Notice u/s 148 issued by JAO and not FAO quashed. Gujarat High Court view disapproved.

Rajasthan High Court quashes notice u/s 148 issued by JAO and not by FAO expressing disagreement with Gujarat High Court judgment.

In a recent judgment the Rajasthan High Court quashes notice u/s 148 issued by Jurisdictional Assessing Officer (JAO) and not Faceless Assessing Officer (FAO). Disagrees with Gujarat High Court view that e-assessment scheme does not cover a case where notice u/s 148 is issued by JAO on information received in the matter of search and seizure u/s 132 or requisitioned under Section 132A.

ABCAUS Case Law Citation:
4775 (2025) (10) abcaus.in HC

In the present Petition, one of the grounds taken was that notice under section 148 of the Income Tax Act, 1961 (the Act) had been issued by Jurisdictional Assessing Officer (JAO) and not Faceless Assessing Officer (FAO). Reliance was placed on the judgment of the Jaipur Bench, Bombay High Court judgment.

The Revenue placed reliance on the judgment of the Gujarat High Court wherein Court considered validity of show cause notice issued under Section 148 and the proceedings initiated under Section 153A of the Act. The High Court did   not   interfere   with   notice   but   directed assessee to file reply to notice.

However, the Rajasthan High Court observed that facts of the Gujarat High Court case were entirely different from the facts of present case. The Gujarat High Court had held   that notification dated 29^th March 2022 (prescribing e-assessment scheme) did not cover a case where notice under Section 148 is issued by the JAO, the information received by him in the matter of search and seizure under Section 132 or requisitioned under Section 132A of the Act.

The Rajasthan High Court noted that the Gujarat High Court had relied on   Explanation 2 to Section 148 (as it existed at the relevant time) to approve the contention of the Revenue that the concept of automated allocation, i.e. application of algorithm for randomized allocation of cases by using suitable technological tools   including Artificial Intelligence and Machine Learning, as defined in Clause 2(1)(b) of the Scheme dated 29th March 2022, cannot be applied in a case of search and seizure under Section 132.

The Rajasthan High Court further observed that the Gujarat High Court had taken cognizance of the contention that pre-requisite conditions before issuance of notice under Section 148, as provided in Explanation 2 of Section 148 would require human   application of mind and cannot be fulfilled by algorithm under the Faceless Regime.

The Rajasthan High Court noted that the Bombay High Court had rejected the contention that the category of cases as notified under order(s) dated March 31, 2021 and September 6, 2021 issued by CBDT under section 119 provide exception to the applicability of the faceless mechanism to assessment orders in relation to Central Charges and International as not the correct position in law.

It was observed that the Bombay High Court also relied upon the order passed by the Telangana High Court against which the Special Leave Petition (SLP) filed by the Revenue was dismissed by the Hon’ble Supreme Court

The Rajasthan High Court noted that the judgment passed by the Gujarat High Court was not based on the reading of notification dated 29th March 2022 along with orders dated 31st March 2021/ 06th September 2021 but was based on the simple reading of Explanation 2 to Section 148 along with understanding that the pre-requisites for issuing notice under Section 148 in search cases cannot be met by the FAO.

The Rajasthan High Court held that in these circumstances, notice passed under Section 148 of the Act was liable to be quashed and set aside.

However, it was observed that Special Leave Petition (SLP) of the Revenue against the judgment of the Bombay High Court has been admitted by the Hon’ble Supreme Court.

Accordingly, the Hon’ble High Court quashed and set aside the notice under section 148 with liberty to Revenue to revive the notice issued under Section 148 of the Act.

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