Reassessment notices u/s147 after faceless scheme rollout held invalid when issued by jurisdictional officer; reassessment quashed.

The dominant issue was whether reassessment proceedings under s.147 could be validly initiated through notices issued by the jurisdictional AO after the faceless reassessment scheme became operative. Applying s.151A read with the Faceless Scheme dated 29.03.2022, and following HC precedent, the Tribunal held that issuance of s.148A(d) and s.148 notices by the jurisdictional AO, instead of the faceless authority, was without jurisdiction and therefore void ab initio. Consequently, the impugned reassessment initiation was quashed and the assessee's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether reassessment initiation and continuation were invalid because the notice under section 148 and the order under section 148A(d) were issued/passed by the Jurisdictional Assessing Officer instead of being issued through the faceless/automated allocation mechanism contemplated by the CBDT Notification dated 29.03.2022 and section 151A.

(ii) Whether, upon holding the notice under section 148 invalid for non-adherence to the mandatory faceless procedure, the consequential reassessment order under section 147 read with section 144 and the appellate order sustaining it were liable to be set aside without examining the merits of the addition.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Validity of section 148 notice and section 148A(d) order when issued by JAO after the 29.03.2022 Scheme

Legal framework (as discussed by the Court): The Court noted the CBDT Notification dated 29.03.2022 formulating "the e-assessment of income assessment Scheme, 2022", providing that reassessment/re-computation under section 147 and issuance of notice under section 148 shall be through automated allocation, in accordance with the Board's risk management strategy, and in a faceless manner to the extent provided in section 144B, pursuant to section 151A.

Interpretation and reasoning: The Court found as a matter of fact that both the notice under section 148 dated 27.03.2023 and the order under section 148A(d) dated 27.03.2023 were issued/passed by the Income Tax Officer, Non-Corp Ward-10(6), Chennai (the JAO), and not by the NFAC/faceless mechanism. Since these actions were taken after 29.03.2022, the Court held that the Scheme was directly applicable. The Court accepted the assessee's contention that the reassessment initiation was not "in accordance with the aforesaid Scheme" and therefore suffered from a foundational illegality. The Court relied on the jurisdictional High Court decision holding that it is mandatory for the faceless mechanism to issue such notices and that issuance by the JAO renders the notice invalid; the Court treated that view as governing because there was no stay and it was binding on the Tribunal.

Conclusions: The Court conclusively held that the notice under section 148 (and the connected action under section 148A(d)) issued by the JAO, contrary to the mandatory faceless procedure under the Scheme notified on 29.03.2022, was unsustainable in law and liable to be set aside.

Issue (ii): Consequential fate of reassessment order and appellate confirmation; whether merits need examination

Legal framework (as applied): The Court proceeded on the principle that where the jurisdictional notice for reopening is invalid, the proceedings founded upon it cannot survive. It also took note of the jurisdictional High Court's approach of quashing such notices while keeping open rights and contentions, including liberty to seek revival if the Revenue ultimately succeeds before the Supreme Court on the underlying legal controversy.

Interpretation and reasoning: Having found the foundational notice under section 148 invalid for breach of the mandatory faceless procedure, the Court held that the consequential orders could not stand. The Court therefore did not enter upon adjudication of the merits of the addition made in the reassessment (including the addition treated as unexplained investment), because the reassessment itself was vitiated at inception. The Court further adopted the jurisdictional High Court's caveat that rights and contentions remain open, with liberty to approach for revival if the Revenue succeeds before the Apex Court in the pending challenge to the governing legal position.

Conclusions: The Court set aside the impugned notice under section 148 and all consequential orders, allowed the appeal on the legal issue, and expressly kept open the rights and contentions of both sides, including liberty for revival in the event the Revenue succeeds before the Supreme Court; in case of revival, the assessee was held entitled to press all grounds raised.

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