In this article we will deal with one of the most litigated and impactful issues under the faceless regime—whether notices or orders issued by the Jurisdictional Assessing Officer, instead of the Faceless Assessing Officer, are legally valid. This issue is not procedural but jurisdictional, and has led to annulment of thousands of assessments and reassessments across the country.
This issue is critical because if the authority issuing the notice lacks jurisdiction, the entire proceeding collapses. It affects regular assessments, reassessments, and pre-reopening notices under section 148A. Members must identify such defects at the earliest stage to protect taxpayer rights.
Faceless regime was not merely a technological reform—it fundamentally changed how jurisdiction works. Earlier, jurisdiction was territorial. Under faceless regime, jurisdiction is functional, determined by automated allocation. This shift is the root cause of the current controversy.
KEY AUTHORITIES: JAO vs FAO
Jurisdictional AO (JAO)
- Territorial jurisdiction
- Traditional role
- Limited functions post-faceless regime
Faceless AO (FAO)
- Automated allocation
- Functional jurisdiction
- Core assessment powers
Once faceless regime applies, the traditional Jurisdictional AO does not automatically retain authority. The Faceless Assessing Officer, though not territorially linked, becomes the legally empowered authority for assessment and reassessment functions.
Section 144B leaves no discretion. It uses mandatory language. Earlier, sub-section (9) categorically stated that any assessment not following the faceless procedure would be non est in law. This provision formed the backbone of early judicial decisions quashing assessments outright.
Post-2021, reassessment is a tightly controlled process. Notices under section 148 and show cause notices under section 148A(b) are required to be issued through the faceless mechanism. JAO’s role is peripheral and not foundational.
The central question courts are addressing is whether a notice or order issued by an officer who lacks authority under the faceless regime can be sustained. Various factual permutations have arisen, each tested judicially.
JURISDICTIONAL ERROR vs PROCEDURAL LAPSE
Jurisdictional Error
- Authority lacks power
- Void ab initio
- Not curable
Procedural Lapse
- Authority competent
- Process defective
- Curable
This distinction is fundamental. If JAO lacks jurisdiction, the defect is incurable. Section 292B cannot save such action. Most High Courts have treated JAO-issued notices under faceless regime as jurisdictional defects.
In the initial phase, courts took a very strict view. Since section 144B(9) declared non-compliant assessments as non est, courts quashed them outright without giving revenue a second chance.
SECTION 144B(9) AMENDMENT
- Finance Act, 2022 amendment
- Word “non est” removed
- Revenue’s argument:
- Procedural lapse
- Section 292B applicable
The amendment was introduced to mitigate revenue losses. The department now argues that deviation from faceless procedure is merely procedural. However, courts have clarified that amendment does not confer jurisdiction where none exists.
POST-AMENDMENT JUDICIAL VIEW
- Authority still examined
- Applicability of faceless regime tested
- Lack of jurisdiction remains fatal
Post-amendment, courts look deeper. If faceless regime applied and JAO had no authority, proceedings are still quashed. The amendment does not validate actions of an incompetent authority.
Reassessment cases face stricter scrutiny because they disturb concluded assessments. Courts have repeatedly held that JAO-issued reassessment notices under faceless regime are invalid.
Revenue commonly argues that assessee participated or no prejudice occurred. Courts consistently hold that jurisdiction cannot be waived and prejudice test does not apply to jurisdictional defects.
PRACTICAL STRATEGY FOR MEMBERS
- Raise jurisdiction objection early
- Separate from merits
- Ground No. 1 in appeal
- Seek annulment, not set aside
Members should raise jurisdictional objections at the earliest stage and maintain them separately from merits. In appeals, always seek annulment of proceedings rather than remand.
KEY CASE LAWS
- Hexaware Technologies Ltd. – Bom HC
- Siemens Financial Services – Bom HC
- Harbanslal Malhotra – Del HC
- Kalpesh Synthetics – Guj HC
- Sutherland Global – Mad HC
These cases consistently hold that notices issued by JAO under faceless regime are invalid due to lack of jurisdiction. Members should rely on jurisdictional High Court rulings wherever possible.
IMPORTANT CLARIFICATION
Ashish Agarwal judgment is often misquoted. It does not approve JAO action under faceless regime. It only provided a one-time transitional solution.
KEY TAKEAWAYS & CONCLUSION
The faceless regime is a jurisdictional revolution. When jurisdiction shifts, authority must follow. Any deviation is not a mere technicality—it goes to the root of legality.
As professionals, our duty is to identify jurisdictional lapses and protect taxpayer rights. Faceless regime demands strict statutory compliance—nothing less.
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