Delhi High Court Upholds Reassessment by Jurisdictional AO – Distinguishes from Hexaware Ruling

The case concerns a writ petition challenging the reassessment initiated under Section 148 by the Jurisdictional Assessing Officer (JAO). The central question was whether a notice issued by the JAO complied with the requirements of the Faceless Scheme of Assessment, introduced under Sections 144B and 151A –  T.K.S. Builders Pvt. Ltd. v. ITO – [2024]

Judicial Bench and Counsel

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• Judges: Justice Yashwant Varma & Justice Ravinder Dudeja
• Counsel for Petitioner: Kapil Goel, Sandeep Goel, Prakash Kumar & Rupinder Kumar, Advocates
• Counsel for Respondent: Aseem Chawla, Abhishek Maratha, Gaurav Gupta (Senior Standing Counsels), with Ms. Pratishta, Ms. Nivedita, Ms. Priya Sarkar, Gaurav Singh, Bhanukaran Singh, Ms. Muskan Goel, Ms. Parithi Kohli, Himanshu Gaur (Advocates), Ms. Nupur Sharma, Parth Semwal, Apoorv Agarwal, Shivendra Singh & Yojit Pareek (Junior Standing Counsels)

Court’s Rationale and Key Findings The Delhi High Court examined the structure of the Faceless Reassessment Scheme 2022 and the statutory roles of the JAO and the National Faceless Assessment Centre (NFAC). It found that the Scheme divides the reassessment process into two distinct phases: the preliminary enquiry and opinion formation, followed by the faceless assessment.

1. JAO’s Role and Responsibilities: The Court observed that the JAO’s role is integral and does not conflict with the objectives of the Faceless Scheme. The system ensures that the JAO can scrutinize information before actual reassessment, maintaining their authority as part of a seamless process. It found that the statutory provisions aimed to integrate traditional assessment with faceless operations, establishing a unified structure.
2. Complementary Powers of JAO and NFAC: The Court highlighted that the JAO and NFAC roles are complementary, with concurrent responsibilities as envisioned in statutory provisions. While Section 144B emphasizes faceless assessment, it does not preclude reassessment actions by the JAO, allowing for certain cases to be evaluated based on data obtained by the JAO, either directly or via the Risk Management System (RMS).
3. Retained Jurisdiction for JAO: Despite the Faceless Scheme, the Court held that the JAO’s jurisdiction remains relevant. The role ensures continuity, accountability, and the capacity for necessary human oversight, which complements the automated, faceless framework. This preserved jurisdiction aids in managing complex cases and reinforces the flexibility of the faceless assessment system.

Distinction from Hexaware Ruling In the 2024 Hexaware Technologies case (162 taxmann.com 225, Bombay HC), the Bombay High Court had ruled that the JAO lost authority to issue reassessment notices post the Faceless E-Assessment Scheme. However, the Delhi High Court disagreed, noting that the Hexaware judgment did not consider a key notification from August 13, 2020, which conferred concurrent powers to NFAC officers alongside the JAO.

The Delhi HC underscored that various sources of information are accessible to the JAO for initiating reassessment, establishing a precedent that supports the JAO’s retained jurisdiction within the Faceless Scheme.

Court’s Conclusion The Delhi High Court upheld the JAO’s jurisdiction to issue reassessment notices, ruling that the JAO retains complementary powers to ensure a balanced and flexible assessment system. It asserted that the introduction of Section 144B and the Faceless Reassessment Scheme does not override the JAO’s authority to assess or reassess cases, affirming the JAO’s active, essential role within the restructured assessment framework.

Cases Reviewed

• Hexaware Technologies Ltd. v. Assistant Commissioner of Income-tax [2024]