Safiya Malik

The Madras High Court has held that the Jurisdictional Assessment Officer (JAO) and the Faceless Assessment Officer (FAO) possess concurrent jurisdiction in matters of assessment, re-assessment, and re-computation under the Income Tax Act, 1961. Justice Krishnan Ramasamy, in an order passed on December 20, 2024, dismissed a writ petition filed by Mark Studio India Private Limited, a Chennai-based film equipment rental firm. The petitioner sought to quash assessment and re-assessment notices issued by the JAO under Sections 148 and 148A(d) of the Income Tax Act, challenging their validity under the faceless assessment scheme.

The petitioner argued that the notices issued by the JAO were inconsistent with the faceless assessment scheme introduced in 2022 under Section 144B of the Income Tax Act. According to the petitioner, the scheme centralized the assessment process within the National Faceless Assessment Unit (NaFAC) and designated the FAO as the sole authority for conducting assessments, re-assessments, and re-computations. It was contended that the role of the JAO was effectively rendered redundant for cases covered under the faceless scheme.

The petitioner’s counsel submitted that by including the JAO’s name in the notices, the Income Tax Department contravened the principles of anonymity and impartiality that the faceless scheme sought to achieve. The counsel further argued that such procedural errors invalidated the notices and necessitated their quashing.

On behalf of the respondents, the Senior Standing Counsel for the Income Tax Department and NaFAC defended the issuance of the notices. It was submitted that while the faceless scheme minimizes direct interaction between taxpayers and authorities, it does not eliminate the JAO’s jurisdiction entirely. The respondent argued that the issuance of notices under Sections 148 and 148A remains within the domain of the JAO, especially in the preliminary stages before the case is assigned to the FAO for assessment.

The respondents emphasized that the faceless scheme is designed to ensure transparency and efficiency but operates within the broader statutory framework of the Income Tax Act. It was submitted that the JAO’s involvement in initiating proceedings is consistent with the provisions of Sections 148 and 148A, as well as the guidelines issued by the Central Board of Direct Taxes (CBDT). The respondent highlighted that the faceless scheme relies on automated allocation systems and risk management strategies, which are activated after the JAO has issued the requisite notices.

The court after a detailed examination of the statutory provisions, including Sections 144B, 147, 148, and 148A of the Income Tax Act, as well as the guidelines issued under the faceless assessment scheme. Justice Krishnan Ramasamy observed that while the faceless scheme governs the assessment, re-assessment, and re-computation processes under Section 147, it does not expressly preclude the JAO’s role in issuing notices.

The court stated: “As far as the assessment, re-assessment, or re-computation is concerned, this Court is of the considered view that both the Faceless Assessment Officer as well as the Jurisdictional Assessment Officer will have concurrent jurisdiction.”

The judgment held that the concurrent jurisdiction is consistent with the statutory scheme of the Income Tax Act. The court reasoned that while the faceless scheme intends to minimize direct interaction between the taxpayer and the authorities, it does not entirely eliminate the procedural steps that necessitate the involvement of the JAO in the initial stages of the process.

Addressing the petitioner’s contention regarding the inclusion of the JAO’s name in the notices, the court described it as a procedural lapse. However, the court observed that such errors are curable and do not vitiate the proceedings. The court noted: “Though mentioning the name of the JAO in the notices issued under the faceless scheme was a procedural lapse, such error will not vitiate the initiation of the proceedings for issuance of notice under Section 148 of the IT Act since such errors are curable.”

The judgment noted that the faceless scheme primarily applies to the allocation and execution of assessments while allowing procedural formalities, such as the issuance of notices by the JAO, which are essential for initiating proceedings under Sections 148 and 148A.

The court, referencing CBDT guidelines, stated that the JAO retains jurisdiction for issuing notices under Sections 148 and 148A, provided procedural safeguards under Section 151A are met. After obtaining requisite approvals, cases transition to NaFAC for subsequent stages through the FAO. The judgment noted the alignment of the faceless scheme with statutory requirements, ensuring transparency and efficiency. It also observed the reliance on automated allocation systems and risk management strategies, which use AI and machine learning to assign cases impartially. The court found that the JAO's procedural role at the initial stages supports statutory compliance without undermining the objectives of the faceless scheme.

The court dismissed the petition of Mark Studio India Private Limited, upholding the validity of the notices issued by the JAO and affirming the concurrent jurisdiction of the JAO and FAO. It determined that the faceless assessment scheme aligns with the statutory framework of the Income Tax Act and integrates with existing provisions. The court concluded that the petitioner’s claims of exclusive FAO jurisdiction were not substantiated and that the procedural compliance by the respondents was sufficient to validate the notices.

Case Title: Mark Studio India Pvt. Ltd.

                  vs. Income Tax Officer, Non-Corporate Ward 10(6), Chennai, & Anr

Case Number: W.P.Nos.25223 & 25227 of 2024

Bench: Justice Krishnan Ramasamy

[View/Download order]