JURISDICTIONAL CHALLENGE TO 148 NOTICE- RECENT TRENDS
In the income tax appeal proceedings, the appellant gets fair chances of success if the technical/legal grounds such as `valid jurisdiction to assess by assessing officer’ are effectively raised before the appellate authorities. To raise the technical grounds, the appellant’s CA/Advocate should examine the assessment proceedings/documents/evidences very deeply with a magnifying glass, to find out the defects committed by the revenue side and convert these defects into appellant’s success.
Author has come across some instances where jurisdictional issue was raised as Original Grounds (in form 35 / 36) or as Additional Grounds and appellant got the success despite the fact that the factual grounds were not so assuring.
Author would like to discuss four grounds which can be looked into by appellant or his A/R and if noticed, can be raised before the appellate authority:
1) NOTICE U/S 143(2) NOT ISSUED IN THE PRESCRIBED FORMAT AFTER 23/06/2017
It has been seen that AO/NAFAC had been issuing notice u/s 143(2) in the different formats which were not in the conformity with the law/section. In order to bring uniformity and making the format compliant to Section 143(2), CBDT prescribed three formats of notices to be issued u/s 143(2) vide CBDT Instruction F. No. 225/157/2017/ITA-II dated 23.06.2017. In the Para No. 3 of the said instruction, it is clearly stated that all notice u/s 143(2) of the Act shall henceforth be issued in this revised format only.
Appellant should closely examine the actual format of notice u/s 143(2) issued to him with the one prescribed in the said CBDT Instruction, and if the format is not in line with those prescribed by CBDT, he should raise the appeal ground for invalid notice u/s 143(2).
Appellant can rely upon following recent judgements by Hon’ble ITAT:
b) Tapas Kumar Das ITO by ITAT (Assessment Year: 2017-18) pronounced on 11/03/2025
c) Shib Nath Ghosh ITO (Assessment Year: 2018-19) pronounced on 29/11/2024
2) SELECTION OF CASE FOR NOTICE U/S 148 BY JURISDICTIONAL ASSESSING OFFICER
CBDT instruction dated 04/03/2021 laid down the following criteria for selection of cases for notice 148 for AY 2013-14 to 2017-18 as under:
| INSTRUCTION F. NO. 225/40/2021/ITA-II
SECTION 148 OF THE INCOME-TAX ACT, 1961 – INCOME ESCAPING ASSESSMENT – ISSUE OF NOTICE FOR – INSTRUCTION REGARDING SELECTION OF CASES FOR ISSUE OF NOTICE UNDER SAID SECTION INSTRUCTION F. NO. 225/40/2021/ITA-II, DATED 4-3-2021 1. The Central Board of Direct Taxes (Board), in exercise of its powers under section 119 of the Income-tax Act, 1961 (Act), with an objective of streamlining the process of selection of cases for issue of notices under section 148 of the Act, hereby directs that the following categories of cases be considered as ‘potential cases’ for taking action under section 148 of the Act by 31.03.2021 for the A.Y 2013-14 to A.Y 2017-18 by the Jurisdictional Assessing Officer (JAO):
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2. No other category of cases, except the above, shall be considered for taking action under section 148 of the Act by the JAO. 3. It is clarified that action under section 148 of the Act shall be taken by the Assessing Officer in respect of the above categories of cases after forming a reasonable belief that income chargeable to tax has escaped assessment and ‘reasons to believe’ shall be recorded and required sanction as per section 151 of the Act shall be obtained before issuing notice under section 148 of the Act. 4. These instructions shall not be applicable to the Central charges and International Taxation charges for which separate instructions are being issued. 5. Issues with the approval of the Chairman, CBDT. |
Above instruction for selection of cases u/s 148 clearly identified the categories of cases which could had been selected for reopening by the Jurisdictional Assessing Officers(JAO)
Even if it is assumed for once that the assessee’s case falls in the category 1(v), then approval of the CCIT is required, while the approval u/s 151 was required to be obtained from PCIT. Thus, the notice may be suffering from the approval by competent authority issue, if the above CBDT Instruction is not followed by assessing authority.
Further the CBDT instruction dated 04/03/2021 lays down in unambiguous terms at Srl. No. 2:
2. No other category of cases, except the above, shall be considered for taking action under section 148 of the Act by the JAO
Thus the appellant can examine his case vis-à-vis the requirements of the aforesaid instruction.
3) NOTICE u/s 148 ISSUED FOR AY 2013-14 AFTER 31/03/2020 CAN BE HELD AS TIME BARRED NOTICE
Reopening u/s 148 after the new law wef 01/04/201 had been one of the most controversial phases of Direct Taxes. During this period, Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA) was enacted to provide the relief in terms of various compliance dates. Further wef 01/04/2021, Section 148A was made applicable which changed the entire process of issue of reopening u/s 148. These changes resulted in the various controversies which were settled by the Hon’ble Apex Court in the Rajiv Bansal case and later in Ashish Agarwal case.
However, some issues are still not resolved. One of them is the validity of notices for AY 2013-14 issued after 31/03/2020. In terms of Section 149(1)(b), the 6 years expired on 31/03/2020 and accordingly, any notice after this date should had been time-barred. However, TOLA, 2020 gave relief for the all the due dates falling between 20/03/2020 to 30/06/2021. Therefore, the notice for AY 2013-14 should also be covered by the TOLA and the notice issue date could had been upto 30/06/2021.
Hon’ble Madras High Court in its judgement in the case of Sohanraj Praveen Kumar Vs. ACIT, NFAC,dated 09/05/2025 has held the notice dated 26/03/2021 issued for AY 2013-14 as time-barred on account of time limits laid down in Section 149.
Appellant can also rely upon the judgement [2024] 158 taxmann.com 367 by Hon’ble High Court of Bombay in the case of New India Assurance Company Ltd. v. Assistant Commissioner of Income-tax. The Hon’ble court held that time limit for issuing notices u/s 148 for AY 2013-14 expired on 31/03/2020 as the TOLA,2020 was not applicable for AY 2013-14.
4) NAFAC DID NOT HAVE JURSICITION TO ASSESS INCOME ESCAPING CASES BEFORE 29/03/2022
Section 151A of the Act, which deals with the faceless assessment of income escaping assessment cases (i.e. Section 148) was brought on the statute book by Taxation and other law (realization and amendment of certain provisions) Act, 2020, (TOLA) with effect from 01.11.2020. Section is being reproduced as under:
| 151A. Faceless assessment of income escaping assessment.
(1)The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of assessment, reassessment or re-computation under section 147 or issuance of notice under section 148 10[or conducting of enquiries or issuance of show-cause notice or passing of order under section 148A] or sanction for issue of such notice under section 151, so as to impart greater efficiency, transparency and accountability by—(a)eliminating the interface between the income-tax authority and the assessee or any other person to the extent technologically feasible; (b) optimising utilisation of the resources through economies of scale and functional specialisation; (c) introducing a team-based assessment, reassessment, re-computation or issuance or sanction of notice with dynamic jurisdiction. (2)The Central Government may, for the purpose of giving effect to the scheme made under sub-section (1), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification, Provided that no direction shall be issued after the 31st day of March, 2022 (3)Every notification issued under sub-section (1) and sub-section (2) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.] |
Though the section was inserted in the statute book wef 01/11/20202 but its enforcement was deferred till the date to be notified later by Central Govt. in the Official Gazette.
E-Assessment of Income Escaping Assessment Scheme, 2022 was notified on 29/03/2022 vide notification No. 18/2022/F. No. 370142/16/2022-TPL(Part)], in terms of the powers granted u/s 151A (2) of the Income Tax Act, 1961. This scheme enabled CBDT/NFAC to conduct faceless assessment process u/s 144B in the cases of ‘income escaping assessment’ wef 29/03/2022.
The said notification reads as under:
Notification No. 18/2022-Income Tax
In view of the above, all notices u/s 143(2), 142(1) and assessment orders for the income escaping cases u/s 148 issued before 29/03/2022 by NAFAC are without jurisdiction.
Appellant can rely relies upon the following case laws by Hon’ble ITATs wherein such notices/assessment orders have been held without jurisdiction and therefore void:
a) MD Mahimud SK ITO, Assessment Years: 2015-16 & 2017-18, pronounced on 04/03/2025
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