ITO Vs Sreenath Murugesh Adimoolam (ITAT Bangalore)
₹60 Lakh Litigation Limit Ends JAO-vs-FAO Battle: Bangalore ITAT Dismisses Revenue Appeal Against Quashing of Reassessment
Summary:
The assessee, Sreenath Murugesh Adimoolam, received salary aggregating to ₹28,59,361 from SAP Labs India Private Limited & Dataformix Technologies Private Limited during AY 2020-21. The salary payments were reflected in Form 26AS, but the assessee did not file his return of income for the relevant year.
Based on information available through the Risk Management Strategy formulated by the CBDT, reassessment proceedings were initiated. After following the procedure prescribed u/s 148A, the jurisdictional AO issued notice u/s 148 on 9 February 2024.
The assessee did not file a return in response to the notice. The AO thereafter passed an assessment order dated 6 February 2025 u/s 147 r.w.s. 144 & 144B, treating the entire salary of ₹28,59,361 as undisclosed income.
The assessee challenged the assessment before the CIT(A). The CIT(A) accepted the jurisdictional objection that the notice u/s 148 had been issued by the Jurisdictional AO instead of the Faceless AO. It held that such issuance was contrary to section 151A & the Faceless Assessment of Income Escaping Assessment Scheme, 2022. The notice & consequential reassessment were therefore quashed as void ab initio.
The Revenue appealed against this decision before the Bangalore Tribunal.
Issue before the Tribunal
The substantive jurisdictional issue was whether, after notification of the faceless reassessment scheme u/s 151A, a Jurisdictional AO could validly initiate proceedings u/s 148A & issue notice u/s 148, or whether such functions could be performed exclusively by the Faceless AO.
However, before examining that controversy, the Tribunal had to consider whether the Revenue’s appeal was maintainable in view of the ₹60 lakh monetary limit prescribed by CBDT Circular No. 9/2024 dated 17 September 2024 for filing departmental appeals before the Tribunal.
Revenue’s submissions
The Revenue contended that sections 147, 148 & 148A confer power upon the AO without excluding the Jurisdictional AO. Section 151A should be interpreted harmoniously with these provisions rather than in a manner that renders the statutory reference to the AO redundant.
According to the Revenue, the 2022 Faceless Scheme did not create exclusive jurisdiction in favour of the Faceless AO. It permitted a hybrid or concurrent framework, under which the Jurisdictional AO could initiate reassessment proceedings, followed by faceless adjudication through the NFAC.
Reliance was also placed upon CBDT Instruction No. 1/2022 dated 11 May 2022, which, according to the Revenue, permitted the Jurisdictional AO to issue notice u/s 148A(b), pass an order u/s 148A(d) & issue notice u/s 148.
The Revenue argued that the CIT(A) had wrongly quashed a bona fide reassessment without examining the merits. Since Form 26AS established receipt of salary that had escaped taxation, the addition of ₹28,59,361 should have been adjudicated substantively.
Assessee’s position
The assessee had succeeded before the CIT(A) on the jurisdictional ground that proceedings initiated by the Jurisdictional AO violated the mandatory faceless procedure notified u/s 151A.
The essence of the assessee’s case was that once the Central Government prescribed a faceless mechanism for reassessment, the statutory functions covered by that scheme had to be performed in the prescribed faceless manner. A notice issued outside that framework was without jurisdiction & incapable of supporting the consequential assessment.
Before the Tribunal, however, the controversy was resolved on the preliminary ground of low tax effect rather than on the competing interpretations of section 151A.
Tribunal’s findings & legal reasoning
The Tribunal examined the assessment record & found that the only disputed addition was ₹28,59,361, representing salary received from the two employers. There were no other additions or disputed amounts.
The Tribunal observed that the tax effect could not, in any circumstance, exceed the disputed addition itself. Therefore, the tax effect was necessarily below ₹60 lakh, the monetary threshold applicable to departmental appeals before the Tribunal under CBDT Circular No. 9/2024.
The purpose of monetary-limit circulars is to reduce repetitive or low-value departmental litigation & enable the Revenue to focus resources on disputes involving higher tax consequences or matters falling within specified exceptions.
Since the Revenue did not demonstrate that the case fell within any exception prescribed by the Circular, the Tribunal held that the appeal deserved to be dismissed as not maintainable on account of low tax effect.
At the same time, the Tribunal granted the Revenue liberty to seek recall of the order if it was subsequently established that the appeal fell within any recognised exception to the Circular.
Accordingly, the Revenue’s appeal was dismissed without adjudicating the JAO-versus-FAO jurisdictional controversy.
Practical implications
The immediate consequence is that the CIT(A)’s order quashing the reassessment continues to operate in favour of the assessee. However, the Tribunal has not affirmed the jurisdictional reasoning on merits. Its dismissal rests exclusively upon the monetary limit.
Therefore, the decision should not be cited as a substantive ruling that every notice issued by a Jurisdictional AO is invalid u/s 151A. The legal controversy remains open for adjudication in an appropriate case having tax effect above the prescribed limit or falling within an exception.
The ruling also confirms that the monetary threshold applies by reference to tax effect, not merely the importance of the legal issue. Unless an exception is specifically established, the Revenue cannot pursue a low-tax appeal merely because it raises a jurisdictional question.
The central principle is that even an important reassessment dispute cannot bypass the CBDT’s binding litigation policy when the tax effect remains below ₹60 lakh.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, BANGALORE BENCH
The Revenue has filed the present appeal against the impugned order dated 12/03/2026, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2020-21.
2. In this appeal, the Revenue has raised the following grounds: –
1. The order of the Ld. CIT(A) dated 12/03/2026 for A.Y. 2020.21 is opposed to law and facts of the case.
2. The Ld. CIT(A) was not justified in holding that the issuance of notice under Section 148A(b) and the order under Section 148A(d) read with notice under Section 148 of the Income Tax Act, 1961, by the Jurisdictional Assessing Officer (JAO) is without jurisdiction and void ab initio, merely on the ground that the Faceless Assessment of Income Escaping Assessment Scheme, 2022 (notified under Section 151A) mandates exclusive faceless proceedings through the NFAC, whereas under Sections 147, 148, and 148A, the JAO is empowered to initiate re-assessment proceedings.
3. The Ld. CIT(A) erred in law by interpreting Section 151A of the Income Tax Act, 1961, by holding that the Jurisdictional Assessing Officers (JAO) did not have authority under Sections 147, 148, and 148A, thereby rendering the broad reference to Assessing Officer in these provisions surplus and otiose, contrary to the principles of harmonious construction and the procedural intent of the 2022 Faceless Scheme (Notification No. 18/2022) to enable hybrid initiation by JAO followed by NFAC adjudication, as clarified in CBDT Instruction No. 1/2022 dated 11.05.2022.
4. The Ld. CIT(A) was not justified in quashing bona fide notices issued under Section 148A(b) / order passed under section 148A(d) read with Section 148, thereby disregarding the concurrent jurisdiction framework under Section 151A and binding CBDT guidelines which permit JAO to issue the notice u/s 148A(b), order u/s 148A(d) and notice u/s 148 of the Act.
5. The Ld. CIT(A) erred in not considering the issues on merits as the assessee has received salary income and the same is reflected in Form 26AS which has escaped taxation.
3. Having considered the submissions and perused the material available on record, we find that on the basis of the information available on the Risk Management Strategy formulated by the CBDT, it was observed that the assessee received salary income totaling Rs. 28,59,361 from SAP Labs India Pvt Ltd and Dataformix Technologies Pvt Ltd. However, the assessee did not file his return of income for the year under consideration. Accordingly, notice under section 148 of the Act was issued on 09/02/2024 after completion of the procedure laid down in section 148A of the Act. In response to the said notice, the assessee did not file his return of income. After considering the submissions of the assessee, the Assessing Officer (“AO”) vide order dated 06/02/2025 passed under section 147 read with section 144 read with section 144B of the Act concluded that the total salary of Rs. 28,59,361 is the undisclosed salary income of the assessee and added the same to the total income of the assessee. The learned CIT(A), vide impugned order, allowed the appeal of the assessee on the jurisdictional issue that since the notice under section 148 of the Act has been issued by the Jurisdictional AO instead of the Faceless AO, the same is void ab initio, being contrary to the provisions of the Act. Being aggrieved, the Revenue is in appeal before us.
4. From the perusal of the record, it is evident that the AO made the total addition only amounting to Rs. 28,59,361, being the salary received by the assessee from SAP Labs India Pvt Ltd and Dataformix Technologies Pvt Ltd. by considering the same as undisclosed income, since the assessee did not file his return of income. Thus, the addition in dispute is only Rs. 28,59,361. Accordingly, the tax effect involved in the present appeal cannot be in any case more than the disputed addition, i.e. Rs. 28,59,361, which is below the monetary limit of Rs.60 lakh, applicable to appeals before the Tribunal, as per CBDT Circular no.9 of 2024, dated 17/09/2024. Therefore, in view of the aforesaid, Revenue’s appeal deserves to be dismissed. However, the Revenue is granted the liberty to seek recall of this order if, at a later point in time, it is found that the appeal falls under any of the exceptions provided in the Circular referred to above.
5. In the result, the appeal by the Revenue is dismissed.
Order pronounced in the open court on 27-Aug-2026.
