Order Collapses as 148 Notice Not Issued by Faceless AO

DCIT Vs Seth Industrial Corporation (ITAT Chandigarh)

Seth Industrial Corporation, engaged in manufacturing of bicycles, filed its return on 03.09.2018. A search u/s 132 was conducted on 21.10.2021. Based on search findings, Jurisdictional AO (JAO) issued notice u/s 148A(b) on 24.03.2022 & after passing order u/s 148A(d), issued notice u/s 148 on 06.04.2022. Reassessment u/s 147 was completed on 24.08.2023 with additions of ₹130 lakhs & ₹21.58 lakhs u/s 69 r.w.s. 115BBE. CIT(A) deleted ₹21.58 lakhs but sustained ₹45.25 lakhs out of ₹130 lakhs. Both Assessee & Revenue filed appeals.

At the outset, Assessee raised an additional legal ground that the reopening itself is void as the notice u/s 148 was issued by Jurisdictional AO instead of Faceless AO, in violation of Sec.151A r.w. CBDT Notification No.18/2022 dated 29.03.2022. It was argued that the law mandates that notices u/s 148 &  148A must be issued only by Faceless AO, &  any notice issued by JAO is without jurisdiction &  vitiates the entire proceedings. Assessee relied upon the landmark judgment of the Punjab & Haryana High Court in Jatinder Singh Bhangu (165 Taxmann.com 115; 19.07.2024) wherein it was held that faceless regime applies from the stage of notice u/s 148, &  any notice issued by Jurisdictional AO is illegal. The High Court categorically held that CBDT circulars or office memoranda cannot override statutory provisions. The same view was subsequently reiterated in Om Satya Overseas (178 Taxmann.com 137; 29.08.2025). The Departmental Representative could not dispute that the impugned notice was in fact issued by JAO.

Tribunal noted that the notice u/s 148 dated 06.04.2022 was indeed issued by DCIT, Central Circle-3, Ludhiana, who is the Jurisdictional AO, &  not by Faceless AO. Following the binding decisions of the jurisdictional High Court, Tribunal held that such notice is invalid &  the entire reassessment is void ab initio. Once the very foundation of reopening is illegal, no further adjudication on merits survives.

FULL TEXT OF THE ORDER OF ITAT CHANDIGARH

1. Aforesaid cross-appeals for Assessment Year (AY) 2018-19 arises out of an order of learned Commissioner of Income Tax (Appeals)-5, Ludhiana [CIT(A)] dated 18-07-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 147 of the Act on 24-08-2023. The assessee is stated to be engaged in manufacturing of bicycles. The assessee filed return of income on 03-09-2018. However, the assessee-group was subjected to search action u/s 132(1) on 21-10-2021. Based on search findings, notice u/s 148A(b) was issued by Jurisdictional Assessing Officer (JAO) of the assessee on 24-03-2022 proposing reopening of the case of the assessee. The Ld. JAO, not satisfied with assessee’s reply, issued notice u/s 148 on 06-04-2022 after passing an order u/s 148A(d). The assessee filed return of income and finally, Ld. AO made twin additions of Rs.130 Lacs and Rs.21.58 Lacs u/s 69 r.w.s. 115BBE in assessment order dated 24-08-2023. Upon further appeal, Ld. CIT(A) deleted the addition of Rs.21.58 Lacs in full but retained part addition of Rs.45.25 Lacs out of addition of Rs.130 Lacs. Aggrieved, the assessee as well as revenue is in further appeal before us.

2. The Ld. AR, at the outset, raised pertinent legal ground by way of additional ground and stated that reopening is bad-in-law and in derogation of the provisions of Sec.151A read with CBDT Notification No.18/2022 dated 29-03-2022 which mandate issuance of such notice by Faceless Assessing Officer (FAO) only. The Ld. AR asserted that in terms of ratio of various decisions of jurisdictional High Court, issuance of notice u/s 148 by Jurisdictional Assessing Officer (JAO) instead of Faceless Assessing Officer (FAO) would vitiate the entire assessment proceedings. The Ld. AR referred to notice issued by Ld. AO u/s 148 on 06-04-2022 which is kept on Page No.65 of the paper-book. This notice has been issued by Tarun Sharda, DCIT, Central Circle-3, Ludhiana who happens to be Jurisdictional Assessing Officer (JAO) of the assessee. The CIT-DR could not controvert the said position but stated that the matter is under consideration before Hon’ble Supreme Court.

3. The undisputed fact that emerges is that notice u/s 148 has been issued on 06-04-2022 by Jurisdictional Assessing Officer (JAO) instead of Faceless Assessing Officer (FAO). This notice, in terms of notification of the Central Government dated 29-03-2022 u/s 151A sub-section (1) and (2) of the Income Tax Act, was required to be issued by FAO. The failure to do so would vitiate the assessment proceedings as per the lead decision of Hon’ble High Court of Punjab & Haryana in the case of Jatinder Singh Bhangu (165 Taxmann.com 115; dated 19-07-2024), the substantive portion of which read as under: –

15. From the perusal of Section 151A, it is quite evident that scheme of faceless assessment is applicable from the stage of show cause notice under Section 148 as well as 148A. Clause 3 (b) of notification dated 29.03.2022 issued under Section 151A clearly provides that scheme would be applicable to notice under Section 148. Even otherwise, it is a settled proposition of law that assessment proceedings commence from the stage of issuance of show cause notice. The object of introduction of faceless assessment would be defeated if show cause notice under Section 148 is issued by Jurisdictional Assessing Officer. The respondents are heavily placing reliance upon office memorandum and letter issued by departmental authorities. It is axiomatic in tax jurisprudence that circulars, instructions and letters issued by Board or any other authority cannot override statutory provisions. The circulars are binding upon authorities and Courts are not bound by circulars. The mandate of Section 144B, 151A read with notification dated 29.03.2022 issued thereunder is quite lucid. There is no ambiguity in the language of statutory provisions, thus, office memorandum or any other instruction issued by Board or any other authority cannot be relied upon. Instructions/circulars can supplement but cannot supplant statutory provisions.

16. In the wake of above discussion and findings, we find it appropriate to subscribe view expressed by Bombay, Telangana and Gauhati High Court. The instant petitions deserve to be allowed and accordingly allowed.

17. The notices issued by Jurisdictional Assessing Officer under Section 148 are hereby quashed with liberty to respondent to proceed in accordance with procedure prescribed by law.

This decision has been followed by the same court in several subsequent decisions, the latest being the decision in Om Satya Overseas (178 Taxmann.com 137; dated 29-08-2025). No change in facts has been demonstrated and nothing has been shown that the aforesaid decisions have subsequently been stayed by higher appellate forums. Therefore, respectfully following the same, we would hold that the impugned notice as issued by JAO u/s 148 on 06-04-2022 is liable to be quashed on this score only. We order so. Consequently, delving into other grounds of assessee’s appeal as well as revenue’s appeal has been rendered merely academic in nature and hence, not dealt with by us. The impugned assessment order stand quashed. The addition made by Ld. AO would not survive.

4. The assessee’s appeal stand allowed in terms of our above order. The revenue’s appeal has been rendered infructuous.

Order pronounced on 16^th October, 2025.