Faceless Assessment is the Rule, Not the Exception: Telangana High Court Quashes Section 148 Notices Issued by Jurisdictional Officers in Central Charges Cases

“No Carve-Out for Central Charges in Reassessment Proceedings Post-2021 Amendments”, In a landmark ruling Telangana High Court decisively quashed reassessment notices issued by jurisdictional assessing officers (JAO) in cases assigned to 'central charges'. The Division Bench of Hon’ble Justice P. Sam Koshy and Hon’ble Justice Narsing Rao Nandikonda held that after the Finance Act, 2021, all reassessment proceedings under Section 148 must strictly follow the faceless procedure, reaffirming the principle that “the introduction of Section 151A read with the e-Assessment Scheme, 2022, leaves no room for traditional assessments, even in central charge matters.” The Court’s verdict sets a binding precedent on the non-negotiable application of the faceless regime post-2021, rejecting revenue’s attempts to create exceptions in search and seizure cases.

The petitioners, including M/s Bartronics India Limited and others, had challenged reassessment notices issued under Section 148 of the Income Tax Act, 1961, in the aftermath of the Finance Act, 2021 amendments. Their primary grievance was that the impugned notices were issued by JAOs despite their cases being assigned to “central charges”, in violation of the mandatory faceless regime introduced by Sections 148A and 151A of the Income Tax Act and the e-Assessment Scheme, 2022.

The petitioners contended that after 01.04.2021, reassessment proceedings must necessarily be initiated and conducted through the National Faceless Assessment Centre (NaFAC), except where explicit statutory exceptions are provided. The revenue, relying on recent judgments of Gujarat and Delhi High Courts, contended that in central charges, particularly in search and seizure cases, JAOs retained jurisdiction.

The High Court, however, firmly aligned with its own binding precedents in Kankanala Ravindra Reddy v. ITO and Sri Venkataramana Reddy Patloola v. DCIT, emphasizing judicial consistency.

The primary question of law framed by the Court was succinct:
“Whether in cases assigned to central charges, reassessment notices under Section 148 can be issued by jurisdictional assessing officers post 01.04.2021 or must they mandatorily follow the faceless mechanism?”

Justice P. Sam Koshy, authoring the judgment, declared unequivocally,

“Section 151A, inserted by the Finance Act, 2021, stipulates that reassessment proceedings shall be carried out in a faceless manner, and the CBDT’s order dated 06.09.2021 exempts only ‘assessment orders’, not the issuance of notices under Section 148. The distinction between initiation and culmination of assessment proceedings is deliberate and must be respected.”

The Court traced the evolution of the law, noting that Section 144B and Section 151A establish a comprehensive faceless system post-2021. Citing Kankanala Ravindra Reddy, the Bench reiterated,

“The impugned notices issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed.”

The Court underlined the legislative intent to protect taxpayer rights and ensure transparency: “The faceless regime was introduced with a clear object to eliminate interface, ensure accountability, and enhance efficiency. Permitting JAO to initiate proceedings defeats this objective.”

The revenue’s primary contention was that cases arising from search and seizure, governed by Section 153D, necessitated JAO involvement. The Court rejected this outright, observing:

“Section 153D governs final assessment orders in search matters; it does not exempt the initiation of reassessment proceedings from the faceless mechanism. Section 151A remains applicable even in such cases.”

The Court categorically rejected the revenue’s argument relying on Gujarat and Delhi High Courts, emphasizing the binding nature of coordinate bench decisions.

“This Court remains bound by its own Division Bench judgments unless overruled. Judicial discipline demands adherence to the settled law in this jurisdiction.”

The Court pointedly remarked, “Accepting the revenue’s position would amount to diluting the mandate of the Hon’ble Supreme Court in Union of India v. Ashish Agarwal and creating unwarranted exceptions not contemplated by the statute.”

On the issue of CBDT notifications, the Court clarified, “CBDT’s Order dated 06.09.2021 excludes only assessment orders in central charges from faceless proceedings, not the issuance of notices under Section 148. The subsequent Notification dated 29.03.2022 mandates that both the issuance of notices and assessment be through automated allocation.”

Summing up the legal position, the Court held, “Faceless assessment is now the norm post-2021. Any deviation from this regime must be expressly provided by statute, not implied or judicially invented.”

In a conclusive pronouncement, the Court ruled: “The question of law framed, namely, whether in cases assigned to central charges the notices issued under Section 148 could be by JAO or must be in a faceless manner, is answered in favour of the petitioners. The impugned notices stand quashed.”

Accordingly, the Court allowed all writ petitions and directed: “All reassessment proceedings, if any, must strictly comply with the faceless mechanism as envisaged under the Finance Act, 2021. No costs.”

The Telangana High Court’s verdict reinforces the supremacy of statutory safeguards under the Finance Act, 2021, in tax administration. By quashing Section 148 notices issued by jurisdictional officers in central charge cases, the Court has safeguarded the principle that faceless proceedings are mandatory, irrespective of the nature of the charge or prior search proceedings. The judgment sets a robust precedent curbing discretionary and opaque reassessment actions by tax authorities and upholding the core legislative intent of transparency, accountability, and fairness in tax assessments.

Date of Decision: 14 July 2025