Telangana HC Quashes Reassessment by Jurisdictional AOs After Faceless Scheme Implementation

Mohammed Ibrahim Ali Vs Assessment Unit (Telangana High Court)

Telangana High Court Quashes Reassessment Proceedings Initiated by Jurisdictional Assessing Officers Post Faceless Scheme

The High Court for the State of Telangana, in a significant batch of writ petitions led by Mohammed Ibrahim Ali vs. Assessment Unit, National Faceless Assessment Centre, delivered an important ruling concerning reassessment proceedings under Sections 148A and 148 of the Income-tax Act, 1961.

The Division Bench comprising Aparesh Kumar Singh and G. M. Mohiuddin held that reassessment proceedings initiated by Jurisdictional Assessing Officers (JAOs) after the implementation of the Faceless Assessment Scheme on 29.03.2022 were without jurisdiction and liable to be quashed.

Core Issue

The common legal issue was:

Whether, after the Faceless Assessment Scheme notified under Section 151A on 29.03.2022, reassessment proceedings under Sections 148A and 148 could still be initiated by the Jurisdictional Assessing Officer (JAO), instead of the Faceless Assessing Officer (FAO).

The Court answered this in favour of the assessees.

What the Court Held

The Bench comprising Aparesh Kumar Singh and G. M. Mohiuddin held:

• After the Faceless Scheme became operational on 29.03.2022, reopening proceedings had to be initiated through the Faceless Assessment mechanism.
• Since the notices in these cases were issued by the JAO, they suffered from lack of jurisdiction.
• The issue was already settled by earlier Telangana High Court judgments, especially:
  • Kankanala Ravindra Reddy v. Income Tax Officer
  • W.P. No.26304 of 2024 decided on 28.04.2025.

Accordingly, the Court:

• quashed the notices issued under Section 148A,
• quashed the notices under Section 148,
• and also quashed consequential assessment orders and penalty proceedings.

Important Reasoning

The Court emphasized that:

• the reassessment machinery after 29.03.2022 had to operate through the faceless regime;
• multiple High Courts across India had taken the same view;
• the Revenue could not continue using the old jurisdictional mechanism contrary to the statutory scheme.

The Court also noted that:

• the Department admitted the proceedings were initiated by the JAO after 29.03.2022;
• no stay had been granted by the Supreme Court against earlier High Court decisions.

Effect of the Judgment

Proceedings Set Aside

The following were set aside:

• Section 148A(b) notices,
• Section 148A(d) orders,
• Section 148 notices,
• consequential reassessment orders,
• and related penalty proceedings in connected matters.

Liberty Reserved to Revenue

The Court protected the Revenue’s rights by stating:

• the Department may proceed afresh in accordance with law,
• consistent with the Supreme Court decision in Union of India v. Ashish Agarwal,
• and subject to the outcome of pending SLPs before the Supreme Court.

So the judgment is not an absolute bar on reassessment; it only invalidates the defective procedure adopted.

Why This Judgment Is Significant

This is another major judgment in the nationwide litigation concerning:

• reassessment notices after the Finance Act, 2021,
• faceless reassessment,
• and the jurisdiction of officers under the new reassessment regime.

The ruling strengthens the line of cases holding that:

• once the Faceless Scheme came into force,
• JAO-issued reassessment proceedings became invalid.

Cases Relied Upon

The Court referred to several High Court rulings from:

• Telangana
• Bombay
• Gujarat
• Madras
• Punjab and Haryana
• Rajasthan
• Jharkhand
• Himachal Pradesh
• Gauhati
• Delhi

though it also acknowledged contrary judgments from some High Courts.

Bottom-Line Summary

The judgment holds that:

Reassessment proceedings initiated by Jurisdictional Assessing Officers after implementation of the Faceless Assessment Scheme on 29.03.2022 are invalid for lack of jurisdiction.

Background of the Dispute

The writ petitions challenged reassessment proceedings initiated under Sections 148A and 148 of the Income-tax Act by Jurisdictional Assessing Officers despite the introduction of the e-Assessment of Income Escaping Assessment Scheme, 2022, notified under Section 151A of the Act.

The petitioners argued that once the faceless reassessment regime came into force on 29.03.2022, reassessment proceedings could only be initiated through the Faceless Assessing Officer (FAO) mechanism and not by the traditional jurisdictional officers.

The batch included numerous taxpayers, companies, cooperative societies, and entities against whom notices had been issued for various assessment years after the introduction of the faceless regime.

Reliance on Earlier Telangana High Court Decisions

The petitioners heavily relied upon the earlier landmark decision in:

• Kankanala Ravindra Reddy v. Income Tax Officer

and the subsequent order dated 28.04.2025 passed in W.P. No.26304 of 2024.

The Telangana High Court had previously ruled that reassessment proceedings initiated by JAOs after the implementation of the Faceless Scheme suffered from inherent lack of jurisdiction.

The petitioners also cited several judgments from various High Courts across India, including Bombay, Gujarat, Rajasthan, Punjab & Haryana, Madras, Jharkhand, Gauhati, Karnataka, and Himachal Pradesh, supporting the same proposition.

Revenue’s Stand

The Income Tax Department admitted before the Court that:

• the impugned proceedings had indeed been initiated by Jurisdictional Assessing Officers;
• such proceedings were initiated after 29.03.2022;
• several High Courts had taken a consistent view against the Revenue.

However, the Revenue also pointed out that certain contrary decisions existed from some High Courts and informed the Court that Special Leave Petitions challenging the Telangana High Court judgments were pending before the Supreme Court.

Importantly, no stay had been granted by the Supreme Court against the earlier Telangana High Court rulings.

Findings of the Court

The Court observed that the issue was no longer res integra and stood conclusively covered by earlier decisions of the Telangana High Court.

The Bench noted that:

• the Faceless Assessment Scheme came into force on 29.03.2022;
• the impugned notices under Sections 148A and 148 were issued thereafter by JAOs;
• such proceedings were contrary to the statutory scheme introduced under Section 151A.

The Court reproduced portions of the earlier judgment wherein it was held that the reassessment proceedings were procedurally illegal and liable to be quashed.

The Bench further expressed concern over repeated litigation on an issue already settled by multiple High Courts.

Operative Directions

Accordingly, the Court:

• quashed the impugned notices issued under Sections 148A and 148;
• quashed consequential reassessment orders and penalty proceedings;
• disposed of all writ petitions in favour of the assessees on the jurisdictional issue.

At the same time, the Court clarified that:

• the Revenue’s rights would remain protected;
• the Department could proceed in accordance with law, if permissible;
• the outcome would remain subject to the pending Special Leave Petitions before the Supreme Court.

The Court also relied upon the Supreme Court’s ruling in:

• Union of India v. Ashish Agarwal

while granting liberty to the Revenue.

Significance of the Judgment

This ruling is another important addition to the growing body of jurisprudence concerning reassessment proceedings after the Finance Act, 2021 reforms.

The judgment reinforces the principle that:

Once the Faceless Assessment Scheme became operational, reassessment proceedings had to comply strictly with the faceless mechanism prescribed under law.

The decision is likely to have a substantial impact on reassessment proceedings initiated across the country by jurisdictional officers after 29.03.2022.

Taxpayers facing similar reassessment notices may rely upon this judgment to challenge proceedings initiated contrary to the faceless reassessment framework.

Conclusion

The Telangana High Court has once again reiterated that reassessment proceedings initiated by Jurisdictional Assessing Officers after the implementation of the Faceless Assessment Scheme are unsustainable in law.

By quashing the notices and consequential proceedings in this batch of cases, the Court has strengthened taxpayer protections against jurisdictionally defective reassessment actions while simultaneously safeguarding the Revenue’s interests pending final adjudication by the Supreme Court.

FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT

Heard learned counsel – Mr. T. Chaitanya Kumar; Ms. Akruti Agarwal; Mr. Dundu Sashank for Mr. Dundu Manmohan and Mr. T.V.L. Narasimha Rao; Mr. Singam Srinivas Rao and Mr. Vighnesh Asawa for Mr. A.V.A. Siva Kartikeya; Mr. Santosh Sagar Kapilavai; Mr. Sheetal Srikanth; Mr. Paturi Rama Krishna; Ms. Sneha Asthana; Mr. Kailash Nath P.S.S.; Mr. Sandeep Sripada for Mr. Karan Talwar; Mr. P.Soma Shekar Reddy; Mr. Mohammed Rafi for Ms. Shaik Vaheeda Sushma; Mr. Parikshith Kutur; Mr. P. Rama Sharana Sharma; Mr. A.V. Raghu Ram; Ms. Syeda Sajida Samareen Fatima; Mr. S.N.S.R. Chinmai and Mr. M. Naga Deepak, appearing for petitioners.

Also heard Ms. J. Sunitha, Ms. Bokaro Sapna Reddy, Mr. N. Praveen Reddy, Mr. Vijhay K. Punna, Mr. K. Sudhakar Reddy, learned Senior Standing Counsel appearing for Income Tax Department; Mrs. B. Kavita Yadav, learned Senior Standing Counsel appearing for Central Government and Mr. N. Bhujanga Rao, learned Deputy Solicitor General of India appearing for Union of India.

2. In all these Writ Petitions, the challenge is to the initiation of proceedings under Sections 148(A) and 148 of the Income Tax Act, 1961 (for short, “the Act”) by the Jurisdictional Assessing Officer (JAO).

3. Petitioners though have taken other pleas in most of these Writ Petitions, they submit that the issues involved in the present batch of Writ Petitions have been considered and settled in the order dated 28.04.2025 passed by the learned Coordinate Bench of this Court in W.P.No.26304 of 2024 following the decision rendered in the case of Kankanala Ravindra Reddy vs. Income Tax Officer¹. It is submitted that the present Writ Petitions may be disposed of on same lines after setting aside the impugned proceedings under Sections 148(A) and 148 of the Act and on similar terms as are set out in the case of Kankanala Ravindra Reddy (supra) and also in the order dated 28.04.2025 in W.P.No.26304 of 2024.

4. In support of the submissions made by the learned counsel for the petitioners, they relied on the judgments of Bombay High Court in Hexaware Technologies Ltd., vs. Assistant Commissioner of Income Tax and others²; Abhin Anilkumar Sah vs. Income Tax Officer (International Taxation) and others³; Bank of India vs. Assistant Commissioner of Income Tax and others⁴; judgment of Gauhati High Court in Ram Narayan Sah vs. Union of India and others⁵, judgment of Punjab and Haryana High Court in Jatinder Singh Bhangu vs. Union of India and others⁶, judgments of Telangana High Court in Venkataramana Reddy Patloola vs. Deputy Commissioner of Income Tax and others⁷; Shaik Sajid vs. Assessment Unit, Income Tax Department and others⁸; Kings Pride Infra Projects (P) Ltd., vs. Deputy Commissioner of Income Tax⁹; Satyaprakash Chigurupati vs. The Assistant Commissioner of Income Tax, Ward 6(1), Hyderabad¹⁰; and Deloitte Consulting India (P) Ltd., vs. Assessment Unit, Income Tax Department¹¹, judgment of Himachal Pradesh High Court in Govind Singh vs. Income Tax Officer¹²; judgment of Gujarat High Court in Mansukhbhai Dahyabhai Radadiya vs. Income Tax Officer, Ward 3(3)(5)¹³; judgment of Jharkhand High Court in Shyam Sunder Saw vs. Union of India and others¹⁴; judgment of Calcutta High Court in Giridhar Gopal Dalmia vs. Union of India and others¹⁵, judgments of Madras High Court in TVS Credit Services Ltd., vs. Deputy Commissioner of Income Tax¹⁶and Mark Studio India Pvt., Ltd., vs. Income Tax Officer and another¹⁷, judgments of Rajasthan High Court in Sharda Devi Chhajer vs. Income Tax Officer and another¹⁸and Shree Cement Ltd., vs. Assistant Commissioner of Income Tax¹⁹, and judgment of Karnataka High Court in Ramchandra Reddy Ravi Kumar vs. Deputy Commissioner of Income Tax²⁰.

5. These matters have been clubbed together for the reason that all of them assail the proceedings initiated under Section 148(A) followed by notice under Section 148 of the Act for reopening the assessment by JAO. The dates of the impugned notices and proceedings have been referred to in the individual Writ Petitions, which are post 29.03.2022 i.e., the date on which the Central Government, in exercise of the powers conferred under Section 151A of the Act, has made the e-Assessment of Income Escaping Assessment Scheme, 2002 vide Notification No.18 of 2022.

6. The respondent Department was asked to obtain instructions and file counter-affidavits, if necessary, on facts and legal issues which are raised herein.

7. The learned Senior Standing Counsel for the respondent Department had obtained instructions in all these matters. Based upon the instructions received from the Department, learned counsel for the respondents do not dispute that the initiation of impugned proceedings under Section 148(A) of the Act has been done by JAO after coming into force of the Faceless Scheme with effect from 29.03.2022.

8. The learned Senior Standing Counsel for the respondents have also not been able to dispute that the legal issues as regards the jurisdiction of JAO to initiate proceedings instead of Faceless Assessing Officer (FAO) have been well settled by the Coordinate Bench of this Court vide order dated 28.04.2025 in W.P.No.26304 of 2024 and followed in several other judgments.

9. The learned Senior Standing Counsel for the respondents also do not dispute that other jurisdictional High Courts have also taken the same view. However, they submit that a contrary view has been taken in the following decisions as well. In support of their submissions, they relied upon the judgment of Bombay High Court in Caishen Enterprise LLP vs. Assistant Commissioner²¹, judgments of Madras High Court in Mark Studio India (P) Ltd., Vs. Income Tax Officer²² and Perur Builders (P) Ltd., Vs. Income Tax Officer²³, judgment of Gujarat High Court in Talati and Talati LLP vs. Assistant Commissioner of Income Tax²⁴ and judgment of Delhi High Court in T.K.S. Builders (P) Ltd., vs. Income Tax Officer²⁵.

10. The learned Senior Standing Counsel for the respondents submit that SLP(C).No.027736 of 2023 and batch challenging the orders passed by this Court and other jurisdictional High Courts are pending before the Hon’ble Supreme Court but no stay of the impugned judgments has been granted in favour of the revenue.

11. We have considered the submissions of the learned counsel for the parties and also the relevant factual assertion made by the petitioners that the impugned proceedings have been initiated by JAO after coming into force of the Faceless Scheme with effect from 29.03.2022. The relevant details concerning individual petitioners are appended to this order and shall be treated as part of the order. They indicate the relevant assessment year, the date of notice issued under Section 148A of the Act, the date of the order under Section 148 of the Act, the date of sanction under Section 151 of the Act, intimation to proceed with assessment under Section 144B of the Act, the date of assessment order as against the individual writ petitions referred to in Column No.1.

12. From a perusal of the tabulation chart, it is apparent that the impugned proceedings in all these cases have been initiated by JAO after coming into force of the Faceless Scheme with effect from 29.03.2022.

13. The legal issue as regards the lack of jurisdiction on the part of JAO to initiate the proceedings post implementation of the Faceless Scheme is no longer res integra as it has been held in the case of Kankanala Ravindra Reddy (supra) and by other jurisdictional High Courts.

14. As a matter of fact, several orders following the ratio rendered in the above cases have been passed one after the other. Therefore, we are of the considered view that the present batch of Writ Petitions also stand covered by the decision rendered by this Court in the case of Kankanala Ravindra Reddy (supra). The relevant extract of the order dated 28.04.2025 passed in W.P.No.26304 of 2024 is reproduced hereunder:

“15. What is worrying this Bench more is the fact that an endeavour is being made whole heartedly to ensure not to generate further litigation on issues which have been laid to rest by a large number of High Courts all of whom have taken a consistent stand that the action of the Income Tax Department being violative of the Finance Act, 2020 and Finance Act, 2021. Now, in order to protect the interest of the Revenue as also that of the assessee, it would be trite at this juncture, if we dispose of the writ petition with an observation/direction that the disposal of the instant writ petition in terms of the judgment rendered by this High Court in the case of Kankanala Ravindra Reddy vs. Income Tax Officer [(2023) 156 taxmann.com 178 (Telangana)] shall however be subject to the outcome of the SLPs which were filed by the Income Tax Department and which is pending consideration before the Hon’ble Supreme Court.

17. So far as the interest of the Revenue is concerned, we are of the considered opinion that the interest of the Revenue has already been considered and protected, as has been observed in paragraphs 36, 37 and 38 of the order which, for ready reference, is reproduced hereunder:

36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respondent-Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent-Department pursuant to the notices issued under Sections 147 and 148 would also get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically.

37. The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petitioner which stands reserved to be raised and contended in an appropriate proceedings.

38. Since the Hon’ble Supreme Court had, in the case of Ashish Agarwal, supra, [Union of India vs. Ashish Agarwal [2022] 444 ITR 1 (SC)], as a one-time measure exercising the powers under Article 142 of the Constitution of India, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right conferred on the Revenue would remain reserved to proceed further if they so want from the stage of the order of the Supreme Court in the case of Ashish Agarwal, supra.

18. We would only further like to make observations that since we are inclined to dispose of the instant writ petition, conscious of the fact that the earlier order of this High Court in the case of Kanakala Ravindra Reddy (1 supra) is subjected to challenge before the Hon’ble Supreme Court in SLP No.3574 of 2024, preferred by the Income Tax Department, we make it clear that allowing of the instant writ petition is subject to outcome of the aforesaid SLP preferred by the Revenue against the decision of this High Court in the case of Kanakala Ravindra Reddy (1 supra). This, in other words, would mean that either of the parties, if they so want, may move an appropriate petition seeking revival of this writ petition in the light of the decision of the Hon’ble Supreme Court in the pending SLP on the very same issue.

19. Accordingly, the instant writ petition stands allowed in favour of the assessee so far as the issue of jurisdiction is concerned. As a consequence, the impugned notice under challenge under Sections 148-A and 148 stands set aside/quashed. The consequential orders, if any, also stand set aside/quashed in similar terms as have been passed by this High Court in the case of Kankanala Ravindra Reddy (1 supra). There shall be no order as to costs.”

15. The impugned proceedings under Sections 148A and 148 of the Act assailed in these Writ Petitions are set aside. The consequential orders, if any, also stand set aside on similar terms as held in the case of Kankanala Ravindra Reddy (supra). The revenue is also granted liberty in the same terms as at para 18 of the above quoted orders.

16. Accordingly, the instant Writ Petitions are disposed of. There shall be no order as to costs.

Miscellaneous applications, if any pending, shall stand closed.

Notes:

¹ (2023) 156 taxmann.com 178 (Telangana)

² (2024) 464 ITR 430 (Bom)

³ (2024) 468 ITR 350 (Bom)

⁴ (2024) 468 ITR 350 (Bom)

⁵ (2024) 471 ITR 228 (Gauhati)

⁶ (2024) 466 ITR 474 (P&H)

⁷ (2023) 468 ITR 181 (Telangana)

⁸ W.P.No.26885 of 2024

⁹ (2025) 176 taxmann.com 704 (Telangana)

¹⁰ W.P.No.21063 of 2025 & batch

¹¹ (2025) 178 taxmann.com 781 (Telangana)

¹² (2024) 165 taxmann.com 113 (Himachal Pradesh)

¹³ (2024) SCC OnLine Guj 4012

¹⁴ (2025) SCC OnLine Jhar 287

¹⁵ MAT No.1690 of 2023 (DB)

¹⁶ (2025) 174 taxmann.com 1078 (Mad) (SB)

¹⁷ W.A.No.781 of 2021 (DB)

¹⁸ (2025) 477 ITR 228 (Raj)

¹⁹ (2025) 177 taxmann.com 538 (Rajasthan)

²⁰ (2025) 170 taxmann.com 422 (Bombay)

¹⁶ (2025) 174 taxmann.com 1078 (Mad) (SB)

¹⁷ W.A.No.781 of 2021 (DB)

¹⁸ (2025) 477 ITR 228 (Raj)

¹⁹ (2025) 177 taxmann.com 538 (Rajasthan)

²⁰ (2025) 170 taxmann.com 422 (Bombay)

²¹ (2025) 176 taxmann.com 471 (Bombay)

²² (2024) 169 taxmann.com 542 (Madras)

²³ (2025) 175 taxmann.com 253 (Madras)

²⁴ (2024) 167 taxmann.com 371 (Gujarat)

²⁵ (2024) 167 taxmann.com 759 (Delhi)