Punjab & Haryana High Court Quashes Income Tax Notice for Lack of Jurisdiction

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Case Name

Onkar Singh Vs. Income Tax Officer Ward 1, Kapurthala & Others

CWP-3986-2025

Date: 13th February 2025

Key Takeaways

• Jurisdiction Matters: The court emphasized that only the National Faceless Assessment Centre (NFAC) has the exclusive power to issue notices under Section 148 (of Income Tax Act, 1961), as per the CBDT circular/notification dated 29.03.2022.
• Consistency with Precedents: The decision follows earlier judgments in “Jatinder Singh Bhangu vs. Union of India and others” (CWP No. 15745-2024, decided on 19.07.2024) and “Jasjit Singh vs. Union of India and others” (CWP No. 21509-2023, decided on 29.07.2024).
• Liberty to Revenue: The revenue authorities are allowed to initiate proceedings again, but only if they follow the correct procedure as laid down by law.
• Relief for Taxpayers: Taxpayers can challenge notices issued by authorities lacking jurisdiction, especially when there are clear procedural guidelines.

Issue

Did the Income Tax Officer have the legal authority (jurisdiction) to issue a notice under Section 148 (of Income Tax Act, 1961), for AY 2020-2021, in light of the CBDT’s notification assigning this power exclusively to the NFAC?

Facts

• Parties: Onkar Singh (Petitioner) vs. Income Tax Officer Ward 1, Kapurthala & Others (Respondents).
• Notice Issued: On 31.03.2024, a notice under Section 148 (of Income Tax Act, 1961), was issued to Onkar Singh for the assessment year 2020-2021.
• Grounds for Challenge: The petitioner argued that, as per a CBDT circular/notification dated 29.03.2022, only the NFAC could issue such notices, not the local Income Tax Officer.
• Relevant Timeline: The notice was issued after the CBDT notification, making the jurisdictional question central to the case.

Arguments

Petitioner (Onkar Singh)

• The notice under Section 148 (of Income Tax Act, 1961) was invalid because it was not issued by the NFAC, as required by the CBDT’s notification dated 29.03.2022.
• Relied on previous High Court decisions in “Jatinder Singh Bhangu vs. Union of India and others” and “Jasjit Singh vs. Union of India and others,” where similar notices were quashed.

Respondent (Union of India/Income Tax Department)

• The counsel for the Union of India did not dispute the petitioner’s reliance on the previous judgments and the jurisdictional issue.

Key Legal Precedents

• Jatinder Singh Bhangu vs. Union of India and others (CWP No. 15745-2024, decided on 19.07.2024)
• Jasjit Singh vs. Union of India and others (CWP No. 21509-2023, decided on 29.07.2024)
• Section 148 (of Income Tax Act, 1961): Deals with the power to issue notices for income escaping assessment.
• CBDT Circular/Notification dated 29.03.2022: Specifies that only the NFAC has the authority to issue notices under Section 148 (of Income Tax Act, 1961) after this date.

The court applied these precedents directly, noting that the facts and legal issues were identical.

Judgement

• The High Court disposed of the writ petition in favor of Onkar Singh.
• The notice dated 31.03.2024 under Section 148 (of Income Tax Act, 1961) was quashed, as it was issued by an authority lacking jurisdiction.
• The court granted liberty to the revenue authorities to proceed afresh, but only if they follow the correct procedure as per the Income Tax Act, 1961, and the CBDT notification.
• All pending applications were also disposed of.

FAQs

Q1: Why was the notice under Section 148 (of Income Tax Act, 1961) quashed?

A: Because it was issued by an authority (local Income Tax Officer) that did not have jurisdiction after the CBDT’s notification, which gave this power exclusively to the NFAC.

Q2: Can the Income Tax Department issue a new notice?

A: Yes, but only if they follow the correct procedure and ensure the notice is issued by the proper authority (NFAC).

Q3: What is the significance of the CBDT notification dated 29.03.2022?

A: It centralized the power to issue Section 148 (of Income Tax Act, 1961) notices with the NFAC, removing this power from local officers.

Q4: What happens to similar cases?

A: This judgment, following earlier precedents, suggests that similar notices issued by unauthorized officers after the notification can also be challenged and quashed.

Q5: Does this mean all Section 148 (of Income Tax Act, 1961) notices are invalid?

A: No, only those issued by authorities without jurisdiction after the CBDT notification are affected.