Introduction
The case of Blazing Star Marketing Private Limited vs. Income Tax Officer (ITA No.2707/KOL/2025) decided by the Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) on 20.05.2026 for Assessment Year (AY) 2013-14 presents a critical examination of the jurisdictional validity of faceless assessments under Section 151A of the Income Tax Act, 1961. The Tribunal quashed the entire assessment order passed by the National Faceless Assessment Centre (NFAC) on the ground that the enabling provision – Section 151A – had not been notified and brought into effect on the date when the faceless proceedings were initiated. This commentary delves into the legal reasoning behind the decision, its implications, and the precedential value attached to the jurisdictional issue.
Facts of the Case
The assessee, Blazing Star Marketing Private Limited, filed its return of income for AY 2013-14 on 23.12.2013 declaring total income of ₹2,27,100. The return was initially processed under Section 143(1). Subsequently, the Jurisdictional Assessing Officer (JAO) issued a notice under Section 148 on 30.03.2021 based on information from the Investigation Wing regarding alleged credits of ₹3,24,90,000 in the assessee’s bank account from seven entities. The assessee filed a return in response on 27.04.2021. Thereafter, the case was assigned to the Faceless Assessing Officer on 10.12.2021, and notices under Section 142(1) were issued by the NFAC on 29.12.2021 and 17.02.2022. A show-cause notice cum draft assessment order was issued on 23.03.2022, and the final assessment order under Section 147 read with Section 144B was passed on 30.03.2022, assessing income at ₹2,92,67,100 by making aggregate additions of ₹2,90,40,000.
The assessee challenged the assessment before the ITAT, raising an additional ground that the NFAC lacked jurisdiction because Section 151A – which empowers faceless assessment of income escaping assessment – was brought on the statute book with effect from 01.11.2020 but was actually notified and made operative only on 29.03.2022 vide Notification No.18/2022. Since the NFAC issued notices under Section 142(1) on 29.12.2021 and 17.02.2022, well before the notification date, the entire assessment proceedings were without jurisdiction.
Legal Reasoning and Analysis
The ITAT admitted the additional ground, observing that it was a pure legal issue requiring no further verification of facts, and relied on the decisions of the Supreme Court in Jute Corporation of India Ltd. vs CIT (187 ITR 688), National Thermal Power Co. Ltd vs CIT (229 ITR 383), and the Calcutta High Court in PCIT vs Britannia Industries Ltd (396 ITR 677) to allow a legal ground to be raised for the first time before the appellate authority.
The Core Jurisdictional Issue
The Tribunal carefully examined the timeline of Section 151A. The provision was introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 with effect from 01.11.2020. However, the actual operational notification – which brought the faceless assessment scheme for income escaping assessment into force – was issued on 29.03.2022. The Tribunal held that since the NFAC had issued the first notice under Section 142(1) on 29.12.2021 and subsequent notices on 17.02.2022, all before 29.03.2022, the proceedings were initiated without lawful authority. Relying on the coordinate bench decision in MD Mahimud SK vs ITO (ITA No.2230 & 2229/KOL/2024, order dated 04.03.2025) and Nabiul Industrial Metal Pvt. Ltd. vs ITO (ITA No.1328/KOL/2024, order dated 15.10.2024), the Tribunal categorically stated that the assessment framed under the faceless mechanism was without jurisdiction and could not be sustained.
Impact on the Assessment Order
The Tribunal did not delve into the merits of the additions – including the ₹1,87,50,000 added on account of sale of unlisted investments and ₹1,02,90,000 on account of undisclosed receipts – because the jurisdictional defect was fatal and dispositive. The assessee had argued on merits that the investments were originally purchased in FY 2007-08 and had been accepted by the Department in scrutiny proceedings for AY 2008-09, and that the sale price of ₹500 per share was realistic given the book value of the investee companies. However, the Tribunal refrained from addressing these arguments as the assessment itself was quashed on the preliminary legal issue.
The Revenue’s Contention
The Revenue argued that Section 151A was on the statute book with effect from 01.11.2020 and therefore the NFAC had jurisdiction. The Tribunal rejected this submission, drawing a clear distinction between the date of enactment (when a provision is placed on the statute book) and the date of notification (when it is brought into force). Since the faceless scheme for income escaping assessment was notified only on 29.03.2022, any action taken before that date was void ab initio.
Precedential Value
The decision reinforces the principle that the exercise of a statutory power must be backed by a valid and operative legal provision at the time of its exercise. The Tribunal’s reliance on the coordinate bench decisions ensures consistency in the Kolkata ITAT and provides a strong precedent for assessees challenging faceless assessments initiated before the notification date. It also clarifies that the NFAC cannot assume jurisdiction under Section 151A merely because the provision exists in the Act; it must be specifically notified and made effective.
Conclusion
The ITAT allowed the appeal of Blazing Star Marketing Private Limited and quashed the assessment order passed by the NFAC for AY 2013-14. The decision underscores the critical importance of operational notification for faceless assessment provisions under Section 151A. It serves as a reminder to the tax administration that procedural compliance with the effective date of enabling provisions is mandatory, and any deviation renders the entire assessment invalid. For taxpayers, this judgment provides a powerful legal defence against assessments initiated prematurely under the faceless regime.