Supreme Court Disposes of Revenue’s SLPs Directing Compliance with Mandatory NFAC Reassessment Notice Jurisdictions

Supreme Court Disposes of Revenue’s SLPs Directing Compliance with Mandatory NFAC Reassessment Notice Jurisdictions

Issue

Whether a reassessment notice issued under Section 148 of the Income-tax Act, 1961 by a jurisdictional Assessing Officer instead of the National Faceless Assessment Centre (NFAC) is bad in law for want of jurisdiction, in light of the central board of direct taxes (CBDT) notification dated March 29, 2022.

Facts

• The assessee filed a writ petition challenging a reassessment notice dated March 31, 2023, issued under Section 148 for the Assessment Year 2016-17.

• The primary ground of challenge was that the issuing officer completely lacked jurisdiction to initiate the reassessment process.

• The challenge relied directly on the CBDT notification dated March 29, 2022, which exclusively authorized and mandated the NFAC to issue notices under Section 148.

• The High Court, following several co-ordinate bench rulings on the exact same jurisdictional error, disposed of the writ petition by quashing the notice while granting liberty to the revenue department to initiate fresh proceedings following the correct legal framework.

• The Revenue Department moved the Supreme Court by filing a Special Leave Petition (SLP) against the High Court’s disposal order.

Decision

• The Supreme Court noted that the core jurisdictional issue regarding faceless reassessment notices was already settled by its own recent ruling in ITO v. Tej Partap Singh and other connected matters.

• The SLPs filed by the Revenue Department were formally disposed of in complete alignment with the terms, directions, and guidelines laid down in the Tej Partap Singh decision.

• The final ruling affirmed the lower court’s stance, deciding the procedural issue in favor of the assessee by checking the validity of the incorrectly routed notice.

Key Takeaways

• Exclusive Faceless Jurisdiction: Following the CBDT notification of March 29, 2022, local jurisdictional Assessing Officers cannot independently issue reassessment notices under Section 148; that power rests strictly within the electronic automated framework of the NFAC.

• Jurisdictional Flaws are Fatal: Any notice issued in violation of the designated statutory route constitutes a structural jurisdictional defect, and courts will invalidate such actions even if the department has a substantive underlying tax case.

• Liberty to Correct Process: Invalidation of a notice due to automated routing errors does not mean the tax liability is permanently erased. The revenue department retains the legal liberty to restart the reassessment procedure correctly by routing it through the NFAC, subject to statutory limitation periods.