CPT Elecy v. ITO: a section 148 notice issued by the JAO, not faceless, is invalid

The facts in brief

For assessment year 2020-21, the assessee — a co-operative thrift and credit society — received a notice under section 148 of the Income-tax Act, dated 30 March 2024, issued by the Jurisdictional Assessing Officer (the Income Tax Officer, Ward 1, Kancheepuram). The notice reopened the assessee's assessment for that year.

The assessee challenged the jurisdiction of the JAO to issue the notice. Its contention was that, under the CBDT Scheme notified on 29 March 2022 — framed under section 151A — all section 148 notices must be issued faceless, through automated allocation by the National Faceless Assessment Centre (NFAC), and that a notice issued directly by the JAO was without jurisdiction and void. The assessee relied on the Madras High Court's decision in TVS Credit Services Ltd., which had followed the Bombay High Court's ruling in Hexaware Technologies establishing the mandatory faceless requirement.

The Revenue defended the JAO's competence to issue the notice. The matter came before the Income Tax Appellate Tribunal at Chennai.

The reassessment architecture

The reassessment provisions were restructured by the Finance Act, 2021, which inserted a new procedural code in sections 147 to 151A. Section 151A empowers the Central Government to make a scheme for the purposes of assessment, reassessment or recomputation under section 147, or for the issuance of notice under section 148, so as to impart greater efficiency, transparency and accountability — by eliminating the interface between the income-tax authority and the assessee to the extent technologically feasible, and by optimising resources through economies of scale and functional specialisation.

Pursuant to that power, the CBDT notified a Scheme on 29 March 2022. The faceless architecture it established is the pivot of the dispute. If the Scheme requires section 148 notices to issue faceless through the NFAC's automated allocation, then a JAO has no parallel power to issue them, and a JAO-issued notice is jurisdictionally defective from the outset. The High Court authority on which the assessee relied had read the Scheme exactly that way.

What the Tribunal held

The Chennai ITAT quashed the reassessment. It held that a notice under section 148 issued by the Jurisdictional Assessing Officer — rather than in a faceless manner through automated allocation under the section 151A Scheme — is invalid and unsustainable in law.

The Tribunal followed the binding jurisdictional precedent of the Madras High Court in TVS Credit Services Ltd., which had itself adopted the Bombay High Court's landmark ruling in Hexaware Technologies. The effect of that chain of authority is that, after the CBDT's 29 March 2022 notification, the issuance of section 148 notices must be done faceless through the NFAC; a JAO has no concurrent jurisdiction to issue such a notice.

Because the impugned notice — issued by the Income Tax Officer, Ward 1, Kancheepuram, on 30 March 2024 — was not issued in a faceless manner, it was bad in law. The Tribunal recorded that the notices under section 148 were not issued in a faceless manner, and that the entire reassessment proceedings and consequential assessment orders flowing from the defective notice were therefore unsustainable. It set aside the notice and all consequential orders.

The decision turns on a jurisdictional and foundational defect, not on the merits of the additions. The Tribunal did not examine whether the reopening was substantively justified or whether the additions were sound; an invalid section 148 notice vitiates everything downstream, and the inquiry stops there.

The doctrinal architecture

The reasoning rests on a chain of binding authority and a single foundational proposition. The chain runs from the Bombay High Court's decision in Hexaware Technologies — which established that, post-notification, section 148 notices must issue faceless via the NFAC — to the Madras High Court's decision in TVS Credit Services Ltd., which adopted that holding and made it binding within the Chennai Bench's jurisdiction, to the present Tribunal application of it. The Chennai ITAT was applying jurisdictionally binding High Court precedent; the result followed almost mechanically once the JAO origin of the notice was established.

The foundational proposition is that a jurisdictional defect in the originating notice voids the entire reassessment and all consequential orders. This is not a curable irregularity that the assessee can be taken to have waived, nor a defect that goes only to one of several additions. The competence to issue the section 148 notice is the foundation on which the whole reassessment is built; if that foundation is absent, the structure cannot stand. The Tribunal therefore did not need to — and did not — reach the merits.

The competing constructions

The dispute is, at bottom, a contest between two readings of the section 151A Scheme, and it is worth setting them out because the eventual Supreme Court resolution will turn on which prevails. The taxpayer's reading — adopted by the Bombay and Madras High Courts and applied here — treats the Scheme as exhaustive of the manner in which a section 148 notice may be issued. On this view, once the Central Government has notified a scheme directing that notices be issued through automated allocation in a faceless manner, that channel becomes the only lawful channel; the JAO's erstwhile power to issue the notice is displaced, not supplemented. The phrase "to the extent technologically feasible" in section 151A is read as describing the reach of the faceless mechanism, not as carving out a residual concurrent jurisdiction for the JAO.

The Department's reading is narrower. It accepts that the Scheme governs the conduct of the faceless assessment that follows, but contends that the issuance of the originating notice remains within the JAO's competence — pointing to the continued statutory role of the Assessing Officer elsewhere in the reassessment code, and to administrative circulars that, on the Revenue's case, contemplate the JAO and the faceless centre operating in tandem. On this construction the JAO-issued notice is not void; at most it is a procedural irregularity that does not go to jurisdiction.

The Chennai Bench did not have to choose between these constructions as a matter of first principle, because the choice had already been made for it by the jurisdictional High Court. Within the Madras High Court's territory, TVS Credit Services binds the Tribunal, and TVS Credit Services adopted the taxpayer's reading. That is why the result followed almost mechanically. Elsewhere — in jurisdictions where the High Court has not yet spoken, or has spoken the other way — the same notice might survive. The unevenness is precisely what makes the question ripe for apex resolution.

Why the ruling matters

This is a representative, high-frequency 2025-26 ITAT ruling in the wave of faceless-reassessment-jurisdiction challenges that followed Hexaware Technologies. The JAO-versus-faceless question has become one of the most litigated procedural issues in direct tax, with taxpayers routinely securing quashal where the Department issued section 148 notices outside the faceless channel. The principle materially constrains the Revenue's reopening machinery and forces strict procedural compliance with the section 151A Scheme.

The contest is not fully settled nationally. The Department continues to defend JAO competence, advancing the argument that the faceless Scheme governs the conduct of assessment but does not strip the JAO of the power to issue the originating notice; and the issue is travelling toward the Supreme Court. But within jurisdictions bound by the Hexaware and TVS Credit line — including the Chennai Bench — the faceless mandate is firmly enforced, and a JAO-issued section 148 notice is liable to be quashed without reaching the merits.

For the assessee, the lesson is procedural and decisive. A reassessment can be defeated at the threshold, before any argument about the additions, if the originating notice was issued by the wrong authority. For the corpus, the decision supplies standalone tribunal coverage of reassessment procedure, complementing the apex- and High-Court-level reassessment authorities by showing how the faceless mandate is applied at the Tribunal coalface in the ordinary run of cases.

Related on Valkya

• Vodafone International Holdings v. Union of India
• Reckitt Benckiser v. ACIT: the Bright Line Test and AMP
• Tax: May–June 2026 roundup

Sources

1. Taxscan — "Notice u/s 148 issued by JAO instead of FAO Invalidates Reassessment: ITAT Quashes Proceedings": https://www.taxscan.in/top-stories/notice-us-148-issued-by-jao-instead-of-fao-invalidates-reassessment-itat-quashes-proceedings-1441121
2. SAG Infotech blog — "Chennai ITAT: Non-Faceless Reassessment Notices Under IT Section 148 Not Valid": https://blog.saginfotech.com/chennai-itat-non-faceless-reassessment-notices-section-148-not-valid
3. TaxGuru — "JAO-Issued Section 148 Notice Invalid: ITAT Chennai Quashes Reassessment": https://taxguru.in/income-tax/jao-issued-section-148-notice-invalid-itat-chennai-quashes-reassessment.html
4. Income Tax Appellate Tribunal — official orders portal, Chennai benches (ITA No. 3058/Chny/2025): https://itat.gov.in/