The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a reassessment order passed against an individual taxpayer, holding that the National Faceless Assessment Centre (NFAC) lacked jurisdiction to complete reassessment proceedings in a faceless manner before the statutory scheme authorizing such proceedings came into force.
The bench of Satbeer Singh Godara (Judicial Member) has observed that the NFAC could not have exercised jurisdiction under a faceless framework before the legal machinery enabling such proceedings had been brought into force. Consequently, the reassessment order suffered from a fundamental jurisdictional defect.
The case arose from reassessment proceedings initiated for Assessment Year 2014-15. The Income Tax Department had issued a notice under Section 148 of the Income Tax Act on 29 March 2021 alleging income escaping assessment. Subsequently, notices under Section 142(1) were issued and reassessment proceedings were conducted through the National Faceless Assessment Centre.
The Assessing Officer eventually passed a reassessment order on 28 March 2022 under Sections 147 and 144 of the Income Tax Act, disallowing the taxpayer’s claim under Section 80C amounting to Rs. 1 lakh. The first appellate authority upheld the assessment, prompting the taxpayer to approach the Tribunal.
Before the Tribunal, the taxpayer raised an additional legal ground challenging the very jurisdiction of the NFAC to conduct and conclude reassessment proceedings in a faceless manner before the issuance of the statutory notification under Section 151A of the Income Tax Act.
The taxpayer argued that although Section 151A had been inserted into the Act, the “e-Assessment of Income Escaping Assessment Scheme, 2022” was notified only on 29 March 2022. Since the reassessment order had been passed on 28 March 2022—one day before the notification came into force—the NFAC lacked legal authority to complete the proceedings under the faceless mechanism.
The department opposed the admission of the additional ground, contending that it was raised at a belated stage. However, the Tribunal relied upon the Supreme Court’s decision in National Thermal Power Corporation Ltd. v. CIT and other precedents to hold that purely legal grounds going to the root of jurisdiction can be raised at any stage of proceedings if the relevant facts are already on record.
Accordingly, the Tribunal admitted the additional ground for adjudication.
While examining the issue, the Tribunal referred extensively to an earlier decision of the Kolkata Bench in Nabiul Industrial Metal Pvt. Ltd. v. ITO, where a similar reassessment had been struck down on the ground that faceless reassessment proceedings were initiated and conducted before the notification under Section 151A became effective on 29 March 2022.
The Kolkata Bench had observed that the statutory scheme authorizing faceless reassessment proceedings came into force only upon publication of the notification dated 29 March 2022. Therefore, any assumption of jurisdiction by the NFAC before that date lacked legal backing and rendered the entire reassessment void.
Adopting the reasoning of the Kolkata Bench, the Delhi Tribunal noted that the reassessment order in the present case had been passed on 28 March 2022, whereas the notification operationalizing the faceless income escaping assessment scheme was issued only on 29 March 2022.
The Bench concluded that the reassessment framed on 28 March 2022 was without jurisdiction and therefore liable to be quashed. Since the appeal was allowed on this legal ground, all issues raised on merits became academic and were not examined further.
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