Elegant Vinimay Pvt. Ltd. Vs ITO (ITAT Kolkata)
NFAC Assessment Quashed for Assumption of Jurisdiction Before Notification of Section 151A Scheme
Background
The assessee filed its original return on 27 September 2012, declaring total income of ₹15,630. The case was selected for scrutiny and subsequently reached a second round of proceedings.
In that round, a notice under section 142(1), accompanied by a questionnaire, was issued on 3 August 2021. According to the order, the assessee did not comply with the notice. The assessment was thereafter completed on 13 September 2021 under section 143(3) read with section 254, determining total income at ₹1,60,55,216.
The CIT(A) partly allowed the appeal. Before the Tribunal, however, the assessee raised an additional legal ground challenging the jurisdiction of the National Faceless Assessment Centre to frame the assessment before 29 March 2022.
Additional Jurisdictional Ground Admitted
The assessee argued that the additional ground involved a pure question of law and that all relevant notices and assessment records were already available. No further factual investigation was required.
The Revenue opposed its admission because the ground had not been raised before the lower authorities.
The Tribunal admitted the ground, relying on National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC). It held that the jurisdictional issue could be examined because it arose from facts already on record and required no further verification.
Thus, failure to raise the legal objection earlier did not prevent its adjudication by the Tribunal.
Assessee’s Challenge to Faceless Jurisdiction
The assessee submitted that section 151A was inserted with effect from 1 November 2020, but the e-Assessment of Income Escaping Assessment Scheme, 2022 was notified only on 29 March 2022 through Notification No. 18/2022.
According to the assessee, migration of the proceedings to the faceless system was communicated through the notice dated 3 August 2021. Both the assumption of jurisdiction and the assessment therefore preceded notification of the scheme.
The contention was that insertion of the enabling provision and notification of the scheme were distinct events, and that the NFAC could not exercise the jurisdiction claimed before the scheme became operational.
Tribunal’s Reasoning
The Tribunal accepted the jurisdictional objection. It reasoned that although section 151A had been brought into the statute from 1 November 2020, the relevant scheme was made effective through the notification dated 29 March 2022.
It consequently treated the earlier assumption of jurisdiction and framing of assessment by the NFAC as unsustainable.
The Tribunal followed MD Mahimud SK v. ITO, ITA Nos. 2230 and 2229/KOL/2024, dated 4 March 2025. In that decision, the coordinate bench had held that proceedings undertaken by the NFAC before notification of the section 151A scheme lacked jurisdiction.
The reproduced precedent also relied on Nabiul Industrial Metal Pvt. Ltd. v. ITO, ITA No. 1328/KOL/2024, dated 15 October 2024, which had adopted a similar view.
Following these decisions, the Tribunal quashed the assessment rather than adjudicating the substantive additions.
Decision
The assessment framed by the AO/NFAC was quashed, and the assessee’s appeal was allowed.
The relief was granted on the additional jurisdictional ground. The order does not decide the correctness of the assessed income on its merits.
Author’s Comments
The outcome is favourable to the assessee, but the order contains a material issue that deserves attention before it is cited broadly.
The factual narration expressly describes the impugned assessment as one passed under section 143(3) read with section 254. The reasoning, however, proceeds under section 151A, concerning faceless assessment of income escaping assessment. The order does not clearly explain why the section 151A scheme governed the particular remand assessment described in its facts.
There is also an internal date discrepancy. The facts and the assessee’s submissions identify the assessment date as 13 September 2021, whereas paragraph 5 refers to an assessment dated 25 March 2022. Both dates precede 29 March 2022, but the inconsistency should be recognised.
Accordingly, the decision should be presented accurately as a Tribunal order quashing the particular assessment by applying its earlier section 151A precedents. It should not be expanded into a proposition that every faceless assessment completed before 29 March 2022 was invalid.
For practitioners, the useful approach is to identify the statutory provision under which the assessment was undertaken, the scheme governing those proceedings and the relevant jurisdictional dates. The applicability of the cited precedent depends on that foundation.
The order also provides clear procedural support for raising a fresh legal ground before the Tribunal where the necessary facts are already on record. In this case, admission of that ground enabled the jurisdictional challenge to be considered and resulted in the assessment being quashed.
Cases Discussed
- National Thermal Power Co. Ltd. v. CIT, [1998] 229 ITR 383 (SC) — relied upon for admission of a pure legal ground where the necessary facts are already on record.
- Jute Corporation of India Ltd. v. CIT, 187 ITR 688 (SC) — cited by the assessee in support of admission of the additional ground.
- MD Mahimud SK v. ITO, ITA Nos. 2230 and 2229/KOL/2024, order dated 04.03.2025 — followed on the section 151A/NFAC jurisdiction issue.
- Nabiul Industrial Metal Pvt. Ltd. v. ITO, ITA No. 1328/KOL/2024, order dated 15.10.2024 — cited in the reproduced coordinate-bench decision for the similar jurisdictional issue.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 18.06.2026 for the AY 2012-13.
2. The assessee has challenged the appellate order passed by the ld. CIT (A) on various grounds of appeal as mentioned in the memorandum of appeal. Besides the assessee has raised an additional ground challenging the jurisdiction of national faceless assessment centre u/s 151A read with section 144B of the Act when it did not have any power. First of all, we shall adjudicate the additional ground raised, which is extracted below:-
“For that the assessment framed by NFAC prior to 29.03.2022 is invalid and not in accordance with law. Therefore, the entire assessment is liable to be quashed.”
2.1. The ld. Counsel for the assessee vehemently submitted before us that the provisions of Section 151A of the Act came on the statute book on 01.11.2020 and the same was notified on 29.03.2022, vide notification no.18/2022 on the e-Assessment of Income Escaping Assessment Scheme, 2022. The ld. AR submitted that in the instant case the migration of assessment proceedings for A.Y. 2012-13 was communicated to the assessee by issuing notice u/s 142(1) of the Act dated 03.08.2021. The ld. AR therefore submitted that it is evident from the above that assumption of jurisdiction to the impugned assessment under faceless assessment scheme was all prior to 29.03.2022, when the provisions of Sec. 151A of the Act had not come into operation. Thus, the assumption of jurisdiction by NFAC is without jurisdiction and consequently, the whole assessment is without jurisdiction and unsustainable in the eyes of the law. The ld. AR therefore, prayed that the additional ground arises out of the assessment order passed by the National Faceless Assessment Centre, Delhi dated 13.09.2021, as well as the appellate order of the ld. CIT (A), NFAC Delhi dated 18.06.2026. The ld. AR submitted that the additional ground raised by the assessee is purely a legal issue and no further verification or any clarification on facts is required from any quarter whatsoever as all the facts and notices in relation to the assessment proceeding as well as the appellate proceedings were already available on records.
2.2. The ld. DR on the other hand opposed the admission of the additional ground for the reason that it was never raised before the authorities below by the assessee. Therefore, at this stage the assessee should be pre-concluded from raking up this legal issue.
2.3. After hearing the rival contentions and perusing the materials available on record, we find that the additional ground raised by the assessee is purely on the legal issue challenging assumption of jurisdiction by the NFAC u/s 151A read with section 144B of the Act, prior to 29.03.2022. In our opinion, the issue involved does not require any verification from any end whatsoever and all the facts in relation to the assessment proceedings as well as appellate proceedings were in appeal folder. Therefore, by relying on the decision of the Hon’ble Apex Court in the case of CIT Vs. National Thermal Power Co. Ltd. Vs. CIT (Supra), we are inclined to admit the same for adjudication.
3. The facts in brief are that the assessee filed the original return of income on 27.09.2012, declaring total income of ₹15,630/-. Thereafter, the case was selected for scrutiny and notice u/s 143(2) of the Act was issued. This is second round of appeal. Notice u/s 142(1) of the Act along with questionnaire was issued and served upon the assessee on 03.08.2021 to furnish the details, which was not complied with. Therefore, in absence of any compliance and keeping in view the facts of the case and also the materials available on record, the ld. AO assessed the total income at ₹1,60,55,216/- u/s 143(3) read with section 254 of the Income-tax Act, 1961 (the Act) vide order dated 13.09.2021.
4. In the appellate proceedings, the ld. CIT (A) partly allowed the appeal of the assessee.
5. After hearing the rival contentions and perusing the materials available on record, we find that the section 151A of the Act deals with the faceless assessment of income escaping assessment and was brought on the statue book by taxation and other law (relaxation and amendment of certain provisions) Act, 2020, with effect from 01.11.2020 which was notified on 29.03.2022 vide notification no.18/2022/F. No. 370142/16/2022-TPL(Part)]. Therefore, we are of the considered view that the issuance of notices and thereafter framing of assessment by the NFAC, dated 25.03.2022 are without jurisdiction as the Provisions of Section 151A of the Act were effective from 29.03.2022.Consequently, the assessment order passed by the AO cannot be sustained. The case of the assessee is squarely covered by the decision of the co-ordinate in case of MD Mahimud SK Vs. ITO in ITA no. 2230 & 2229/KOL/2024 vide order dated 04.03.2025, wherein the co-ordinate Bench has decided the issue by observing and holding as under: –
“11. We have perused the section of Section 151A of the Act, which deals with the faceless assessment of income escaping assessment and was brought on the statute book by taxation and other law (realization and amendment of certain provisions) Act, 2020, with effect from 01.11.2020 which was notified on 29.03.2022 vide notification no.18/2022/F. No. 370142/16/2022-TPL(Part)]. Therefore, the assessment proceedings were taken by the National Faceless Assessment Centre, Delhi by issuing notice u/s 142(1) dated 09.02.2022 and thereafter the assessment was framed accordingly after issuing show cause notice which in our opinion is without jurisdiction. The provisions of Section 151A of the Act were brought on the statute book with effect from 01.11.2020. However, the same were made effective and applicable with effect from 29.03.2022 vide notification no. when the CBDT notified the new scheme for assessment of income escaping assessment scheme, 2022. In our considered view the assessment framed is without jurisdiction and cannot be sustained. The case of the assessee find force from the decision of Nabiul Industrial Metal Pvt. Ltd., Paschim Medinipur VS. I.T.O., in ITA no. 1328/KOL/2024 for A.Y. 2017-18, the order dated 15.10.2024, wherein a similar issue has been decided in favor of the assessee. For the sake of ready reference, the notice issued u/s 142(1) dated 09.02.2022 and show cause notice dated 17.03.2022, are extracted below:-
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
INCOME TAX DEPARTMENT
National Faceless Assessment Centre Delhi
To, MD MAHIMUD SK
S/O ABDUL RAJAK VILL-KISMAT
NARAYANPUR, PO-SRIRAMPUR SD-
ENGLISHBAZAR
MALDA 732216, West Bengal India
| Particulars | Details |
|---|---|
| PAN | BQYPS8209L |
| Assessment Year | 2015-16 |
| Date | 09/02/2022 |
| DIN | ITBA/AST/F/142(1)/2021-22/1039573181(1) |
Notice under sub-section (1) of Section 142 of the Income Tax Act, 1961
Dear Taxpayer,
Kindly refer to ongoing assessment proceedings in your case for A.Y. 2015-16 under Faceless Assessment Scheme, 2019.
2. We appreciate the anxiety and uncertainty that is facing all of us in the times of Covid-19. This communication is to assist you in ending one uncertainty, which is pending e-Assessment in your case for the Assessment Year 2015-16.
3. You are requested and required to kindly furnish or cause to be furnished on or before 12/02/2022 by 04:47 PM, the accounts and documents specified in the Annexure to this notice.
4. The accounts or documents, as mentioned above, are required to be submitted online electronically in E-Proceedings facility through your account in E-Filing website (www.incometaxindiaefiling.gov.in).
Yours faithfully,
Additional / Joint / Deputy / Assistant Commissioner of Income Tax,
National Faceless Assessment Centre, Delhi
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
INCOME TAX DEPARTMENT
National Faceless Assessment Centre Delhi
To, MD MAHIMUD SK
S/O ABDUL RAJAK VILL-KISMAT
NARAYANPUR, PO-SRIRAMPUR SD-
ENGLISHBAZAR
MALDA 732216, West Bengal India
| Particulars | Details |
|---|---|
| PAN | BQYPS8209L |
| Assessment Year | 2015-16 |
| Date | 17/03/2022 |
| DIN | ITBA/AST/F/147(SCN)/2021-22/1040949460(1) |
Show cause Notice as to why the proposed variation should not be made
Ms/ Mr/ M/s,
1. We appreciate the anxiety and uncertainty that is facing all of us in the times of Covid-19. This communication is to assist you in ending one uncertainty, which is pending e-Assessment in your case for the Assessment Year 2015-16.
2. The variations as per the draft assessment order may be seen which are proposed to be made in your case:-
Credible information had been received for the FY 2014-15 relevant to AY 2015-16, that the assessee had aggregated credit turnover is Rs. 16.99 lacs and debit turnover is 16.99 lacs during the period 01.04.2014 to 31.03.2015 in the bank accounted maintained in Bank of Baroda bearing a/c no. 39920100006975. Prima facie there was reason to believe that the assessee had total credit/deposit in bank account during the FY 2014-15 relevant to AY 2015-16 is Rs. 38,65,557/-, which has escaped assessment within the meaning of section 147 of the Act. Assessment proceedings u/s 147 were initiated after recording reasons and seeking prior approval of Pr. Commissioner of Income-tax. Accordingly, statutory notice U/s 148 of the Act was issued & sent to the assessee by DIN & Document No. ITBA/AST/S/148/2020-21/1032066973(1) dated 31.03.2021 through E-mail requiring the assessee to file his Income Tax Return for the A.Y 2015-16 within 30 days of service of the said notice. In compliance of notice u/s 148, the assessee filed her return of income vide acknowledgement No. 345878730280421 dated 28.04.2021 declaring an income of Rs. 2,25,800/-. During the year under consideration the assessee earned income under the Head Income from Business and Income from other Sources. Statutory notices u/s 143(2), 142(1) alongwith questionnaire were issued to assessee.
2. During the course of assessment proceedings it has been noticed that assessee had deposited cash in Bank of Baroda bearing a/c no. 39920100006975 and in State Bank of India bearing A/c No. 31561107456. In response to notice u/s 143(2) dated 29.06.2021, assessee submitted his reply dated 11.08.2021 stating that he has filed his return of Income for the AY 2015-16 showing a turnover of Rs. 25,46,080/- and Net Profit u/s 44AD of Rs. 2,25,780/- besides this assessee receives S/B interest of Rs. 3,280/- during the A.Y. 2015-16. He is doing mainly labour Contract business on the different part of the country and sometimes in local basis. He receives cash from different contractee and paid to the daily workers on cash basis. Whenever, he does not receive any contract he deposited the cash in the bank accounts and later on he again withdraws cash from Bank and pay the daily workers if he receive any contract work. Notice u/s 142(1) dated 29.12.2021 was issued to the assessee to furnish detailed computation of income, brief note indicating the nature of business/professional activities carried out by him and explain the source of cash deposit in the above said accounts. In response to notice u/s 142(1) dated 29.12.2021, assessee did not submit his reply. After that, again a notice u/s 142(1) dated 09.02.2022 was issued to furnish detailed computation of income, copy of cash flow statement, details of contract made with documentary evidence and details of payment to the labour with documentary evidence. But, assessee again did not submit his reply.
3. A final show cause notice u/s 144 of the I.T Act, 1961 was issued to the assessee on 23.02.2022 for the sake of natural justice and providing one more and last opportunity to explain requesting him to furnish the requisite details on or before 25.02.2022. The assessee again failed to furnish any reply.
4. It is a part of record that during the course of assessment proceedings sufficient opportunity and reasonable time was granted to the assessee but he did not bother to comply with the notices and to provide the vital information /documents so as to enable the assessing officer to complete the assessment. Needless to mention here that when a statutory notice has been issued, it is the duty of the assessee to respond and to furnish the required information. Further, while scrutinizing the case it would be of great importance to have an idea about assessee’s intention behind the non co-operation. The immediate idea that can be formed is that the assessee might have taken it beneficial to evade the proceedings rather than to co-operate in furnishing the information to avoid further investigation in the matter. Therefore, in the absence of relevant reply from the assessee, the matter is being decided as per the record available.
5. After pursing the reply of the assessee and the return of the income filed u/s 148 that the assessee is driving income from the business and income from other sources. After considering the reply of the assessee, the reply is not found tenable because the assessee has not produced proper books of account coupled with non-production of documentary evidence of contract business. Hence, cash deposited in Bank of Baroda bearing a/c no. 39920100006975 amounting to Rs. 16,96,682/- and in State Bank of India bearing A/c No. 31561107456 amounting to Rs. 4,09,500/- totaling to Rs. 21,06,182/- is treated as unexplained credit entries in book of the assessee and accordingly, addition of Rs. 21,06,182/- is proposed to be added back to the income of the assessee u/s 69A r.w.s. 115BBE of the Income Tax Act, 1961 Penalty proceedings u/s 271(1)(c) of the Income tax act, 1961 for inaccurate particulars of the income are initiated separately.
| Particulars | Amount |
|---|---|
| Returned Income | Rs. 2,25,800/- |
| Add:- as per para 5 | Rs. 21,06,182/- |
| Assessed Income | Rs. 23,31,982/- |
Issue Penalty notice u/s 271(1)(c) and 271(1)(b) of the Income Tax Act, 1961.
Assessed issue requisite documents to the assessee.
This order is being passed u/s 147/143(3) r.w\.s. 144B of the I.T. Act, 1961.
You are hereby given an opportunity to show cause why proposed variation should not be made and the assessment should not be completed accordingly.
3. Kindly submit your response through your registered e-filing account at www\.incometax.gov.in by 23:59 hours of 21/03/2022, whereby you may either:-
a. accept the proposed variation; or
b. file your written reply objecting to the proposed variation; or
c. If required, after filing written reply you may request for personal hearing so as to make oral submissions or present your case. The request can only be made by clicking the Seek Video Conferencing button available against the SCN, in the view notices of this proceeding in the e-proceedings tab on efiling portal. The request can be made only before expiry of compliance date & time. On approval of request, personal hearing shall be conducted exclusively through video conference.
4. In case no response is received by the given time and date, the assessment shall be finalized as per the draft assessment order.
Yours faithfully,
Additional / Joint / Deputy / Assistant Commissioner of Income Tax/
Income-tax Officer,
National Faceless Assessment Centre, Delhi
12. Considering the above facts and legal position, we are of the considered opinion that the order passed by the NFAC, Delhi is without jurisdiction and is hereby quashed. The appeal of the assessee is allowed.
13. The additional ground raised in ITA No. 2230/Kol/2024 A.Y.2017-18 is similar to one as decided by us in ITA No. 2229/Kol/2024 A.Y. 2015-16. Therefore, our decision would, mutatis mutandis, apply to this appeal as well. The appeal of the assessee is allowed.
14. In the result, the appeal of the assessee is allowed.”
6. In view of the above facts and the decision of the coordinate bench, we are inclined to quash the assessment framed by the ld. AO/ NFAC. The appeal of the assessee is allowed.
7. In the result, the appeal of the assessee is allowed.
Order pronounced on 07.10.2026.
