JAO Cannot Bypass Faceless Reassessment Framework: Telangana HC

ST ISAAC Welfare Society Vs ITO (Telangana High Court)

Telangana High Court Quashes Reassessment Notices Under Sections 148A and 148 Following Earlier Precedent

In a significant ruling concerning income tax reassessment proceedings, the Telangana High Court set aside notices issued under Sections 148A and 148 of the Income-tax Act, 1961, along with consequential proceedings, by following its earlier landmark judgment in Kankanala Ravindra Reddy vs Income Tax Officer.

The Court reiterated that reassessment proceedings initiated contrary to the scheme introduced under the Finance Acts of 2020 and 2021 are unsustainable and liable to be quashed. However, the relief granted remains subject to the outcome of pending Special Leave Petitions before the Supreme Court.

Introduction

The Telangana High Court dealt with a large batch of writ petitions involving challenges to reassessment proceedings initiated by the Income Tax Department under Sections 148A and 148 of the Income-tax Act.

The petitioners contended that the reassessment notices were issued in violation of the statutory framework introduced through the Finance Act, 2021 and were therefore without jurisdiction.

Since the issues raised were identical to those already decided in Kankanala Ravindra Reddy vs Income Tax Officer, the Court disposed of the batch by applying the same principles and granting similar relief.

Background of the Dispute

Various taxpayers challenged:

• Notices issued under Section 148A;
• Reassessment notices under Section 148;
• Consequential assessment proceedings initiated by the Income Tax Department.

The petitioners argued that:

• The reassessment proceedings were initiated contrary to the amended statutory framework;
• The notices suffered from jurisdictional defects;
• The proceedings violated the legal principles already settled by several High Courts across the country.

The Revenue defended the proceedings and relied upon the pendency of appeals before the Supreme Court against similar judgments.

Key Legal Issue

The principal question before the Court was:

Whether reassessment proceedings initiated under Sections 148A and 148 of the Income-tax Act were legally sustainable in light of the law laid down by the Telangana High Court in Kankanala Ravindra Reddy and other similar judgments?

Court’s Observations

The High Court noted that the controversy was no longer res integra and had already been addressed in detail in:

• Kankanala Ravindra Reddy vs Income Tax Officer
• Subsequent decisions of the Telangana High Court
• Various decisions of other High Courts across the country

The Court reproduced portions of its earlier judgment emphasizing that:

• Reassessment proceedings initiated contrary to the amended statutory scheme are unsustainable;
• When the initiation itself is invalid, all consequential proceedings automatically fail;
• Jurisdictional defects strike at the root of the proceedings.

The Court further observed that numerous High Courts had consistently held that such proceedings violated the framework introduced by the Finance Act, 2021.

Reliance on Earlier Telangana High Court Judgment

The Court extensively relied upon its earlier decision in W.P. No. 26304 of 2024, wherein it had held:

• The reassessment notices were procedurally defective;
• The notices deserved to be quashed;
• Consequential assessment orders also could not survive.

The Court reiterated that once the foundation of the reassessment proceedings is invalid, every subsequent action based upon those proceedings must also fall.

Protection of Revenue’s Interests

While granting relief to taxpayers, the Court also took note of the Revenue’s interests.

The Court clarified that:

• The relief granted would remain subject to the final outcome of pending Special Leave Petitions before the Supreme Court;
• Either party may seek appropriate remedies depending upon the final verdict of the Supreme Court;
• The Revenue retains such rights as may be available under law following the Supreme Court’s decision.

This approach balanced taxpayer rights with the interests of the tax administration.

Final Judgment

The Telangana High Court held that:

√ Notices Under Sections 148A and 148 Were Unsustainable

The impugned reassessment notices were set aside.

√ Consequential Proceedings Also Quashed

Any consequential assessment orders or proceedings arising from those notices were also quashed.

√ Revenue Granted Liberty

The Revenue was granted liberty in terms of the earlier judgments, subject to the outcome of the pending proceedings before the Supreme Court.

√ No Costs

The writ petitions were disposed of without any order as to costs.

Author’s Analysis

1. Reaffirmation of Kankanala Ravindra Reddy Principle

This judgment further strengthens the precedential value of the Telangana High Court’s decision in Kankanala Ravindra Reddy, which has become a key authority in reassessment litigation.

The Court clearly reaffirmed that reassessment proceedings suffering from jurisdictional defects cannot survive.

2. Jurisdictional Errors Cannot Be Cured Later

A significant principle reiterated by the Court is:

When the initiation of proceedings is illegal, subsequent proceedings automatically become invalid.

This reflects a settled principle of administrative and tax law that jurisdictional defects are fatal and cannot be cured through later procedural compliance.

3. Continued Judicial Scrutiny of Reassessment Proceedings

The ruling demonstrates the judiciary’s continued scrutiny of reassessment notices issued during the transition to the amended reassessment regime introduced by the Finance Act, 2021.

Taxpayers facing similar notices may find substantial support from this line of decisions.

4. Supreme Court Outcome Remains Crucial

The Court carefully protected the Revenue’s interests by making the relief subject to the outcome of pending Special Leave Petitions before the Supreme Court.

This ensures:

• Judicial consistency;
• Protection of taxpayer rights;
• Preservation of the Revenue’s position pending final adjudication.

5. Importance for Taxpayers Challenging Reassessment Notices

The judgment highlights that taxpayers should carefully examine:

• The validity of reassessment notices;
• Compliance with amended statutory requirements;
• Jurisdictional defects in reopening proceedings.

Where foundational defects exist, writ remedies may remain available despite the existence of alternate remedies.

Conclusion

The Telangana High Court, in a batch of writ petitions led by ST Isaac Welfare Society and other taxpayers, reaffirmed its earlier position that reassessment notices issued under Sections 148A and 148 of the Income-tax Act in violation of the amended statutory framework are unsustainable.

By quashing the notices and consequential proceedings, the Court once again emphasized that jurisdictional defects cannot be cured through subsequent actions. At the same time, it preserved the Revenue’s rights by making the relief subject to the final outcome of pending Supreme Court proceedings.

Key Takeaway: Where reassessment proceedings suffer from foundational jurisdictional defects, taxpayers may successfully challenge the notices, and all consequential proceedings are liable to be set aside.

FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT

Heard learned counsels Sri Dundu Manmohan, Ms. K.Prabhabati representing learned counsel Sri A.V.Raghu Ram, Ms. Pragathi Mandapalle representing learned counsel Ms. Sneha Asthana, Sri P.Soma Shekar Reddy, Sri P.Venkata Prasad representing learned counsel Ms. Velgani Gayatri Priya, Sri Thanneru Chaitanya Kumar, Sri I.Sudhakar Reddy representing learned counsel Ms. Shaik Vaheeda Sushma, Sri Sheetal Srikanth, Sri M.Naga Deepak, Sri A.V.A.Siva Kartikeya, Sri K.Govinda Rao, Sri Santosh Sagar Kapilavai, Sri S.Vijay Adithya, Sri Upadhyay Raghavender, Sri Kailash Nath P.S.S., Ms. Akruti Agarwal, Sri Paturi Rama Krishna and Sri Prudhviraj Mattapally representing learned counsel Sri B.Muralidhar, appearing for the petitioners.

Also heard Ms. J.Sunitha, Ms. Bokaro Sapna Reddy, Sri N.Praveen Reddy, Sri Vijhay K. Punna, Sri K.Sudhakar Reddy, learned Senior Standing Counsels appearing for the Income Tax Department and Sri N.Bhujanga Rao, learned Deputy Solicitor General of India, and learned counsel Sri J.Suresh Babu 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, but they submit that the issues involved in the present batch of writ petitions have been considered and settled by the judgment rendered by the learned Coordinate Bench of this Court in W.P.No.26304 of 2024 vide order dated 28.04.2025 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 W.P.No.26304 of 2024, dated 28.04.2025.

4. In support of the submissions made by the learned counsel for the petitioners, they relied on the judgments of the 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 Tax¹⁶ and 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 another¹⁸ and 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 the 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 affidavit, if necessary, on facts and legal issues raised herein.

7. Learned Senior Standing Counsels for the respondent Department have 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 the JAO after coming into force of the faceless scheme with effect from 29.03.2022.

8. Learned Senior Standing Counsels for the respondents have also not been able to dispute that the legal issue as regards the jurisdiction of the JAO to initiate proceedings instead of Faceless Assessing Officer (FAO) have been well settled by the coordinate Bench of this Court in W.P.No.26304 of 2024 followed in several other judgments.

9. Learned Senior Standing Counsels for the respondents also do not dispute that a number of 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 the 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. Learned Senior Standing Counsels 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 the 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 in some cases, the date of assessment order in some of the cases 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 Writ Petitions are disposed of. No order as to costs.

Miscellaneous applications pending, if any, 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)

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)