The Supreme Court has settled the long-standing controversy over whether reassessment notices and orders under the Income-tax Act, 1961 could be issued by the Jurisdictional Assessing Officer (JAO) after the introduction of the faceless reassessment regime under the Finance Act, 2021. 

The bench of Chief Justice Of India Surya Kant, Justice B.V. Nagarathna and Justice Joymalya Bagchi disposed of a massive batch of appeals arising from conflicting judgments delivered by various High Courts on the interpretation of the reassessment framework and the e-Assessment of Income Escaping Assessment Scheme, 2022.

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Background of the Dispute

The litigation traces its origin to the sweeping amendments introduced by the Finance Act, 2021, which overhauled the reassessment mechanism contained in Sections 147 to 151 of the Income-tax Act. The amendments, effective from April 1, 2021, were intended to make reassessment proceedings more transparent while strengthening procedural safeguards available to taxpayers.

Under the amended statutory framework, reassessment proceedings commence where the Assessing Officer possesses information suggesting that income chargeable to tax has escaped assessment. Before issuing a notice under Section 148, the officer is required to conduct a preliminary inquiry under Section 148A, provide the assessee an opportunity of being heard, and thereafter pass an order under Section 148A(d) deciding whether reassessment proceedings should be initiated.

Emergence of the Faceless Reassessment Scheme

The controversy deepened after the Central Government notified the e-Assessment of Income Escaping Assessment Scheme, 2022 under Section 151A of the Income-tax Act through Notification No. 18/2022 dated March 29, 2022.

The Scheme envisaged that reassessment proceedings under Section 147 and issuance of notices under Section 148 would be carried out through automated allocation and a faceless mechanism, with the objective of improving efficiency, transparency and accountability in tax administration.

However, uncertainty arose regarding whether these provisions completely displaced the jurisdiction of the traditional Jurisdictional Assessing Officer or whether both the Jurisdictional Assessing Officer and the Faceless Assessment mechanism could simultaneously exercise powers under the reassessment provisions.

Conflicting High Court Decisions

The Supreme Court noted that several High Courts adopted divergent interpretations of the statutory scheme.

While some High Courts held that the Jurisdictional Assessing Officer and the National Faceless Assessment Centre exercised concurrent jurisdiction and that the Scheme did not completely eliminate the authority of the Jurisdictional Assessing Officer, other High Courts reached the opposite conclusion. Those courts quashed notices issued under Section 148 and orders passed under Section 148A(d) solely because they had been issued by the Jurisdictional Assessing Officer instead of through the faceless mechanism, thereby invalidating the entire reassessment proceedings.

The conflicting judicial opinions resulted in thousands of reassessment cases across the country becoming embroiled in litigation, prompting the Revenue to approach the Supreme Court.

Revenue’s Stand Before the Supreme Court

Representing the Revenue, the Additional Solicitor General argued that Parliament had always intended a coordinated framework where reassessment proceedings would ultimately be handled through the faceless system. According to the Revenue, subsequent amendments introduced by the Finance Act, 2026 merely clarified the original legislative intent and removed the ambiguity that had led to conflicting judicial opinions.

The Revenue further contended that Parliament possesses the authority to enact retrospective clarificatory amendments and submitted that reassessment proceedings could now continue in accordance with the clarified statutory framework.

Finance Act, 2026 Brought During Pendency of Appeals

The Supreme Court observed that while these appeals were pending, Parliament enacted the Finance Act, 2026, introducing clarificatory amendments to both the Income-tax Act, 1961 and the Income Tax Act, 2025.

According to the Court, these amendments were intended to bring greater procedural clarity and clearly demarcate the respective stages of reassessment proceedings from the pre-assessment inquiry through the passing of the reassessment order.

Supreme Court Recognises Need for Uniform Interpretation

The Court recorded that the batch involved a common question of law arising from reassessment proceedings initiated under the Income-tax Act. It noted that several High Courts had invalidated reassessment proceedings because notices and orders were issued by Jurisdictional Assessing Officers rather than through the faceless mechanism, whereas other High Courts had upheld the authority of the Jurisdictional Assessing Officer.

Given these conflicting judicial views, the Supreme Court considered it appropriate to settle the legal position through a common judgment applicable to all connected matters.

Appeals Disposed of by Common Judgment

The Supreme Court granted leave in the batch matters and disposed of all the connected civil appeals through a common judgment. The Court also disposed of all pending applications, including intervention applications, thereby bringing to a close one of the largest batches of reassessment-related litigation under the amended reassessment regime.

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