Reassessment is no longer about only “what” was missed but also “how” it was reopened. Process is now jurisdiction.
A Landmark Turning Point in Reassessment Jurisprudence
In a development that reshapes the foundation of reassessment law, the Supreme Court has dismissed the Revenue’s challenge to the Telangana High Court ruling in Red Chilli International Sales v. ITO. The High Court had held that any reassessment notice under Section 148 issued after 29 March 2022 by a Jurisdictional Assessing Officer (JAO), bypassing the Faceless Scheme, is ultra vires and void ab initio.
By refusing to interfere, the Supreme Court has silently but firmly cemented a principle with far-reaching consequences: the authority to reassess is not merely about detection of escaped income — it is rooted in strict procedural compliance as laid down by statute and delegated legislation.
The Core Legal Reasoning
The CBDT, through Notification No. S.O. 1806(E) dated 29 March 2022, introduced the Faceless Assessment Scheme, 2022, to govern all reassessment proceedings under Sections 147 to 151. This scheme not only altered the procedure but restructured jurisdiction itself.
What the Notification Mandates:
-
Only designated Faceless Assessing Officers (FAOs) are empowered to issue notices under Section 148.
-
Jurisdictional AOs cease to have authority to initiate reassessment unless explicitly permitted.
-
International Taxation Units are exempted only for final assessments, not for issuing reassessment notices.
In short, procedural non-compliance under this scheme is not curable — it is jurisdictionally fatal.
Telangana High Court’s Interpretation
The High Court reasoned that:
-
Jurisdiction flows from law, not habit.
-
Once a statutory scheme (like the faceless reassessment system) is notified, any deviation by a non-designated authority renders the entire proceeding void, irrespective of the alleged escapement of income.
-
A reassessment notice by a JAO post-29 March 2022 is unauthorised and unenforceable, regardless of whether the case involves a domestic taxpayer, NRI, or international transaction.
This conclusion, now endorsed by the Supreme Court, has rendered many reassessment proceedings procedurally unsustainable.
Why This Ruling Matters
1. Jurisdiction is Now Digitally Defined
The move to a faceless system is not an administrative convenience — it is a legislative redesign of power allocation. The issuance of a Section 148 notice is a jurisdictional act. If the person issuing it has no authority under the current framework, the entire proceeding is void, even if the facts and income escapement are undisputed.
2. No Immunity for International Tax Cases
A common misconception has been that International Taxation Units can continue to issue reassessment notices traditionally. This judgment clarifies that only final assessments are exempted — not the initiation of reassessment proceedings. Thus, non-residents and foreign companies improperly issued notices by local AOs can seek to have them quashed entirely.
3. Procedural Lapses Now Operate as Constitutional Defects
In the post-faceless regime, reassessment is not merely about revenue protection. It is about due process. As with natural justice, the manner in which power is exercised is as important as the objective for which it is exercised.
Strategic Implications for Taxpayers and Practitioners
-
All Section 148 notices issued after 29 March 2022 must be examined for procedural validity.
-
Was it issued by a Faceless AO?
-
Was it routed through the digital system or backdoor signed by the JAO?
-
-
If not in conformity with the faceless scheme, the notice is a nullity, and writ remedy lies directly before the High Courts.
-
Merits become irrelevant where initiation itself is illegal.
This opens a litigation opportunity to challenge defective reassessments purely on jurisdictional grounds — saving years of fact-based defense and evidence collation.
The New Reassessment Matrix
| Date of Section 148 Notice | Issuing Officer | Faceless Compliance | Validity Status |
|---|---|---|---|
| Before 29 March 2022 | Jurisdictional AO | Not applicable | Valid |
| After 29 March 2022 | Jurisdictional AO | No | Invalid |
| After 29 March 2022 | Faceless AO | Yes | Valid |
Conclusion: Faceless Is Now Foundational
This judgment signals a doctrinal shift in reassessment law: process is no longer procedural—it is constitutional. Power delegated under the faceless regime carries binding force. Any deviation is not a mere lapse—it is excess of jurisdiction.
In this new era, Section 148 is not just a tool to reopen income; it is a test of whether the Department follows the rule of law. The Supreme Court has now set the tone — reassessment is not open season; it is due process by design.
