High Court Quashes Income-Tax Reassessment Notice Issued by Jurisdictional Officer Instead of Faceless Officer
A partnership firm based out of Rajsamand, in the present appeal, challenged a notice dated 26 March 2025 issued under Section 148 of the Income Tax Act, 1961. The petitioner’s first challenge was that the notice had been issued by the Jurisdictional Assessing Officer (JAO), whereas it was to be issued by the Faceless Assessing Officer (FAO), which was contrary to the faceless assessment scheme introduced by the Central Board of Direct Taxes (CBDT) by a notification dated 29 March 2022.
The petitioner in the appeal relied upon precedents, including Shree Cement Ltd., Sharda Devi Chhajer, and the Bombay High Court’s judgment in Hexaware Technologies Ltd., whereby it was held that notices issued by a JAO instead of an FAO are invalid. The revenue in defence cited the Gujarat High Court’s decision in Talati and Talati LLP v. ACIT (2024), which upheld a similar notice in a search and seizure case, arguing that faceless allocation could not apply to such proceedings.
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Central Issue: Whether a reassessment notice issued under Section 148 of the Income Tax Act, 1961, by a JAO instead of a Faceless Assessing Officer is valid under the faceless regime introduced by the CBDT notification.
HC’s Ruling: The HC held that the impugned notice issued by the Jurisdictional Assessing Officer was invalid. The Court reasoned that the faceless assessment scheme mandated the use of automated allocation through suitable technological tools and algorithms, including artificial intelligence and machine learning, to ensure transparency and objectivity. The issuance of the notice by a physical jurisdictional officer without following the faceless allocation mechanism violated the notification dated 29 March 2022.
Relying on the judgments in Shree Cement Ltd., Sharda Devi Chhajer, and Hexaware Technologies Ltd., the Court quashed the reassessment notice and any subsequent proceedings or orders. It granted liberty to the Revenue to revive the proceedings if the Supreme Court were to overturn the decisions in Hexaware Technologies Ltd., Sharda Devi Chhajer, or Shree Cement Ltd..
All other contentions of the parties were kept open for consideration for a later stage.
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