Faceless Reassessment Is The Rule; Central Charges Get No Exception: Telangana High Court Quashes Income Tax Notices Issued By Jurisdictional Officers

“Mandatory Faceless Reassessment Cannot Be Bypassed Even In Search Cases”, In a crucial judgment a Division Bench of the Telangana High Court comprising Justice P. Sam Koshy and Justice Narsing Rao Nandikonda struck down reassessment notices issued under Section 148 of the Income Tax Act, 1961 by Jurisdictional Assessing Officers (JAOs), emphatically holding that all such notices post 01.04.2021 must be issued only through the faceless assessment procedure. Deciding a batch of writ petitions the Court categorically ruled that even cases assigned to ‘Central Charges’ are not exempted from the faceless scheme introduced by the Finance Act, 2021.

The Court declared, “The question of law…stands decided in favour of the petitioners holding that it can be in a faceless manner alone and the question of law thus stands answered against the Revenue.”

The petitioners challenged reassessment notices under Section 148 issued after 01.04.2021 in respect of cases assigned to ‘Central Charges’. The central argument was that the amended Income Tax regime post Finance Act, 2021 mandated that all reassessment proceedings must be faceless, conducted via the National Faceless Assessment Centre (NFAC) under Section 151A and the E-Assessment of Income Escaping Assessment Scheme, 2022. The notices issued manually by JAOs were therefore argued to be without jurisdiction, illegal, and liable to be quashed.

The Revenue, led by the Additional Solicitor General of India, argued that the presence of search and seizure proceedings and assignment to ‘Central Charges’ necessitated involvement of the jurisdictional officer under Section 153D and 153A of the Act.

Faceless Procedure Is Mandatory For All Reassessments Including Central Charges

The High Court rejected the Revenue’s arguments, holding that post 01.04.2021, reassessment under Section 148 must be faceless without exception. The Bench stressed:

“It has to be only through automated faceless mechanism and no other way.”

The Court noted that the only statutory exemption from faceless assessment under Section 144B is limited to final assessment orders under Sections 143(3) and 144, not to reassessment proceedings under Section 148.

“It would not make any difference whether it is cases assigned to central charges or international tax charges,” the Court ruled, referring to its own previous judgments.

Supreme Court’s Judgment In Ashish Agarwal Applied Fully

The Telangana High Court followed the binding precedent of the Supreme Court in Union of India v. Ashish Agarwal, (2022), observing:

“Once the statute substantially mandates assessment proceedings to be drawn through automated scheme allocation in a faceless manner, there does not seem to be any exceptions carved out permitting the JAO to issue proceedings under Section 148 of the Act.”

The Bench held that continuing with manual notices issued by JAOs would be contrary to the law laid down in Ashish Agarwal, where the Supreme Court had underscored that faceless procedure must be the default route even for past assessment years where notices are issued post 01.04.2021.

Administrative Orders Cannot Override Statute

Rejecting the Revenue’s reliance on CBDT administrative instructions and circulars, the Court clarified:

“There is no exemption provided in Section 148 or Section 151A for reassessment notices in such cases… Administrative circulars or CBDT orders cannot override statutory provisions.”

The Court distinguished between ‘assessment orders’ and ‘reassessment notices’, observing that the CBDT’s carve-out for Central Charges applies only to assessment orders, not to Section 148 notices.

“Section 151A mandates faceless reassessment. The statutory language does not permit carve-outs for Central Charges. Judicial propriety demands obedience to the binding precedents,” it ruled.

Delhi and Gujarat High Court Views Overruled by Jurisdictional Authority

The Revenue had relied on Delhi High Court’s judgment in T.K.S. Builders and Gujarat High Court’s decision in Talati and Talati LLP to justify the jurisdiction of JAOs in Central Charges. The Telangana High Court refused to follow these decisions, stating:

“Since there is an authoritative decision on the said issue by this very High Court… judicial propriety requires for this Bench to honor the view taken by the Division Bench of this High Court itself.”

Reiterating settled principles, the Court held that jurisdictional High Court’s binding decisions override divergent views from other High Courts.

No Escape via Search and Seizure Provisions

The Revenue’s final contention was that Section 153D necessitated JAO involvement post search and seizure. This too was dismissed as legally unsustainable.

“The provisions of Section 153D would be applicable in proceedings drawn under Section 153A and Section 153B. Section 153A nowhere provides for exclusion from the mandate of Section 151A,” the Court observed.

The Bench highlighted that until and unless the law explicitly provides an exemption, faceless assessment applies uniformly.

“Until and unless there is a specific exception carved out from the applicability of Section 151A, every assessment proceeding even after search and seizure must adhere to faceless procedure,” the Court ruled.

Telangana High Court Affirms Rule of Faceless Reassessment

In conclusion, the Telangana High Court quashed all reassessment notices issued by JAOs post 01.04.2021, declaring them illegal for violating statutory provisions mandating faceless reassessment.

“Hence, reassessment notices issued manually by JAOs stand vitiated for non-compliance with the mandatory faceless procedure,” the Court concluded, allowing the writ petitions and quashing the impugned notices.

The Court did not impose costs but cautioned the Revenue to strictly comply with the faceless reassessment framework in future.

This judgment will have significant ramifications, providing clarity on the non-negotiable nature of faceless reassessments under Indian tax law.

Date of Decision: 14th July 2025