri N.
Venkataraman submits that these instructions are
continued under CASS, 2021 dated 13.10.2021.
14. Sri N. Venkataraman emphasizes that the
CBDT's Notification dated 13.08.2020, though issued
when the Faceless Assessment Scheme, 2019 was in
force, will continue to be effective providing for
assessment in cases of Central and International
Taxation Charges through the jurisdictional Assessing
Officer after the notices are issued by the Prescribed
Income Tax Authority, and the operation of this
notification, which carves out an exception to the golden
rule of assessment through the Faceless Scheme after
issuance of notice by the 'Prescribed Income Tax
Authority', does not cease to operate with the repeal
of the Faceless Assessment Scheme, 2019 with the
enactment of Taxation and Other Laws [Relaxation and
Amendment of Certain Provisions] Act, 2020 introducing
Section 144B. The learned Additional Solicitor General,
to support this contention relies upon Section 24 of the
General Clauses Act, 1897 and the decision of the
Hon'ble Supreme Court in Fibre Boards Private
Limited, Bangalore v. Commissioner of Income-tax
Bangalore2.
15. Sri A. Shankar in rejoinder rebuts the
canvass on the maintainability of the writ petition
challenging the assessment order dated 20.09.2022
[Annexure- A1] contending that the petitioner does not
challenge the jurisdiction of the first respondent to pass
the impugned order because the petitioner's case before
this Court is in the premise that the first respondent,
and not the second respondent, is the jurisdictional
Assessing Officer. The learned Senior Counsel argues
2 [2015] 10 SCC 333
that this Court must consider that the petitioner is
categorical that the impugned assessment order dated
20.09.2022 [Annexure - A1] is by the jurisdictional
Assessing Officer, but such officer first has not assumed
jurisdiction with the issuance of notice under Section
143[3] of the IT Act, and therefore, the Assessment
Order dated 20.09.2022 must fail.
16. Sri A. Shankar further submits that the
embargo under Section 124[3] of the IT Act is to call in
question the jurisdiction of the Assessing Officer as
defined under Section 2[7A] of the IT Act unlike in the
present case where the petitioner, without questioning
the jurisdiction of the Assessing Officer, is contending
that the assessment proceedings could not have been
continued with the notice under Section 143[2] of the IT
Act being issued by the Prescribed Income Tax
Authority. Sri A. Shankar, relying upon the decision of
the High Court of Gujarat in CIT v. Ramesh D Patel3,
also submits that in any event the embargo under
Section 124[3] of the IT Act will be only when an
assessee proposes to question the Assessing Officer's
territorial jurisdiction.
17. Sri A. Shankar and Sri N. Venkataraman,
are heard on the question framed for hearing, but as
they have dilated on the question of maintainability of
the petition, this Court will have to consider the
following two questions:
[a] Whether the Additional Commissioner of
Income Tax NaFAC-1(1)(2) could have
assumed jurisdiction in respect of the
petitioner's case which belongs to Central
Charge for issuance of notice under Section
143(2) of the Income Tax Act, 1961; and if
the aforesaid officer could not have so
assumed jurisdiction, whether the
proceedings must fail for want of due notice
3 326 ITR 492 [GUJ]
under Section 143(2) of the Income Tax Act,
1961.
[b] Whether the petitioner can invoke this
Court's jurisdiction under Article 226 of the
Constitution of India to call in question the
Assessment Order dated 20.09.2022
[Annexure- A1] on the ground that the
Prescribed Income Tax Authority who has
issued the notice under Section 143[2] of the
IT Act could not have assumed jurisdiction to
issue such notice despite the fact that:
the petitioner, upon receipt of such notice,
has participated in the assessment
proceedings without demur with these
proceedings culminating with the
impugned Assessment Order dated
20.09.2022 [Annexure - A1], and
the petitioner has filed statutory appeal as
against this assessment order 20.09.2022
[Annexure A1], apart from seeking
rectification under section 154 of the IT Act
and when it is extended the advantage of
certain interim orders against the demand
computed after the assessment order.
18. The first question must be considered in the
light of the changes that are brought about by way of
statutory amendments and statutory orders to
introduce faceless assessment to usher in greater
efficiency, transparency and accountability by:
eliminating the interface between the assessing
officer and the assessee, not entirely but to the
extent technologically feasible
optimizing utilization of the resources through,
what are described, as economies of scale and
functional specialization, and
introducing a team-based assessment with a
dynamic jurisdiction.
In this regard this Court must refer to the provisions of
Section 143[3A] of the IT Act, which are inserted along
with Sections 143[3B] and 143[3C] by the Finance Act,
2018 with effect from 01.04.2018.
19. The provisions of Section 143[3B] of the IT
Act empower the Central Government, for the purposes
of giving effect to a scheme as contemplated under
Section 143[3A] of the IT Act, to notify that any
provision of the IT Act relating to the assessment of total
income or loss shall not apply or shall apply with such
exceptions, modifications and adaptations as may be
specified in the notification. These provisions are
inserted after Section 143[2] is substituted vide the
Finance Act, 2016 with effect from 01.06.2016.
20. The Parliament in substituting the
provisions of Section 143[2] of the IT Act has introduced
the first change paving way for the later changes. The
provisions of Section 143[2] of the IT Act prior to the
amendment vide the Finance Act, 2016 and after such
amendment read as under:
Post Amendment Prior to Amendment
(2) Where a return has been "(2) Where a return has been
furnished under section 139, or furnished under section 139, or
in response to a notice under in response to a notice under
sub-section (1) of section 142, sub-section (1) of section 142,
the Assessing Officer or the the Assessing Officer shall,-
prescribed income-tax authority,
as the case may be, if, (i) where he has reason to
considers it necessary or believe that any claim of loss,
expedient to ensure that the exemption, deduction, allowance
assessee has not understated or relief made in the return is
the income or has not computed inadmissible, serve on the
excessive loss or has not under- assessee a notice specifying
paid the tax in any manner, particulars of such claim of loss,
shall serve on the assessee a exemption, deduction, allowance
notice requiring him, on a date or relief and require him, on a
to be specified therein, either to date to be specified therein to
attend the office of the produce, or cause to be
Assessing Officer or to produce, produced, any evidence or
or cause to be produced before particulars specified therein or
the Assessing Officer any on which the assessee may rely,
evidence on which the assessee in support of such claim:
may rely in support of the Provided that no notice under
return: this clause shall be served on
the assessee on or after the 1st
Provided that no notice under day of June, 2003;
this sub-section shall be served (ii) notwithstanding anything
on the assessee after the expiry contained in clause (i), if he
of six months from the end of considers it necessary or
the financial year in which the expedient to ensure that the
return is furnished.] assessee has not understated
the income or has not computed
excessive loss or has not under-
paid the tax in any manner,
serve on the assessee a notice
requiring him, on a date to be
specified therein, either to attend
his office or to produce, or cause
to be produced, any evidence on
which the assessee may rely in
support of the return:
Provided that no notice under
clause (ii) shall be served on the
assessee after the expiry of six
months from the end of the
financial year in which the
return is furnished."
21. Prior to this amendment, consequent to the
different amendments starting with Direct Tax Laws
[Second Amendment] Act, 1989 and up until the
Finance Act, 2008, if the Assessing Officer, under
Section 143[2][i] of the IT Act, earlier to 01.06.2003, had
reasons to believe that any claim of loss or exemption or
deduction or allowance in the ROI is inadmissible,
should have issued notice with details of specified; and
similarly, for the period after 01.06.2003 and the
Assessing Officer considered it either necessary or
expedient, to ensure that an assessee has not
understated the income or has not computed excessive
loss, or has not under-paid the tax in any manner,
should have served notice on the concerned assessee as
required under Section 143[2][ii] of the IT Act subject to
the time limit in the proviso to such sub-section.
22. However, with the amendment vide the
Finance Act 2016, where the ROI is furnished under
Section 139, or response is filed on service of a notice
under Section 142[1], either the Assessing Officer or the
Prescribed Income Tax Authority, as the case may be, if,
it is considered necessary or expedient to ensure that
an assessee has not understated the income or has not
computed excessive loss or has not underpaid tax in
any manner, shall serve on the assessee a notice for
attendance or production of evidence as mentioned
therein. This notice is to be served on an assessee only
within the time contemplated in the proviso appended to
this subject. It would suffice, for the purposes of the
present controversy, to record that if there is change
inasmuch as an Assessing Officer or the Prescribed
Income Tax Authority can serve notice under Section
143[2] of the IT Act, the provisions of Section 143[3]
have always stipulated that the Assessing Officer shall
complete the assessment in writing assessing the total
income loss of the assessee and determining the sum
payable. Subsequently changes have been made to
introduce e-assessment/faceless assessment, but this
change has remained unaltered.
23. The Central Government, with the
amendment of Section 143[2] of the IT Act and the
introduction of Section 143[3A]-[3C] Act, has notified
Faceless Assessment Scheme, 2019 vide the notification
dated 12.09.2019 in exercise of jurisdiction under
Section 143[3A] of the IT Act. The Scheme is initially
called the E-assessment Scheme, 2019, and the scope
of the Scheme, as contained in paragraph-3 thereof, is
to ensure that the assessment shall be made in respect
of such territorial area, or persons or class of persons,
incomes or class of incomes, or cases or class of cases
as may be specified by the CBDT4.
24. The CBDT, under this Scheme, is
empowered to set up National E-assessment Centre and
Regional E-assessment Centers [with jurisdiction to
make assessment in accordance with the provisions of
this Scheme] as also Assessment Units, Verification
Units, Technical Units and Review Units with the power
to specify the respective jurisdictions. In paragraph-5 of
the Scheme, the procedure for the assessment is
detailed, and again for the purposes of the present
petition, it would be necessary to emphasize that in
terms of paragraph 5[xxi] of the Scheme5, the National
E-assessment Centre could, at any stage of the
4 The Board is defined under the Scheme to be the Central
Board of Direct Taxes [CBDT] constituted under the Central
Board of Revenue Act, 1963.
5 [xxi] Notwithstanding anything contained in paragraph xx,
the 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.
assessment, if considered necessary, transfer the case
to the concerned Assessing Officer having jurisdiction
over such case. Crucially, the CBDT, given the scope of
the Scheme delineated in paragraph 3 of the Scheme,
can specify inter alia the class of cases for assessment
under the Scheme.
25. The CBDT, with the introduction of this
Scheme and the establishment of the necessary Units
as aforesaid, has issued order dated 13.08.2020 in [F
No. 187/3/2020-ITA-1] stipulating that all assessment
order shall be passed by the National E-assessment
Centre through the Faceless Assessment Scheme, 2019
except insofar as assessment orders in the case of
Central Charges and International Tax Charges with the
stipulation that any assessment which is not in
conformity with this arrangement shall be treated as
non est and deemed to have never been passed. The
CBDT, in exercise of the powers conferred under Section
143[2] of the IT Act read with rule 12E of the Income
Tax Rules, 1962, has authorized the Additional
Commissioner/Deputy Commissioner of Income
Tax[National Assessment Centre] to act as the
Prescribed Income Tax Authority for the purposes of
Section 143[2] of the IT Act stipulating that this
Notification shall come into force with effect from
13.08.2020.
26. It is undisputed that with the introduction of
the Scheme and the CBDT's order as aforesaid, the
Prescribed Income Tax Authority, for the relevant
assessment years, has issued notice under Section
143[2] to all the assessees and the assessment
proceedings are continued under the Faceless
Assessment Scheme, 2019 except insofar as Central
Charges and International Tax Charges.
27. The Faceless Assessment Scheme, 2019 is
repealed with effect from 01.04.2021 and National
Faceless Assessment Scheme is introduced by the
Parliament inserting Section 144B of the IT Act. The
petitioner does not have any quarrel with the Prescribed
Income Tax Authority issuing notices in the cases of
Central Charges and International Taxation Charges
under the erstwhile Scheme, but contends the
Prescribed Income Tax Authority under the new Scheme
cannot assume jurisdiction in these cases. The
background and the antecedent matrix in which the
new Scheme [National Faceless Assessment Scheme] is
incorporated will be a relevant consideration, and in
this regard, this Court must refer to the decision of the
Hon'ble Supreme Court in Shashikant Laxman Kale
v. Union of India6, wherein its held as follows:
"17. For determining the purpose or object of the
legislation, it is permissible to look into the
circumstances which prevailed at the time when
the law was passed and which necessitated the
passing of that law. For the limited purpose of
6 (1990) 4 SCC 366
appreciating the background and the
antecedent factual matrix leading to the
legislation, it is permissible to look into the
Statement of Objects and Reasons of the Bill
which actuated the step to provide a remedy for
the then existing malady. .........
18. Not only this, to sustain the presumption of
constitutionality, consideration may be had
even to matters of common knowledge; the
history of the times; and every conceivable state
of facts existing at the time of legislation which
can be assumed. Even though for the purpose of
construing the meaning of the enacted provision,
it is not permissible to use these aids, yet it is
permissible to look into the historical facts and
surrounding circumstances for ascertaining the
evil sought to be remedied. The distinction
between the purpose or object of the legislation
and the legislative intention, indicated earlier, is
significant in this exercise to emphasise the
availability of larger material to the court for
reliance when determining the purpose or object
of the legislation as distinguished from the
meaning of the enacted provision.''
28. This Court must observe that the essential
features of the Faceless Assessment Scheme, 2019 are
retained with certain modifications under the National
Faceless Assessment Scheme in Section 144B of the IT
Act, and undeniably, the Parliament's intention in
incorporating the Faceless Assessment into the IT Act
with inclusion of Section 144B is to continue the
Faceless Assessment subject to some changes as felt
necessary from the past experience. This is a crucial
aspect, and must be examined in the light of fact that
CBDT, under both the two Schemes, is conferred with
jurisdiction to specify the classes of cases in which the
assessment has to be faceless. The relevant provisions
are as follows:
Paragraph 3 of the Section 144B [2] of the IT
Faceless Assessment Act
Scheme, 2019
Scope of the Scheme.-- The The faceless assessment
assessment under this under sub-section (1) shall
Scheme shall be made in be made in respect of such
respect of such territorial territorial area, or persons
area, or persons or class of or class of persons, or
persons, or incomes or class
of incomes, or cases or class incomes or class of
of cases, as may be specified incomes, or cases or class
by the Board of cases, as may be
specified by the Board
29. The CBDT, with the National Faceless
Assessment Scheme on the anvil, has issued Order
dated 31.03.2021 under Section 119[2] of the IT Act
stipulating that all the assessment proceedings pending
as on 31.03.2021 and assessment proceedings initiated
on or before 01.04.2021 [other than those a settled
charges and International Taxation chances] shall be
completed under Section 144B of the IT Act. The
Directorate of Income Tax [Systems] has issued
Communication dated 17.05.2021 to the Principal Chief
Commissioner of Income Tax/Chief Commissioners of
Income Tax stating that in cases pertaining to Central
Charges and International Taxation, notices under
Section 143[2] of the IT Act have been issued by the
Prescribed Income Tax Authority and served on the
assessee concerned electronically and subsequently
these cases have been directly displayed to the
concerned jurisdictional assessing officer for carrying
out further assessment proceedings.
30. The efficacy of the Communication dated
17.05.2021 to continue the arrangement that prevailed
when Faceless Assessment Scheme, 2019, is called in
question by the petitioner essentially on the ground that
the CBDT order dated 13.08.2020 stands lapsed with
the introduction of the National Faceless Assessment
Scheme and the Communication dated 17.05.2021
cannot be relied upon to sustain the same arrangement
when the provisions of section 143[2] of the IT Act,
recognizing the possibilities of the different classification
of classes of income/cases, stipulate that the Assessing
officer or the Prescribed Income Tax Authority, as the
case may be, shall serve notice for the purposes of
Section 143 [3] of the IT Act.
31. However, the respondents contend that the
CBDT Order dated 13.08.2020 continues to hold the
field notwithstanding the repeal of Faceless Assessment
Scheme with the introduction of the National Faceless
Assessment Scheme under section 144B of the IT Act
because of the provisions of section 24 of the General
Clauses Act, 1897. This Court must observe that if this
proposition can prevail, then the petitioner cannot
succeed in its challenge to the assessment order dated
20.09.2022 [Annexure-A1] on the ground that the
jurisdictional Assessing Officer [the first respondent]
should have issued the notice under section 143[2] of
the IT Act and not the Prescribed Income Tax authority
[the second respondent].
32. The provisions of Section 24 of the General
Clauses Act, 1897 provide for continuation of orders
etc., issued under enactments repealed and re-enacted.
"Section 24. Continuation of orders, etc., issued
under enactments repealed and re-enacted.--
Where any Central Act or Regulation, is, after
the commencement of this Act, repealed and
re-enacted with or without modification, then,
unless it is otherwise expressly provided any
appointment notification, order, scheme, rule,
form or bye-law, made or issued under the
repealed Act or Regulation, shall, so far as it is
not inconsistent with the provisions re-
enacted, continue in force, and be deemed to
have been made or issued under the
provisions so re-enacted, unless and until it is
superseded by any appointment notification,
order, scheme, rule, form or bye-law, made or
issued under the provisions so re-enacted and
when any Central Act or Regulation, which, by
a notification under section 5 or 5-A of the 8
Scheduled Districts Act, 1874, (14 of 1874) or
any like law, has been extended to any local
area, has, by a subsequent notification, been
withdrawn from the re-extended to such area
or any part thereof, the provisions of such Act
or Regulation shall be deemed to have been
repealed and re-enacted in such area or part
within the meaning of this section."
These provisions contemplate that where any central
Act or Regulation, after the commencement of the
General Clauses Act, 1897 is repealed and re-enacted
with or without modification, then, unless it is
otherwise expressly provided, any order or regulation
made under the repealed Act or Regulation shall
continue in force and be deemed to have been made or
issued under the re-enactment unless it is inconsistent
with the provisions of the re-enactment and until it is
superseded by any order, scheme or rule or such other
issued under the provisions of the re-enactment.
33. The Hon'ble Supreme Court in 'Fibre
Boards Private Limited v. CIT supra, while
considering the earlier decisions on Section 24 of the
General Clauses Act, 1897 has reiterated that, unlike
Section 6 of the General Clauses Act, 1897 which saves
certain rights, Section 24 continues notifications,
orders, schemes, rules etc., that are made under a
Central Act which is repealed and re-enacted with or
without modification declaring that the objective of
Section 24 is to continue uninterrupted subordinate
delegation that may be made under a Central Act that is
repealed or re-enacted with or without modification.
34. In the present case, at the first instance,
Sections 143[3A] - 143[3C] are incorporated into the Act
enabling Notification of a Scheme for the purposes of
making assessment under Section 143[3] or Section 144
to usher in efficiency, transparency and accountability
in the assessment proceedings and stipulating that the
Central Government may, for the purposes of giving
effect to the Scheme proposed, direct, by a Notification
in the Official Gazette, that any of the provisions of the
IT Act relating to the assessment of total income or loss
shall not apply or shall apply with such exceptions,
modifications and adaptations.
35. In exercise of this power, the Central
Government has notified Faceless Assessment Scheme,
2019 and the CBDT, which is conferred with powers to
ensure that assessment shall be under the Scheme in
respect of certain persons or class of persons or class of
incomes under the terms of the Scheme, has issued
order dated 13.08.2020 under Section 119[2] of the IT
Act stipulating that all assessment orders shall be by
the National E-Assessment Centre through the Faceless
Assessment Scheme, 2019 except insofar as the cases
assigned to Central Charges and International Taxation
Charges.
36. Further, with the CBDT also issuing
appropriate notification in exercise of powers under
Section 143[2] of the IT Act authorizing certain officers
as the Prescribed Income Tax Authority for the purposes
of this section, notices have been served on all
assessees, including the assessees in the case of Central
Charges and International Taxation Charges, and
because of the order dated 13.08.2020, the assessment
proceedings insofar as the aforesaid two categories are
carried forward by the jurisdictional Assessing Officer.
This arrangement with the necessary statutory orders is
part of the Scheme notified in exercise of powers under
Section 143[3A] - 143[3C].
37. The terms of the Scheme which is part of the
Scheme notified under sub-delegation is brought into
the enactment with the introduction of Section 144B of
the IT Act, and thus, the Faceless Assessment Scheme,
2019 is repealed with this enactment. It must be
observed at this stage that it is not pointed out to this
Court that the National Faceless Assessment Scheme
which is now part of the Statute contained any
condition that would be inconsistent with the
arrangement under the Faceless Assessment Scheme,
2019 or that the CBDT has issued any directions to the
contrary.
38. In fact, it is submitted that the order dated
31.03.2021 issued by the CBDT is to continue the
arrangement in the Scheme under the National Faceless
Assessment Scheme This order dated 31.03.2021 in its
material part reads as under:
"Order under sub-section (2) of Section 144B of
the Income-tax Act, 1961 for specifying the scope
cases to be done under the Act - regarding
In pursuance of sub-section (2) of Section 144B of
the Income-tax Act, 1961 (hereinafter referred to
as "the Act"), the Central Board of Direct Taxes
hereby specifies that all the assessment
proceedings pending as on 31.03.2021 and the
assessment proceedings initiated on or after
01.04.2021 (other than those in the Central
Charges and International Taxation charges)
which fall under the following class of cases shall
be completed under section 144B of the IT Act:-
a. where the notice under section 143(2) of the
IT Act was/is issued by the (erstwhile)
NeAC or by the NaFAC;
b. where the assessee has furnished her / his
return of income under section 139 or in
response to a notice issued under section
142(1) or section 148(1); and a notice under
section 143(2) of the IT Act, has been
issued by the Assessing Officer or the
Prescribed Income-tax Authority, as the
case may be;
c. where the assessee has not furnished her/
his return of income in response to a notice
issued under section 142(1) of the IT Act by
the Assessing Officer;
d. where the assessee has not furnished
her/his return of income under section
148(1) of the IT Act and a notice under
section 142(1) of the IT Act has been issued
by the Assessing Officer.
2. This order shall come into force with effect
from the 1st day of April, 2021."
39. This Court must opine that there is a
transition from a Scheme notified under the provisions
of the IT Act to a Scheme under the IT Act incorporation
all the essential without material changes insofar as
assessments generally and assessments in the cases of
Central Charges and International Taxation Charges
and there is nothing in this transition, including the
provisions of Section 144B or the CBDT's Order, to infer
exclusion of the operation of CBDT's order dated
13.08.2020. This Court must therefore conclude that
the operation of the CBDT's order dated 13.08.2020 is
saved by the application of the Section 24 of the General
Clauses Act, 1897.
Conclusions on Question No. II
40. The petitioner after being served with the
notice under Section 143[2] under the National Faceless
Assessment Centre on 29.06.2021 has filed response,
and the petitioner has also filed response to the
subsequent notices served under Section 142[1] of the
IT Act. The petitioner has thus participated in the
proceedings culminating with the assessment order
dated 20.09.2022. The petitioner has availed its
statutory remedy against this assessment order in not
just filing an appeal under Section 246A of the IT Act
but also in filing an application for rectification under
Section 154 of the IT Act. These proceedings are
pending consideration, and during the pendency of
these proceedings, the petitioner has also filed an
application for stay before the Principal Commissioner
of Income Tax which is disposed of on 20.12.2022
"requesting the petitioner to pay an amount equal to ten
percent of the disputed demand after disposal of the
rectification application filed by the petitioner in ten equal
monthly installments starting from the month of January
2023".
41. The petitioner has paid the first installment
in terms of this interim order, and it is at this stage that
the petitioner has approached this Court essentially on
the ground that the petitioner is not challenging the
jurisdiction of the first respondent to pass the impugned
assessment order dated 20.09.2022 but is calling in
question the jurisdiction of the Prescribed Income Tax
authority to issue notice under Section 143[2] of the IT
Act under the National Faceless Assessment Scheme.
42. The provisions of Section 124 reads as
follows:
" Jurisdiction of Assessing Officers.
Section 124. (1) Where by virtue of any
direction or order issued under sub-section (1)
or sub-section (2) of section 120, the Assessing
Officer has been vested with jurisdiction over
any area, within the limits of such area, he
shall have jurisdiction--
(a) in respect of any person carrying on a
business or profession, if the place at which he
carries on his business or profession is situate
within the area, or where his business or
profession is carried on in more places than
one, if the principal place of his business or
profession is situate within the area, and
(b) in respect of any other person residing
within the area.
(2) Where a question arises under this
section as to whether an Assessing Officer has
jurisdiction to assess any person, the question
shall be determined by the Principal Director
General or Director General or the Principal
Chief Commissioner or Chief Commissioner or
the Principal Commissioner or Commissioner;
or where the question is one relating to areas
within the jurisdiction of different Principal
Directors General or Directors General or
Principal Chief Commissioners or Chief
Commissioners or Principal Commissioners or
Commissioners, by the Principal Directors
General or Directors General or Principal Chief
Commissioners or Chief Commissioners or
Principal Commissioners or Commissioners
concerned or, if they are not in agreement, by
the Board or by such Principal Director
General or Director General or Principal Chief
Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner as
the Board may, by notification in the Official
Gazette, specify.
(3) No person shall be entitled to call in
question the jurisdiction of an Assessing
Officer--
(a) where he has made a return under sub-
section (1) of section 115WD or under sub-
section (1) of section 139, after the expiry of
one month from the date on which he was
served with a notice under sub-section (1)
of section 142 or sub-section (2) of section
115WE or sub- section (2) of section 143 or
after the completion of the assessment,
whichever is earlier;
(b) where he has made no such return, after
the expiry of the time allowed by the notice
under sub-section (2) of section 115WD or sub-
section (1) of section 142 or under sub-section
(1) of section 115WH or under section 148 for
the making of the return or by the notice under
the first proviso to section 115WF or under the
first proviso to section 144 to show cause why
the assessment should not be completed to the
best of the judgment of the Assessing Officer,
whichever is earlier;
(c) where an action has been taken
under section 132 or section 132A, after the
expiry of one month from the date on which he
was served with a notice under sub-section (1)
of section 153A or sub-section (2) of section
153C or after the completion of the
assessment, whichever is earlier.
(4) Subject to the provisions of sub-
section (3), where an assessee calls in
question the jurisdiction of an Assessing
Officer, then the Assessing Officer shall, if not
satisfied with the correctness of the claim,
refer the matter for determination under sub-
section (2) before the assessment is made.
(5) Notwithstanding anything
contained in this section or in any direction or
order issued under section 120, every
Assessing Officer shall have all the powers
conferred by or under this Act on an Assessing
Officer in respect of the income accruing or
arising or received within the area, if any, over
which he has been vested with jurisdiction by
virtue of the directions or orders issued under
sub-section (1) or sub-section (2) of section
120."
43. It must be observed that Section 124[1] of
the IT Act mentions the Assessing Officer's territorial
jurisdiction in respect of a person when such
jurisdiction is vested by any direction or order issued
under Section 120[1] or 120[2] of the IT Act, and Section
124[2] stipulates that when a question arises as to
whether an Assessing Officer has jurisdiction to assess
any person, such question shall be determined by the
officers as mentioned therein with a further stipulation
on the Officers who can decide such question when it
relates to different jurisdiction. Section 124[3]
prescribes the time limit. Where a return is filed under
Section 115WD[1] or under Section 139[1], an Assessee
cannot call in question the jurisdiction of the Assessing
Officer after the expiry of one month from the date on
which the assessee is served with notice under Section
143[2] or 143[1] or 115WE[2] and after the completion
of assessment but on the condition that the earlier of
the two will apply. The provisions of Section 124[1]
relate to the territorial jurisdiction and determination of
the questions relating to territorial jurisdiction when
raised within the time limit under Section 124[3] by the
officers mentioned in Section 124[2]. The provisions of
Section 124 stipulate that when an assessee calls in
question the jurisdiction of the Assessing Officer, then
the Assessing Officer shall, if not satisfied with the
correctness of the claim, refer the matter for
determination under Section 124[2].
44. These provisions, it is argued, is limited to
those cases where territorial jurisdiction is challenged,
but even according to the decision7 relied upon by the
petitioner, these provisions mainly refer to the territorial
jurisdiction. It is implicit from this that the restriction
under Section 124[3] of the IT Act on the right to raise
the question of jurisdiction must extend to all grounds
on which jurisdiction is called in question. If the right
to call in question the jurisdiction is left open to be
raised at any stage, the proceedings will remain
inconclusive and that could not have been the
intendment of the legislature. Therefore, this Court
must opine that the petitioner must fail even on the
second question.
45. The petitioner, because of the undertaking
given by the respondents before this Court, which is
continued through these months, has had the
7 CIT v. Ramesh D Patel [supra]
advantage of not tendering the further installments in
terms of the order 20.12.2022. However, with the
disposal of this petition answering the questions framed
against the petitioner, the petitioner must necessarily
pursue its appeal subject to deposit of further
installments in terms of the order dated 20.12.2022
starting from 20.01.2024. Hence the following:
ORDER
The petition is rejected, and the petitioner, in
terms of the orders of the Principal Commissioner of
Income Tax, Central, Bengaluru, shall be at liberty to
pay installments due but from the month of February
2024.
Sd/-
JUDGE
NV
