The Andhra Pradesh High Court has delivered a significant ruling on the jurisdictional validity of reassessment notices issued under Section 147 of the Income Tax Act, 1961 outside the prescribed faceless assessment mechanism. This judgment reinforces the mandatory nature of the E-Assessment Scheme of Income Escaping Assessment, 2022, clarifying that jurisdictional assessing officers cannot unilaterally issue notices or orders without adhering to the statutory framework established under Section 144B read with Section 151A of the Act.
Background & Facts
The Dispute
The petitioner, Sri Venkateswara Infratech, a partnership firm engaged in infrastructure development, challenged an order dated 22 February 2024 issued by the National Faceless Assessment Centre (NFAC) under Section 147 read with Section 144B of the Income Tax Act. The order, bearing DIN No. ITBA/AST/S/147/2023-24/1061305097(1), sought to reopen the assessment for the assessment year 2016-17. The petitioner contended that the order was arbitrary, violative of principles of natural justice, and contrary to the statutory provisions governing reassessment proceedings.
Procedural History
The dispute progressed through the following stages:
- 2024: The NFAC issued the impugned reassessment order under Section 147 for the assessment year 2016-17.
- 2025: The petitioner filed Writ Petition No. 36122 of 2025 before the Andhra Pradesh High Court, challenging the order on multiple grounds, including jurisdictional overreach and violation of constitutional provisions.
- 2025: The petitioner also filed IA No. 1 of 2025, seeking a stay on all recovery proceedings pursuant to the impugned order.
Relief Sought
The petitioner sought the following reliefs:
- A writ of mandamus quashing the reassessment order dated 22 February 2024 as arbitrary, illegal, and void ab initio.
- A declaration that the order violated Articles 14, 19(1)(g), and 265 of the Constitution of India, as well as the provisions of Sections 148A and 149 of the Income Tax Act.
- An injunction restraining the respondents from taking any further action pursuant to the impugned order.
The Legal Issue
The central question before the Court was whether a jurisdictional assessing officer (JAO) possesses the authority to issue reassessment notices or orders under Section 147 of the Income Tax Act outside the faceless assessment mechanism prescribed under Section 144B read with Section 151A and the E-Assessment Scheme of Income Escaping Assessment, 2022.
Arguments Presented
For the Petitioner
The petitioner’s counsel advanced the following contentions:
- The impugned order was issued in violation of the E-Assessment Scheme, 2022, which mandates that all reassessment proceedings under Section 147 must be conducted through the faceless mechanism.
- The JAO lacked jurisdiction to issue the order, as the Central Board of Direct Taxes (CBDT) had notified the E-Assessment Scheme under Section 151A, making compliance with the faceless mechanism mandatory.
- The order was arbitrary and violated principles of natural justice, as it was passed without affording the petitioner an opportunity to be heard.
- The reassessment proceedings were initiated in contravention of Sections 148A and 149, which prescribe specific conditions for reopening assessments.
For the Respondent
The learned Standing Counsel for the Income Tax Department argued:
- The JAO retained residual jurisdiction to issue reassessment notices even under the faceless assessment framework, particularly in cases where the NFAC had delegated authority.
- The E-Assessment Scheme, 2022 did not explicitly bar the JAO from exercising jurisdiction in reassessment matters.
- The impugned order was issued in accordance with the statutory provisions, and the petitioner’s challenge was premature as the reassessment proceedings were still ongoing.
The Court's Analysis
The Court relied on its earlier judgment in Smt. Parameela Pasumarthi v. Deputy Commissioner of Income Tax Circle-II, Vijayawada and another (W.P. No. 14681 of 2023 and batch), which had comprehensively addressed the jurisdictional validity of reassessment notices issued outside the faceless mechanism. The Court observed:
"Considering the background in notifying the (E-Assessment Scheme of Income Escaping Assessment Scheme, 2022) notified by the Government of India on 29.03.2022, and in the light of the decisions of various High Courts stated supra and upon careful consideration of the contentions raised by the learned counsel appearing on either side, we hold that the impugned notices and orders which have been issued by the Jurisdictional Assessing Officer, or outside the faceless mechanism as provided under the provisions of Section 144B read with Section 151A and the 'E-Assessment Scheme of Income Escaping Assessment Scheme, 2022' notified by the Government of India on 29.03.2022 under Section 151A, is bad and illegal. It is made clear that the Jurisdictional Assessing Officer ('JAO') had no jurisdiction to issue the impugned orders/notices."
The Court’s reasoning rested on the following key principles:
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Statutory Interpretation: The Court emphasized that the E-Assessment Scheme, 2022, notified under Section 151A, was intended to create a mandatory faceless mechanism for reassessment proceedings. The scheme explicitly provided that all notices, orders, and communications under Section 147 must be issued through the NFAC, thereby divesting the JAO of independent jurisdiction.
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Jurisdictional Validity: The Court held that the JAO’s authority to issue reassessment notices was circumscribed by the E-Assessment Scheme. Any notice or order issued outside this framework was void ab initio for want of jurisdiction. The Court rejected the respondent’s argument that the JAO retained residual authority, noting that the scheme’s language was clear and unambiguous in its mandate.
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Precedential Consistency: The Court noted that its decision aligned with the rulings of other High Courts, which had similarly held that reassessment proceedings must adhere to the faceless mechanism. This consistency reinforced the binding nature of the E-Assessment Scheme and the limited role of the JAO in such proceedings.
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Natural Justice: While the Court did not explicitly address the petitioner’s contention regarding principles of natural justice, the judgment implicitly upheld these principles by ensuring that reassessment proceedings conformed to a structured, transparent, and accountable framework under the faceless mechanism.
The Verdict
The Andhra Pradesh High Court allowed the writ petition and set aside the reassessment order dated 22 February 2024 issued by the NFAC under Section 147 read with Section 144B of the Income Tax Act. The Court held that the JAO lacked jurisdiction to issue the impugned order outside the faceless assessment mechanism prescribed under Section 144B read with Section 151A and the E-Assessment Scheme, 2022. No order as to costs was passed, and all pending miscellaneous applications were closed.
What This Means For Similar Cases
Faceless Mechanism Is Mandatory For Reassessment
The judgment reaffirms that reassessment proceedings under Section 147 must strictly adhere to the faceless assessment mechanism prescribed under Section 144B and the E-Assessment Scheme, 2022. Practitioners should note:
- JAOs cannot unilaterally issue reassessment notices or orders outside the NFAC framework.
- Any reassessment order issued by a JAO without following the faceless mechanism is void ab initio and liable to be quashed.
- Taxpayers challenging reassessment orders should scrutinize compliance with the E-Assessment Scheme as a primary ground for relief.
Jurisdictional Challenges Can Invalidate Reassessment
The judgment underscores the importance of jurisdictional compliance in reassessment proceedings. Key takeaways include:
- Section 151A confers exclusive authority on the CBDT to notify schemes for reassessment, and such schemes override the general powers of JAOs.
- Courts are likely to strictly construe the scope of the JAO’s authority in light of the faceless assessment framework.
- Taxpayers should raise jurisdictional objections at the earliest opportunity to avoid waiver of rights.
Precedential Value Of The Judgment
This judgment holds significant precedential value for similar cases across India:
- The decision aligns with the rulings of other High Courts, reinforcing the uniform application of the E-Assessment Scheme.
- Lower courts and tribunals are likely to follow this precedent when adjudicating challenges to reassessment orders.
- The judgment provides a clear legal basis for taxpayers to challenge reassessment proceedings initiated outside the faceless mechanism.
