Summary: The shift to faceless tax assessments raised a fundamental question of who can initiate the reopening of an assessment? While several high courts have held that jurisdictional assessing officers can no longer issue reopening notices, others have recognised their continuing authority. The Finance Act, 2026, sought to settle this disagreement through a retrospective insertion, but fresh challenges followed over whether it resolved the procedural objections identified by the courts. The controversy now extends beyond the division of responsibilities between jurisdictional and faceless officers to the limits of retrospective lawmaking, leaving the Supreme Court to reconcile effective tax administration with procedural certainty.
The 2021 Overhaul: A New Framework for Reopening Assessments
Effective April 1, 2021, the reassessment framework under the Income-tax Act, 1961 (“IT Act”), was overhauled and redesigned to promote efficiency, transparency, and accountability through faceless proceedings. Relevant provisions were incorporated into the IT Act to empower the Central Government to frame a scheme for faceless assessment. Later, the e-assessment of the Income Escaping Assessment Scheme, 2022 (“Scheme”), notified on March 29, 2022, provided that reassessment proceedings be conducted through automated allocation, in accordance with the risk-management strategy of the Central Board of Direct Taxes (“CDBT”), and in a faceless manner to the extent provided under the IT Act.
However, even after this change, several Jurisdictional Assessing Officers (“JAO”) continued to issue these notices out of habit, without viewing the practice as manifestly erroneous. This inertia opened a Pandora’s box of litigation, as taxpayers across the country challenged the validity of proceedings initiated by a JAO. At this juncture, the pertinent question was whether the JAO could continue initiating reassessment, leaving the subsequent assessment to the faceless assessing officer (“FAO”), or whether the Scheme displaced the JAO at the initiation stage itself.
The Judicial Divide: Who Can Reopen an Assessment?
Several high courts (“HC”) have held that notices issued by JAOs were inconsistent with the Scheme. In Kankanala Ravindra Reddy,[1] the Telangana HC treated automated allocation and faceless proceedings as mandatory. Proceedings initiated contrary to that framework were consequently quashed.
Bombay HC developed this reasoning in Hexaware Technologies Ltd.,[2] where it rejected concurrent jurisdiction between the JAO and the FAO for issuing Section 148 notices. It held that since the Scheme expressly covers the issuance of reassessment notices, such proceedings should be mandatorily initiated by FAOs. Other HCs, however, accepted the continued authority of JAOs, such as in Triton Overseas[3], Talati and Talati LLP,[4] creating a jurisdictional divide.
Finance Act, 2026: Retrospective Insertion and Renewed Challenges
Amid such divergent views, the Finance Act, 2026 (“FA 2026”), has inserted Section 147A with retrospective effect from April 1, 2021. This section contains a non-obstante clause clarifying that, notwithstanding any judgment, order, or decree of any court, the term “Assessing Officer” under Sections 148 and 148A also includes JAO. Enacted while challenges to earlier reassessment notices remained pending before the SC, the amendment’s objective was to clarify the JAO’s jurisdiction alongside the FAO to avoid litigation.
Thereafter, in Tej Partap Singh,[5] the SC set aside all the HC judgments favourable to the taxpayers on the limited ground of the intervening amendment through FA 2026, remitting the matters to the respective HCs. However, it permitted taxpayers to amend their writ to challenge the constitutional validity of Section 147A.
The taxpayers argued that since Section 147A seeks to nullify the judicial decisions without curing the inherent defects identified by the courts, the retrospective amendment is constitutionally void. They also contended that the section became effective from April 1, 2026, after the IT Act had been repealed.
Second Round of Litigations: From Jurisdiction to Constitutional Validity
In Jyoti Sareen,[6] the Punjab and Haryana HC held that Section 147A did not cure the jurisdictional non-compliance identified in earlier judgments, i.e., the requirement that Section 148 notices originate through randomised automated allocation and the faceless mechanism prescribed by Section 151A and the Scheme. Although Section 147A retrospectively excluded faceless officers from Sections 148 and 148A, it neither amended that framework nor addressed randomised allocation or the Scheme. However, the SC in Bharat Industrial Enterprises[7] stayed the decision in Jyoti Sareen supra, pending its final disposal.
Subsequently, in Bala Sreenivas Rao Somisetty,[8] the Andhra Pradesh HC independently struck down Section 147A, notwithstanding that stay. It reasoned that because the Scheme still expressly covered Section 148 notices, merely redefining the competent officer without amending Section 151A or the Scheme did not eliminate the requirement for faceless initiation. It additionally held the insertions were unsustainable because the relevant FA 2026 provisions commenced after the IT Act had already been repealed.
Way Forward
Reassessment is an important tool for bringing escaped income to tax, but its exercise must operate within a clear and predictable procedural framework. The introduction of faceless administration sought to strengthen transparency and accountability. However, the conflicting judicial interpretations and subsequent retrospective legislative intervention have brought the allocation of reassessment powers, and the limits of legislative validation, into renewed focus.
As stakeholders await the SC’s determination, the broader takeaway is that statutory authority and procedural safeguards must align. The tax authority’s position that Section 147A validly clarifies jurisdiction must be considered alongside the HCs’ concern that the requirements supporting their earlier decisions remained unresolved. The ultimate solution should provide certainty on both aspects, rather than settle the identity of the competent officer while leaving the applicable procedure open to further dispute.
For further information, please contact:
Thangadurai V.P, Partner, Cyril Amarchand Mangaldas
thangadurai.vp@cyrilshroff.com
[1] Kankanala Ravindra Reddy v. Commissioner of Income Tax [TS-539-HC-2023(TEL)].
[2] Hexaware Technologies Ltd. v. Assistant Commissioner of Income Tax [TS-298-HC-2024(BOM)].
[3] Triton Overseas (P.) Ltd. v. Union of India [2023] 156 taxmann.com 318 (Calcutta).
[4] Talati and Talati LLP v. ACIT [R/ Special Civil Application No.13198 of 2024]. (Gujarat HC)
[5] Tax Officer v. Tej Partap Singh [TS-615-SC-2026].
[6] Jyoti Sareen and others v. Union of India [TS-1442-HC-2026 (P&H)].
[7] Union of India v. Bharat Industrial Enterprises Private Limited [SLP(C) No. 33196/2026].
[8] Bala Sreenivas Rao Somisetty v. Income-tax Officer [TS-1626-HC-2026 (AP)].
