Rule 12E of Income Tax Rules does not confine CBDT’s powers to only authorize NFAC Officers for purposes u/s 142(1): Delhi HC [Read Order]

The Delhi High Court recently dismissed a Petition citing that Rule 12E of the Income Tax Rules, 1962 does not mandate the Central Board of Direct Taxes ( CBDT ) to appoint only Officers from the National Faceless Assessment Centre ( NFAC ) as the ‘Prescribed Income Tax Authority’ for the purposes of Inquiry Before Assessment under Section 142(1) of the Income Tax Act, 1961

The observation was made by the Delhi High Court while adjudging a Writ Petition lodged by NGR Consultants Pvt. Ltd. impugning Notices issued under Section 143(2) and Section 142(1) of the Act, asserting the lack of jurisdiction exercisable by the issuing authority.

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Primary contention raised by the Petitioner was that the Assessing Officer, Central Circle 20, Delhi ( AO ) who issued the above-mentioned Notices lacked the requisite jurisdiction to do so and did not qualify to be a ‘prescribed income tax authority’ as per the Act; in the event that the AO could be deemed a prescribed authority, he would still be ineligible to issue a ‘notice’ rather only able to ‘serve’ a notice.

Counsels for the Petitioner, N.P. Sahni and Kumar Abbas drew reference to Section 143(2) of the Income Tax Act, 1961 to posit that a ‘prescribed income tax authority’ may not issue Notices in the event that the jurisdiction is vested within the Assessing Officer, pushing for the quashal of the impugned Notices.

Conversely, the Revenue represented by Senior Standing counsel, Vipul Agrawal along with Junior Standing Counsels, Gibran Naushad and Sakashi Shairwal referred to Section 12E of the Income Tax Rules, 1962 which permits the CBDT to authorize an Income-Tax Officer to act as a ‘prescribed authority’ under the Income Tax Act, 1961.

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Additionally the Revenue cited CBDT Notification No.56/2022 dated 28.05.2022 authorizing ‘the Assistant Commissioner of Income Tax/ Deputy Commissioner of Income Tax (International Taxation), Circle -1(1)(1), Delhi to act as the 'Prescribed Income-tax Authority' for the purpose of issuance of notice under sub- section (2) of section 143 of the Act.’

The Delhi High Court Bench constituted by Justice Vibhu Bakhru And Justice Swarana Kanta Sharma forbade the Petitioner’s argument that the power to issue Notice under Section 143(2) of the Income Tax Act, 1961 lies solely with the authorised Income Tax Officers of the NFAC besides the Assessing Officer, all while asserting that such argument does not sit right with Section 143(2) of the Act or Rule 12E of the allied Rules.

The High Court further laid to rest the Petitioner’s contentions that the income tax authority can only serve, and not issue notices as the same was insubstantial.

In dismissal, the Court reaffirmed that once jurisdiction of an AO to issue notice under Section 143(2) of the Income Tax Act, 1961 has been accepted, then the AO cannot be faulted for undertaking proceedings to complete the Assessment.

To Read the full text of the Order CLICK HERE

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