Jurisdiction in Reassessment under the Faceless Regime

Jurisdiction in Reassessment under the Faceless Regime:

Reconciling Statute, Scheme and Judicial Divergence

Executive Summary

The faceless reassessment regime represents a significant structural transformation in income-tax administration. Conceived to eliminate discretion-based interface and introduce system-driven transparency, the regime has nevertheless generated substantial controversy regarding jurisdiction in proceedings under Sections 147, 148 and 148A of the Income-tax Act, 1961. A central question has emerged: once reassessment is mandated to be conducted in a faceless manner, does the Jurisdictional Assessing Officer retain authority to initiate proceedings, or is such power exclusively vested in the faceless framework?

Divergent High Court rulings reflect competing interpretative approaches—ranging from strict mandatory compliance to statutory construction and concurrent jurisdiction models. The proposed insertion of Section 147A under the Finance Bill 2026 seeks to clarify legislative intent. Until authoritative resolution, jurisdictional challenges will remain central to reassessment litigation. The controversy ultimately reaffirms a foundational principle: technological reform cannot displace statutory jurisdiction unless clearly authorised by law.

1. Introduction: Assessment as a Jurisdictional Act

Assessment under the Income-tax Act, 1961 (“the Act”) is the statutory process through which returned income is translated into a legally enforceable tax liability. It is neither a mechanical computation nor a mere verification exercise. It involves examination of facts, evaluation of claims, application of statutory provisions and formation of reasoned satisfaction by the Assessing Officer.

Jurisdiction forms the bedrock of this process. An order passed without lawful authority is void ab initio, irrespective of the merits of additions made therein. Jurisdiction is not a procedural formality but a condition precedent to validity.

The transition to a faceless regime has fundamentally altered the administrative structure of assessment. However, it has also raised important questions concerning the source and exercise of jurisdiction—particularly in reassessment proceedings.

2. Traditional Framework of Jurisdiction

Before the faceless regime, jurisdiction was primarily governed by Sections 120 and 124 of the Act.

Section 120 empowers income-tax authorities to exercise powers in accordance with directions issued by the Board. Jurisdiction may be assigned based on territorial area, persons, income or cases. Section 124 further provides that an Assessing Officer shall have jurisdiction over persons carrying on business or residing within assigned territorial limits.

The Act also prescribes time limits within which jurisdiction may be challenged. Where a return has been filed, objection must be raised within one month from service of notice under Section 142(1) or 143(2), or before completion of assessment. In cases where no return is filed, objection must be raised within the time allowed under notice issued under Section 142(1) or Section 148. In search cases, objection must be raised within one month from service of notice under Section 153A or 153C.

Under this framework, the Jurisdictional Assessing Officer (“JAO”) functioned as the single statutory authority responsible for initiation, conduct and completion of proceedings.

3. Emergence of the Faceless Regime

3.1 Legislative Evolution

The structural shift began with the Finance Act, 2018, which inserted Section 143(3A), empowering the Central Government to introduce a scheme eliminating physical interface between the assessee and the Assessing Officer.

The E-Assessment Scheme, 2019 introduced the National e-Assessment Centre and specialised Assessment, Review, Technical and Verification Units. Proceedings were centralised, and communication was routed electronically. Upon completion, records were transferred to the jurisdictional officer.

The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (“TOLA”) expanded the scope of the scheme to include Section 144 assessments and introduced Section 151A to enable faceless reassessment.

The Finance Act, 2021 substituted the entire reassessment framework, introducing Section 148A and inserting Section 144B to codify faceless assessment procedure. The Finance Act, 2022 further substituted Section 144B and integrated reassessment proceedings within the faceless architecture. The E-Assessment of Income Escaping Assessment Scheme, 2022 provided for automated allocation under a risk management strategy.

Thus, reassessment proceedings were legislatively integrated into a system-driven mechanism.

4. The Jurisdictional Controversy

Following notification of the 2022 scheme, a fundamental question arose:

Does the Jurisdictional Assessing Officer retain authority to initiate reassessment, or must initiation occur exclusively through automated faceless allocation?

The issue is not administrative but jurisdictional. If the faceless scheme is mandatory and jurisdictional in character, deviation would render proceedings void. If the scheme is procedural, the absence of faceless initiation may not automatically invalidate notice.

On this issue High Courts have adopted divergent views.

5. Judicial Divergence

5.1 Telangana High Court – Mandatory Compliance Model

In Kankanala Ravindra Reddy ^[1], the Telangana High Court treated the faceless reassessment scheme as a statutory mandate. The Court held that automated allocation under the risk management strategy and conduct of proceedings in faceless mode were mandatory conditions. Relying on the principle that where a statute prescribes a particular manner of doing a thing it must be done in that manner alone, the Court concluded that deviation renders proceedings invalid.

Applicability to Non-Resident cases is dealt with in case of Sri Venkataramana Reddy Patloola ^[2]. The Telangana High Court examined whether reassessment notices issued in International Tax cases must comply with the faceless procedure prescribed under the scheme dated 29.03.2022.

The Revenue contended that international tax charges were exempt from the faceless mechanism and that the Jurisdictional Assessing Officer could issue notice under Section 148 outside the faceless framework.

The Court rejected this argument. It held that any exemption relating to international tax charges applies only at the stage of passing the assessment order and not to the issuance of notice under Section 148. The scheme mandates automated allocation and faceless conduct of reassessment proceedings. The statutory language, being clear, cannot be diluted by reading implied exclusions.

Since the notices were not issued through the faceless mechanism, the Court held that the initiation itself was invalid and all consequential proceedings stood vitiated.

A similar view was taken in Deepanjan Roy v. ADIT (International Taxation) ^[3], Hyderabad, where reassessment notices issued outside the faceless framework were quashed. The Court treated compliance with the faceless scheme as mandatory and jurisdictional in nature.

The Hon’ble Supreme Court has dismissed the SLP filed by the Revenue against the orders of Telangana High Court in case of DEEPANJAN ROY vide order dated 16.07.2025. SLP(C) No. 018753 / 2025 Registered on 17-07-2025.

5.2 Bombay High Court – Statutory Construction Approach

In Hexaware Technologies Ltd., the Bombay High Court ^[4] examined the scope of Section 151A and the expression “to the extent provided in Section 144B.” The Court held that the scheme is with reference to only making assessment or reassessment or total income or loss of assessee. The said term does not apply with the issue of notice U/s 148 of the Act.

It is pertinent to note that the Hon’ble Bombay High Court, while adjudicating the issue, placed reliance on the decision of the Hon’ble Telangana High Court in Kankanala Ravindra Reddy v. Income Tax Officer  and, following the same reasoning, held that reassessment notices issued by the Jurisdictional Assessing Officer contrary to the faceless mandate are unsustainable in law.

While reiterating that actions contrary to statutory mandate inherently cause prejudice, the Court did not find explicit statutory divestment of the Jurisdictional Assessing Officer at the initiation stage. The ruling thus rests on statutory construction and the absence of express exclusion, rather than on recognition of unfettered concurrent jurisdiction.

5.3 Delhi High Court – Functional Concurrent Model

In T.K.S. Builders (P) Ltd., the Delhi High Court ^[5] observed that Section 144B does not regulate commencement of reassessment under Sections 147, 148 and 148A. The Jurisdictional Assessing Officer independently receives information and forms satisfaction. The faceless mechanism reorganises procedure but does not extinguish statutory authority at initiation. The Court’s reasoning suggests a complementary or concurrent model of jurisdiction.

5.4 Gujarat High Court – Unity of Authority Principle

In Snehdham Trust, the Gujarat High Court ^[6] emphasised continuity of authority. It held that the authority issuing notice under Section 148 must align with the authority passing the order under Section 148A(d). Fragmentation of statutory stages between different authorities was considered inconsistent with the statutory framework.

6. Analytical Perspective

The divergence ultimately turns on whether the faceless scheme is jurisdictional or procedural in character. If jurisdictional, automated allocation is a condition precedent. If procedural, initiation by the Jurisdictional Assessing Officer may not automatically invalidate proceedings absent express prohibition.

Section 151A empowers the Government to notify a scheme but does not expressly redefine jurisdictional authority. Courts differ on whether delegated legislation can implicitly displace statutory jurisdiction absent explicit amendment.

The issue therefore lies at the intersection of delegated legislation and statutory conferment of authority.

Conclusion:-

The faceless reassessment regime reflects an ambitious administrative reform. Yet the controversy surrounding jurisdiction demonstrates that technological transformation cannot override foundational legal principles.

Jurisdiction must flow clearly and unequivocally from statute. Where legislative language is ambiguous, courts will interpret scheme notifications in harmony with the parent Act. The divergence across High Courts underscores the delicate balance between administrative modernisation and statutory authority.

7. Legislative Clarification – Proposed Section 147A

The legislative position has now been clarified by insertion of Section 147A, which begins with a non obstante clause overriding any judgment, order or decree of any court, as well as Section 151A and any scheme framed thereunder. The provision expressly declares, for removal of doubts, that the “Assessing Officer” for the purposes of Sections 148 and 148A shall mean and shall always be deemed to have meant an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in Section 144B(3).

By employing retrospective deeming language and expressly overriding judicial pronouncements, Parliament has sought to clarify that the authority competent to issue notices under Sections 148 and 148A is the Jurisdictional Assessing Officer and not the faceless set-up.

This amendment appears to reaffirm the primacy of the Jurisdictional Assessing Officer at the initiation stage. Its character—whether declaratory or prospective—will significantly influence ongoing litigation. If treated as clarificatory, it may strengthen the statutory construction approach. If prospective, past notices may continue to be examined under existing judicial divergence.

-----

^[1]Kankanala Ravindra Reddy Versus The Income Tax Officer and 2 others - 2023 (9) TMI 951 - TELANGANA HIGH COURT

^[2]Sri Venkataramana Reddy Patloola Versus Deputy Commissioner of Income Tax, Circle 1 (1), Hyderabad and Others - 2024 (9) TMI 100 - TELANGANA HIGH COURT

^[3]DEEPANJAN ROY Versus ADIT INT TAXN -2., HYD - 2024 (8) TMI 1598 - TELANGANA HIGH COURT

^[4]Hexaware Technologies Limited Versus Assistant Commissioner of Income Tax, Circle 15 (1) (2), Mumbai, Principal Commissioner of Income Tax, Mumbai – 6, Principal Chief Commissioner of Income Tax, Mumbai, Central Board of Direct Taxes, Union of India. -2024 (5) TMI 302 - BOMBAY HIGH COURT

^[5]T.K.S. Builders Pvt. Ltd., GDR Finance And Leasing Private Limited, Sulochna Goel, Bishamber Dayal Chander Mohan (Acting Through Competent Partner, Mr. Chander Mohan Agarwal) Versus Income Tax Officer Ward 25 (3) New Delhi. - 2024 (10) TMI 1586 - DELHI HIGH COURT

^[6]Snehdham Trust Versus Assistant Commissioner of Income Tax, Central Circle 2 (2), Ahmedabad - 2026 (2) TMI 266 - GUJARAT HIGH COURT