In a landmark decision regarding the authority of income tax officers handling cases of income evasion, the Madras High Court has determined that the Jurisdictional Assessing Officer (JAO) possesses ‘exclusive powers’ to issue notices under Section 148 of the Income Tax Act, 1961. Both the JAO and the Faceless Assessing Officer (FAO) will share concurrent authority for ‘assessment, reassessment, and recomputation’ of specific income in a faceless framework.
Justice Krishnan Ramasamy delivered this judgment on Friday, dismissing the petitions brought forth by Mark Studio India Private Limited from Chennai, which challenged the JAO’s authority to issue notices under Sections 148 and 148 A (d) of the Income Tax Act related to the assessment of escaped income.
During the proceedings, the petitioner’s counsel, G. Vardhini Karthik, argued that the JAO lacked the authority to issue notices for income escaping assessment following the enactment of Section 151 A of the Income Tax Act and the establishment of the E-Assessment of Income Escaping Assessment Scheme, 2022, as of March 29, 2022, along with the Faceless Jurisdiction of Income-tax Authorities Scheme, 2022, dated March 23, 2022.
In contrast, B. Ramasamy, the senior standing counsel representing the Central government, contended that Section 144 B of the Act grants powers to the JAO and that cases are selected by the Directorate of IT (Systems) via the Automated Allocation System (AAS) according to the jurisdiction of the PAN card.
He further asserted that the notices served to Mark Studio India complied with the AAS’s three conditions, relied upon a risk management framework devised by the board, and adhered to the faceless protocol, allowing for online procedures.
Justice Ramasamy stated, “Regarding the issuance of notices under Section 148 of the IT Act, only the JAO has exclusive jurisdiction.” He added, “In terms of assessment, reassessment, or recomputation under Section 147, both the FAO and JAO will have concurrent jurisdiction.”
According to the judge, the Directorate of IT (Systems) is given the authority to allocate cases through the AAS for issuing notices under Sections 148 A and 148 in qualified instances, guided by the risk management strategy of the E-Assessment of Income Escaping Assessment Scheme related to the jurisdiction of the JAO based on the PAN card information.
In this particular case, the judge explained that the impugned notice was issued “in accordance with the Scheme,” aside from a minor procedural issue of not naming the JAO specifically. The Directorate of IT (Systems) assigned cases through the AAS based on the risk management strategy for the faceless issuance of notices.
He remarked that such procedural discrepancies would “not vitiate” the initiation of the notice under Section 148 of the IT Act, as these errors are “curable in nature.”
While the court ultimately dismissed the writ petitions, it permitted the petitioner company to submit a response to the relevant authorities within 30 days. Those authorities are obliged to review the response and issue decisions after allowing an opportunity for a personal hearing.