income tax
The Bombay High Court addressed the legality of the notice issued under Section 148 of the Income Tax Act, asserting the need for compliance with the Faceless Assessment Scheme as mandated by Section 151A. The court concluded that the notice was invalid due to procedural shortcomings, emphasizing the adherence to statutory provisions regarding time limitations and documentation.
The court held the notice issued under Section 148 on 27th August 2022 was time-barred. The limit for issuing such notifications for the Assessment Year (AY) 2015-2016 expired on 31st March 2022, rendering any notice post that date invalid. Moreover, the argument that the fifth and sixth provisos could extend this period was dismissed, as they do not apply when a notice is not within prescribed limitations.
The court noted the absence of a Document Identification Number (DIN) on the notice, violating Circular No. 19/2019. This circular mandates that all communications post-1st October 2019 must include a DIN to be deemed valid, which the notice failed to comply with.
Arguments by the revenue asserting that JAO (Jurisdictional Assessing Officer) could issue the notice were rejected. The court reinforced that only the NFAC (National Faceless Assessment Centre) holds jurisdiction under the Framework set by Section 151A, intended for automated and faceless assessments.
The court emphasized that the jurisdictional conditions outlined in Section 149(1)(b) had not been fulfilled, as the questioned claims related to deductions simply could not constitute the classification of income "escaping assessment" as provided by the Act.
The case was deemed a change of opinion, as the same deduction had been allowed in previous assessments. The reassessment notice based solely on this change is impermissible under established legal principles.
The court held that the assessing officer could not reassess claims that had previously been allowed without new and tangible evidence that would mandate a change in position. There was no basis for alleging that the income chargeable to tax had been underestimated given that similar claims had been approved in prior years.
While the approval for reopening the assessment was under scrutiny, the court maintained that it appeared to meet the necessary thresholds as dictated by law, despite being part of a larger invalid process.
The High Court's ruling established a clear precedent emphasizing the binding nature of the prescribed procedures under the Income Tax Act, particularly regarding the validity of notices issued without a DIN and the prohibition against reopening assessments based merely on a change of opinion. This decision reinforces the necessity for stringent adherence to compliance measures to uphold fair legal standards in income tax assessments.
The court's ruling was in favor of Hexaware Technologies, setting a cornerstone for future assessments concerning the procedural adherence outlined in the Faceless Assessment Scheme and other relevant provisions of the Income Tax Act.