Exotic Innovations Private Limited Vs DCIT (Karnataka High Court)
Conclusion: Once the Central Government notified the Faceless Scheme for reassessment (effective March 29, 2022), the JAO was effectively divested of the power to issue notices under Section 148. The issuance of a notice by a JAO instead of the National Faceless Assessment Centre (NFAC) was a jurisdictional error that could not be cured. The impugned notice under Section 148 and the resulting assessment orders were set aside.
Held: Assessee challenged a reassessment notice issued under Section 148 and the subsequent assessment order on the ground that under Section 151A and the e-Assessment of Income Escaping Assessment Scheme, 2022, all notices under Section 148 and proceedings under Section 148A must be conducted in a faceless manner through automated allocation. Department argued that the JAO and the Faceless Assessing Officer (FAO) enjoyed concurrent jurisdiction. It was held that once the Central Government notified the Faceless Scheme for reassessment (effective March 29, 2022), the JAO was effectively divested of the power to issue notices under Section 148. The issuance of a notice by a JAO instead of the National Faceless Assessment Centre (NFAC) was a jurisdictional error that could not be cured. If a notice was issued by an authority not empowered by the specific scheme notified under Section 151A, the entire foundation of the assessment was flawed. Any assessment order passed pursuant to an invalid notice was void ab initio (legally void from the start). Even if an appeal was pending, the court has the power to quash the original notice if it lacks inherent jurisdiction. The impugned notice under Section 148 and the resulting assessment orders were set aside. However, Budget 2026 had introduced a retrospective amendment (effective from April 1, 2021). A new Section 147A clarifies that the “AO” for Section 148 notices includes the Jurisdictional AO, effectively validating JAO notices retrospectively.
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