Supreme Court Allows Revenue to Represent Clarification on Local vs. Faceless Assessment Jurisdiction in Reopening Cases

1. The Core Dispute: JAO vs. Faceless Assessing Officer (FAO)

The High Court had originally ruled in favor of the assessee, quashing reassessment notices issued under Section 148. The primary reason was that the Jurisdictional Assessing Officer (JAO)—the local officer—issued the notice and initiated the proceedings instead of following the Faceless Assessment Scheme mandated under Section 144B and the specialized scheme notified under Section 151A.

Petitioner’s Stand: Once the Faceless Assessment Scheme was notified (effective April 1, 2021), any notice for “income escaping assessment” must be issued through the National Faceless Assessment Centre (NFAC) using automated allocation. A notice by a local officer (JAO) is a jurisdictional error.
Revenue’s Stand: The Revenue challenged this in the Supreme Court via a Special Leave Petition (SLP), arguing that the JAO still retains concurrent jurisdiction in certain circumstances.

2. Legal Context: The Transition to Faceless Reassessment

The Finance Act 2021 and subsequent notifications fundamentally altered the geography of tax assessments.

Section 151A: Empowered the Central Government to notify a scheme for faceless reassessment to ensure transparency and eliminate personal interface.
E-Assessment of Income Escaping Assessment Scheme, 2022: Mandated that the issuance of notice under Section 148 and the subsequent assessment be conducted in a faceless manner.

3. The Supreme Court’s Decision: A Procedural Leeway

The Supreme Court did not flatly overturn the High Court’s decision but provided the Revenue a specific window to present new arguments.

The Clarification: The Revenue pointed to a “latest clarification” issued with effect from April 1, 2021, which was proposed to be part of a legislative amendment in the Finance Act.
The Order: The SLP was disposed of by granting the Revenue the liberty to file an application before the High Court. The High Court is directed to consider this “latest clarification” and hear both sides on the merits of whether the JAO still had the power to issue the notice in this specific timeframe.
Result: While the assessment remains set aside for now, the Revenue has been given a “second chance” to prove the validity of the notice based on recent legislative clarifications.

Key Takeaways for Taxpayers

Conflict of Jurisdiction: The battle between Bombay High Court (holding faceless is mandatory) and Delhi High Court (allowing concurrent jurisdiction for JAOs) is currently being monitored by the Supreme Court.
Vigilance on Notices: If you receive a reassessment notice from your local officer (JAO) for a period after April 2021, it may be legally vulnerable. However, the Revenue is actively seeking to validate these through legislative amendments.
Check the DIN: Notices issued in a faceless manner usually carry a specific Document Identification Number (DIN) and come from the NFAC. Local JAO notices are easily distinguishable by the designation of the officer.

SUPREME COURT OF INDIA

Income-tax Officer

Vandana Malhotra^*

Mrs. B.V. Nagarathna and Ujjal Bhuyan, JJ.

SLP (CIVIL) DIARY NO(S). 57403 OF 2025^†

FEBRUARY 3, 2026

Raghavendra P. Shankar, A.S.G., Ms. Madhulika Upadhyay, AOR, Ms. Pallavi Mishra, Ms. Aashna Gill, B.K. Satija, Piyush Beriwal, Chandrashekhara A. Chaklabbi, Surendra Sinha, Sudhakar Dwivedi, Mrs. Sunita Sharma, Sushil Raaja, Krishna Kant Dubey, Kamal Kishor, S.A. Haseeb, Mrs. Alka Agarwal, Sanjay Kumar Dubey, Sachin Sharma, Brijesh Yadav, Ms. Anasuya Choudhary, Shashank Bajpai, Keshav Thakur, Arun Kumar Singh, Ms. Shweta Garg, Suvesh Kumar, Abhinav Mishra, Mrs. Rashmi Malhotra, Gobind Kumar, Mukesh K. Verma, Mrs. Pankhuri Srivastava and Praneet Pranav, Advs. for the Petitioner.

ORDER

1. We dispose of these Special Leave Petition(s) by permitting the petitioner(s) herein to file an application(s) before the High Court(s) in the disposed of matter(s) to bring to the notice of the High Court(s) the latest clarification which has been issued with effect from 01.04.2021 on such clarification to be inserted in the proposed Finance Act.

2. If such an application(s) is made by the petitioner herein before the High Court, the same shall be considered after giving an opportunity of hearing to both sides on its merits.

3. In the event, the petitioner or any other party is unsuccessful, then liberty is reserved to the aggrieved party(s) to approach this Court to assail the impugned order(s) as well as the subsequent order(s) to be passed.

4. Special Leave Petitions are disposed of in the aforesaid terms.

5. All contentions on both sides are kept open to be advanced on the application(s) to be filed by the petitioner herein before the High Court in the disposed of cases.

6. All pending application(s), including application(s) seeking condonation of delay, shall stand disposed of.