Ashok A Sundrani
Faceless Assessment Regime and Section 148 – Jurisdictional Challenges in Light of Recent Judicial Pronouncements
Issue for Consideration
The transition to a faceless regime under the Income-tax Act, 1961 has introduced new procedural safeguards and compliance expectations for the Revenue. Particularly, reassessment notices under section 148 must now adhere to the Scheme framed under section 151A, which mandates automated allocation and action through the Faceless Assessing Officer (FAO).
Three Judgements of the Bombay High Court reinforce the legal consequences of by passing these procedural mandates. These decisions highlight that even substantive claims of income escapement cannot rescue a notice that is procedurally flawed under the new regime. In contrast to this Calcutta High Court in the case of Triton Overseas Private Limited[1] and Sanghi Steel Udyog (P) Ltd vs. Union of India & Ors[2] have held that notice issued under 148 by the JAO and not by the NFAC is not invalid.
Surendra Kantilal Vora[3]
In this case, the assessee received a notice under Section 148 on 1st April 2025 for AY 2022–23, issued by the Jurisdictional Assessing Officer (JAO). The assessee challenged the notice before the Bombay High Court on the ground that it violated the CBDT Scheme dated 29th March 2022, issued under Section 151A, which mandates issuance only by the FAO.
The assessee relied on the decision in Hexaware Technologies Ltd[4]. (discussed below). The High Court agreed with the legal position adopted in Hexaware, holding that the JAO had no jurisdiction to issue the notice.
However, since the Hexaware judgment was under challenge before the Supreme Court, the High Court granted interim relief, staying the operation of the impugned notice pending final disposal. It also gave liberty to the parties to move appropriate applications after the outcome in Hexaware is known.
Court Order:
“Pending hearing and final disposal of the present petition, this Hon’ble Court may be pleased to stay the operation of the said notice under s. 148 dt. 1st April, 2025 for asst. yr. 2022-23”
‘Liberty to the parties to apply after appropriate orders are passed by the Hon’ble Supreme Court or a final decision is rendered by the Supreme Court in the case of Hexaware Technologies Ltd. (supra).”
Another identical judgement has also been passed by the Hon’ble Bombay High Court in the case of Devyani Hasmukh Shah vs. Income Tax Officer & Ors[5] on the same date i.e 17th June 2025.
Hexaware Technologies Limited
Brief Facts of the case:
The assessee, engaged in software and business process services, filed its return for AY 2015–16 claiming deductions under Section 10AA and Section 80JJAA. After scrutiny under Section 143(3), the return was accepted.
Later, the Department issued a notice under Section 148 on 8th April 2021, which was challenged and quashed as invalid. Following the Supreme Court’s decision in Union of India v. Ashish Agarwal, the notice was treated as one under Section 148A(b), and fresh proceedings ensued.
Ultimately, a fresh Section 148 notice dated 27th August 2022 was issued by the JAO, which became the subject of legal scrutiny.
After hearing the learned counsels one of the issues considered was as under –
“Whether the imposed notice dated 27th August, 2022 is invalid and bad in law being issued by the JAO and the same was not in accordance with the section 151A of the Act?”.
The findings of the Court were as under:
a) Breach of Statutory Scheme under Section 151A
The Court observed that the impugned notice dated 27th August 2022 was issued by the JAO and not by the National Faceless Assessment Centre (NFAC), as mandated by the Scheme framed under section 151A. Such issuance was held to be not in accordance with law, as the Scheme requires automated allocation, in accordance with the risk management strategy formulated by the board and faceless processing of reassessment proceedings.
b) Internal CBDT Guidelines Not Binding
The CBDT guidelines dated 1st August 2022, relied upon by the Revenue, were held to be internal in nature, marked as “Confidential for departmental circulation only”, and not issued under section 119. Therefore, they have no binding effect, either on the assessee or on the assessing authorities, especially when they contradict the Act and the Scheme.
It is a settled principle that internal guidelines issued by the CBDT, while meant to ensure uniformity in administrative functioning, cannot override or curtail the operation of statutory provisions enacted by the legislature. In this regard, reliance was placed on the decision in Sofitel Realty LLP vs. ITO, wherein the Hon’ble Court categorically held that guidelines which are contrary to the provisions of the Act cannot be relied upon by the Revenue to reject an application for compounding filed by an assessee.
The Court further observed that guidelines are subordinate to the principal Act or the Rules. They cannot restrict or override the application of specific provisions enacted by the legislature. Any such guideline must function within the four corners of the Act, and cannot travel beyond the scope of powers conferred under the statutory framework.
In Sofitel Realty LLP (supra), it was also noted that the guidelines dated 1st August 2022 do not even refer to the Scheme dated 29th March 2022 framed by the Government under Section 151A of the Income Tax Act. As per Section 151A(3), the said Scheme was required to be and was duly laid before both Houses of Parliament, thereby giving it binding statutory force. Accordingly, the Scheme framed under Section 151A prevails over any subsequently issued internal guideline. If the guideline dated 1st August 2022 contains any provision contrary to the Scheme, the same would be invalid and bad in law.
c) No Validity in ITBA Internal Instructions
The ITBA Manual (Step-by-Step Document) cited by the Department was also rejected. The Court noted it was a mere technical manual for portal usage and had no legal value, particularly since it did not refer to or acknowledge the existence of the binding statutory Scheme under section 151A.
d) No Concurrent Jurisdiction Between JAO and FAO
It is respectfully submitted that there is no concept of concurrent jurisdiction between the JAO and the FAO either for issuance of notice under Section 148 of the Income-tax Act, 1961, or for passing an assessment or reassessment order. The Faceless Assessment Scheme dated 29th March 2022, notified under Section 151A of the Act, clearly provides for exclusive jurisdiction—either with the JAO or the FAO, depending on the automated allocation made under the Scheme. Once specific jurisdiction is assigned through such automated allocation, it operates to the exclusion of the other.
To suggest otherwise would not only cause administrative chaos but would also defeat the very purpose and object of the faceless regime. Acceptance of the Revenue’s argument that both officers may simultaneously act would imply that an assessee could respond to notices issued by either the JAO or the FAO interchangeably—a proposition that is neither contemplated by the Act nor supported by the Scheme.
In the scheme dated 29th March 2022 under Para 3 makes it explicitly clear that the issuance of notice under Section 148 “shall be through automated allocation”. The use of the word “shall” makes the provision mandatory, leaving no discretion with the Department to choose whether to follow this procedure. Further, as defined in para 2(b) of the Scheme, “automated allocation” means randomised allocation of cases using technological tools, including artificial intelligence and machine learning, with the object of optimizing resources and eliminating human bias.
In the present case, it is not the contention of the Respondent that Respondent No. 1 was the officer to whom the case had been randomly allocated. Therefore, any issuance of notice under Section 148 by an officer not selected through automated allocation is without jurisdiction and contrary to the binding provisions of the Scheme framed under Section 151A of the Act.
e) Scheme Covers Both Issuance and Reassessment
The Court rejected the Revenue’s argument that the Scheme applies only “to the extent” of section 144B (post-notice assessment). It clarified that section 151A empowers the CBDT to frame a Scheme for both issuance and completion of reassessment, and thus, the Scheme fully covers issuance of notice under section 148. Accordingly, only the FAO can issue such notices.
f) Violation of Law Itself is Prejudicial
A significant legal principle reiterated is that any action contrary to statute is per se prejudicial. The assessee need not demonstrate specific prejudice once the procedural mandate is violated. Non-compliance with the law renders the action void.
g) Office Memorandum Dated 20.02.2023 Not Binding
The Office Memorandum relied upon by the Revenue was held to be not issued under section 119, and therefore, has no statutory force. It merely contains internal commentary and cannot override the binding provisions of the Act or the CBDT’s notified Scheme.
Final Holding
The reassessment notice dated 27th August 2022, issued by the JAO, was held to be invalid and bad in law for not being in compliance with the binding Scheme under section 151A. The notice was quashed accordingly.
There are many more favourable decisions, a few of them are mentioned herein below wherein a view has been taken that JAO can not issue notice u/s 148 and it is only NFAC which can do so.
Jasjit Singh vs. Union of India (2024) 8 NYPCTR 939(P&H)
Venus Jewel vs. Assistant Commissioner of Income Tax & Anr. (2024) 8 NYPCTR 869 (Bom)
Everest Kanto Cylinder Ltd vs. Deputy Commissioner of Income Tax & Ors. (2024) 8 NYPCTR 865 (Bom)
Jatinder Singh Bhangu vs. Union of India & Ors. (2024) 8 NYPCTR 914 (P&H)
Triton Overseas Private Limited
In this case the Hon’ble Calcutta High Court referring to the Office Memorandum dated 20th February, 2023 has held that JAO and units of NFAC have concurrent jurisdictions and hence notice issued under 148 by the JAO and not by the NFAC is not invalid.
The Bombay High Court in the decision of Hexaware had an occasion to refer to the decision of the Calcutta High Court in the case of Triton Overseas where in it opined that the Hon’ble Calcutta High Court had passed the Order without considering the scheme dated 29th March 2022 and hence could not be relied upon. The Bombay High Court also concurred with the view of Telangana High Court in Kankanala Ravindra Reddy where in it was held that notices issued by JAOs are invalid, reaffirming the binding nature of the Scheme under Section 151A.
Conclusion
The Bombay High Court’s decisions in Hexaware Technologies Ltd, Surendra Kantilal Vora and Devyani Hasmukh Shah[6] reinforce the foundational principle of “procedure established by law” under the Income-tax Act. In the faceless regime, the process is as important as the substance.
Section 151A and the Scheme notified thereunder are jurisdictional mandates, not mere administrative guidelines. Any reassessment initiated without adherence to the Scheme, especially where notices are issued manually or by unauthorized officers, is liable to be quashed.
These decisions are a reminder to the Revenue that procedural safeguards especially in a faceless and automated system are not to be diluted by internal instructions or operational shortcuts.
[1] (2024) 8 NYPCTR 592 (Cal)
[2] (2024) 8 NYPCTR 600 (Cal)
[3] (2025) 9 NYPCTR 870 (Bom)
[4] (2024) 338 CTR (Bom) 536
[5] (2025) 9NYPCTR 877 (Bom)
[6] 9NYPCTR877(Bom)
