JAO Section 148 Reassessment Remanded After Retrospective Amendment: ITAT Chennai

ITO vs. Munirathinam Sivasankari (ITAT Chennai)

Summary: The Chennai Bench of the Income Tax Appellate Tribunal considered the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, dated 06.03.2026 for AY 2020-21. The Revenue’s appeal was delayed by four days, which the Tribunal condoned after considering the Assessing Officer’s affidavit and finding sufficient cause. The CIT(A) had quashed the reassessment proceedings solely on the jurisdictional ground that the notice under section 148 had been issued by the Jurisdictional Assessing Officer instead of the Faceless Assessing Officer. For this conclusion, the CIT(A) relied upon the Madras High Court decisions in Mark Studio India Pvt. Ltd. v. ITO & Others and TVS Credit Services Ltd. v. ITO, which held that notices issued by JAOs on or after 29.03.2022 were invalid under the faceless reassessment regime. Since the proceedings were quashed on this preliminary issue, the assessee’s remaining grounds were not adjudicated. Subsequently, the Finance Act, 2026 introduced a retrospective amendment validating the issuance of such notices by JAOs. The Supreme Court, by its order dated 10.04.2026, took note of the amendment and set aside the High Court judgments holding that JAOs lacked jurisdiction to issue notices under section 148 on or after 29.03.2022. However, the Supreme Court preserved the taxpayers’ right to challenge the validity of the retrospective amendment before the respective High Courts and directed the High Courts to decide writ petitions filed on or before 31.07.2026. The ITAT held that the judicial foundation on which the CIT(A)’s order rested had consequently been removed and the order could not survive in its existing form. It therefore set aside the CIT(A)’s order and restored the appeal for fresh adjudication. The CIT(A) was directed to await the jurisdictional High Court’s decision on the validity of the retrospective amendment and thereafter decide the appeal in conformity with that judgment. If the assessee chose not to pursue the jurisdictional challenge, the CIT(A) could adjudicate the remaining grounds on merits after providing a reasonable opportunity of hearing. Accordingly, the Revenue’s appeal was allowed for statistical purposes.

Revenue Challenges Quashing of Reassessment

The Chennai Bench of the ITAT considered an appeal filed by the Revenue against the order of the NFAC dated 06.03.2026 for AY 2020-21 in the case of Shri Munirathinam Sivasankari.

The Revenue’s appeal was delayed by four days. The AO filed an affidavit explaining the reasons for the delay. Finding sufficient cause and observing that no lapse could be attributed to the Department, the Tribunal condoned the delay and proceeded to decide the appeal on merits.

The dispute concerned the validity of a notice issued under section 148 by the Jurisdictional Assessing Officer (JAO) instead of the Faceless Assessing Officer (FAO).

The assessee remained unrepresented before the Tribunal. However, after examining the appellate order and subsequent legal developments, the ITAT found that the very basis upon which the CIT(A) had quashed the reassessment no longer survived.

CIT(A) Quashes Notice Issued by JAO

Before the CIT(A), the assessee had raised a jurisdictional ground that, under the faceless reassessment regime, the notice under section 148 ought to have been issued by the FAO and not by the JAO.

The assessee contended that the JAO lacked jurisdiction to issue a reassessment notice on or after 29.03.2022. Consequently, the notice issued by the JAO, as well as all proceedings flowing from it, were liable to be quashed.

The CIT(A) accepted this objection by relying upon the decisions of the Madras High Court in Mark Studio India Pvt. Ltd. v. ITO & Others, WA No. 781 of 2025, judgment dated 24.06.2025, and TVS Credit Services Ltd. v. ITO, WP No. 22402 of 2024, judgment dated 24.06.2025.

Following the ratio of those decisions, the CIT(A) held that the notice issued under section 148 by the JAO was invalid. The reassessment proceedings were accordingly quashed without adjudicating the assessee’s other grounds on merits.

The Revenue challenged this conclusion before the Tribunal.

Finance Act, 2026 Changes the Legal Landscape

The Tribunal noticed that after the CIT(A) passed the impugned order, significant statutory and judicial developments had taken place.

The Revenue had approached the Supreme Court against various High Court judgments holding that notices under section 148 issued by JAOs on or after 29.03.2022 were invalid. While those matters were pending, the Finance Act, 2026 introduced a retrospective amendment validating the issuance of such notices by JAOs.

Thus, the amendment directly addressed the jurisdictional defect which had formed the foundation of the High Court decisions relied upon by the CIT(A).

The Supreme Court, by its order dated 10.04.2026, took note of the retrospective amendment. It thereafter set aside the High Court judgments which had held that JAOs could not validly issue notices under section 148 on or after 29.03.2022.

However, the Supreme Court did not finally foreclose challenges to the validity of the retrospective amendment itself. It permitted taxpayers to approach the respective High Courts through writ petitions questioning the constitutional or legal validity of the amendment introduced by the Finance Act, 2026.

The Supreme Court also directed the High Courts to decide such writ petitions filed on or before 31.07.2026 and stayed the related assessment proceedings in the meantime.

The continuing controversy concerning the authority of the JAO and FAO, including the challenge to the retrospective amendment introduced through the Finance Act, 2026, has also been considered in the High Court decision striking down section 147A and holding JAO-issued section 148 notices invalid.

Foundation of CIT(A)’s Order Stood Removed

The ITAT observed that the CIT(A) had quashed the reassessment exclusively by relying upon the then-existing Madras High Court decisions concerning the lack of jurisdiction of JAOs.

However, those decisions had subsequently been set aside by the Supreme Court after taking note of the retrospective amendment. Consequently, the judicial foundation supporting the CIT(A)’s order was no longer available.

The Tribunal invoked the settled principle that when the very foundation upon which an order is constructed is removed, the order founded upon it cannot independently survive.

Therefore, the CIT(A)’s conclusion that the reassessment notice was invalid merely because it had been issued by the JAO could not be sustained in its existing form.

At the same time, the Tribunal recognised that the controversy had not necessarily reached finality. The Supreme Court had expressly allowed taxpayers to challenge the retrospective amendment before the appropriate High Courts. The validity of the amendment, particularly its effect on notices issued by JAOs on or after 29.03.2022, was thus required to be decided by the jurisdictional High Court.

Matter Restored to Await High Court’s Verdict

Since the CIT(A) had disposed of the assessee’s appeal solely on the jurisdictional ground, the other grounds raised against the reassessment had remained undecided. The Tribunal therefore considered it appropriate to set aside the impugned appellate order and restore the entire matter to the CIT(A).

The CIT(A) was directed to await the judgment of the jurisdictional High Court concerning the validity of the retrospective amendment made by the Finance Act, 2026. After the High Court decides whether a notice issued by the JAO under section 148 on or after 29.03.2022 is legally valid, the CIT(A) must adjudicate the assessee’s appeal afresh in conformity with that judgment.

The Tribunal further clarified that if the assessee did not wish to press the jurisdictional challenge to the retrospective amendment, the CIT(A) would be free to decide the remaining grounds on merits after providing the assessee a reasonable opportunity of hearing.

Accordingly, the Revenue’s appeal was allowed for statistical purposes.

Key Findings of ITAT Chennai

1. The four-day delay in the Revenue’s appeal was supported by sufficient cause and was condoned.

2. The CIT(A) had quashed the reassessment solely because the section 148 notice was issued by the JAO instead of the FAO.

3. The Madras High Court judgments relied upon by the CIT(A) were subsequently set aside by the Supreme Court after it took note of the retrospective amendment made by the Finance Act, 2026.

4. Once the judicial foundation of the CIT(A)’s order was removed, the order could not independently survive.

5. The Supreme Court preserved the taxpayers’ right to challenge the validity of the retrospective amendment before the respective High Courts.

6. The jurisdictional High Court’s decision would govern whether notices issued by JAOs under section 148 on or after 29.03.2022 are valid.

7. Since the CIT(A) had not decided the remaining grounds on merits, the entire appeal required fresh adjudication.

8. If the assessee did not press the jurisdictional challenge, the CIT(A) could decide the remaining grounds on merits after providing a reasonable opportunity of hearing.

9. The Revenue’s appeal was allowed for statistical purposes.

Conclusion

This decision illustrates how a retrospective amendment can alter the fate of an appellate order even after relief has been granted. The CIT(A)’s decision was legally supported by the Madras High Court judgments prevailing when it was passed. But once those judgments were set aside following the Finance Act, 2026 amendment, the relief could not remain untouched.

Yet, the Tribunal refrained from treating the JAO controversy as finally concluded, since the Supreme Court itself preserved the right to challenge the amendment. The section 148 notice has survived for now—but its final jurisdictional health report must come from the High Court.

Full Text of the Order of ITAT Chennai

This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 06.03.2026 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2020-21.

2. The appeal filed by the Revenue is delayed by 4 days. The AO has filed an affidavit stating therein the reasons for belated filing of the appeal. On perusal of the reasons stated in the condonation petition, we are of the view that there is sufficient cause for late filing of the appeal and no latches can be attributed to the Department. Hence, we condone the delay in filing the appeal and proceed to dispose off the appeal on merits.

3. The FAA had not decided the issued on merits but quashed the reassessment on legal ground raised namely Jurisdictional Assessing Officer (JAO) does not have the power to issue notice u/s.148 of the Act. The FAA has considered the specific contention of the assessee that the notice u/s. 148 of the Act ought to have been issued by the Faceless Assessing Officer (FAO), instead of the Jurisdictional Assessing Officer (JAO), and consequently the proceedings initiated u/s.148 of the Act were liable to be quashed. The FAA, after considering the decisions of the Hon’ble Jurisdictional High Court in the cases of Mark Studio India Pvt. Ltd. vs. ITO & Others in WA No.781 of 2025 and CMP No.6739 of 2025, dated 24.06.2025, and TVS Credit Services Ltd. in WP No.22402 of 2024, dated 24.06.2025, and following the ratio laid down therein, has held that the notice issued u/s.148 by the JAO was not valid and, consequently, quashed the reassessment proceedings.

4. However, we note that the Revenue had preferred appeals before the Hon’ble Apex Court against the various decisions of the Hon’ble High Courts referred to (supra), wherein the notices issued under section 148 of the Act by the JAO on or after 29.03.2022 were held to be invalid. In the meantime, the Finance Act, 2026 has introduced a retrospective amendment validating the issuance of such notices by the JAO. The Hon’ble Apex Court, vide its order dated 10.04.2026, has taken note of the aforesaid retrospective amendment and set aside the judgments of the Hon’ble High Courts holding that the JAO could not have issued notices under section 148 of the Act on or after 29.03.2022. It is further noted that the Hon’ble Apex Court has permitted the taxpayers to approach the respective High Courts by way of writ petitions challenging the validity of the retrospective amendments introduced by the Finance Act, 2026. The Hon’ble Apex Court has directed the respective High Courts to decide such petitions filed on or before 31.07.2026 and has also stayed the assessment proceedings in the meanwhile.

5. In view of the aforesaid subsequent developments, the basis on which the FAA had allowed the legal ground raised by the assessee no longer survives. The decisions of the Hon’ble High Courts relied upon by the FAA having been set aside by the Hon’ble Apex Court, the impugned finding of the FAA cannot be sustained. It is a settled principle that when the very foundation on which an order has been passed is removed, the order founded thereon cannot survive.

6. Accordingly, we set aside the impugned order of the FAA. We further note that the FAA has not adjudicated the grounds raised by the assessee on merits, as the appeal was allowed on the aforesaid legal issue. Therefore, we deem it appropriate to restore the matter to the file of the FAA. The FAA shall await the outcome of the appeals before the Hon’ble Jurisdictional High Court. After Hon’ble High Court has passed judgment, concerning the validity of the retrospective amendment introduced by the Finance Act, 2026 particularly on the issue as to whether the notice issued by the JAO under section 148 of the Act on or after 29.03.2022 is valid in law or not, the FAA is directed to adjudicate the appeal afresh in accordance with judgment so rendered by the Hon’ble High Court. In the event the assessee does not wish to press the aforesaid legal issue, the FAA shall be at liberty to adjudicate the remaining grounds on merits, after affording reasonable opportunity of hearing to the assessee and in accordance with law. It is ordered accordingly.

7. In the result, the appeal of the Revenue is allowed for statistical purposes.

Order pronounced in the open court on 11 September, 2026 at Chennai.