The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) had upheld the validity of Pre-29 March 2022 Faceless Reassessment Orders.
The bench of Prashant Maharishi (Vice-President) and Keshav Dubey (Judicial Member) has delivered an important ruling on the validity of reassessment orders passed through the National Faceless Assessment Centre (NFAC) before the notification dated 29 March 2022, disagreeing with a series of earlier coordinate bench decisions that had treated such orders as jurisdictionally defective. The Tribunal also condoned a delay of 367 days in filing the appeal, holding that the assessee had demonstrated sufficient cause for the delay.
The assessee was subjected to reassessment proceedings after the Income Tax Department received information regarding the purchase of an immovable property valued at ₹2.25 crore and cash deposits amounting to ₹18.30 lakh in a bank account.
During the reassessment proceedings, the Assessing Officer noted that although the assessee had filed a statement of income reflecting rental income and presumptive business income, no return of income had been filed. Consequently, additions were made under Section 69 of the Income-tax Act for alleged unexplained investment in property and unexplained cash deposits, resulting in an assessed income of ₹2.56 crore.
The first appellate authority dismissed the appeal ex parte and confirmed the additions after the assessee failed to respond to notices issued during the appellate proceedings.
Before addressing the merits, the Tribunal considered the issue of delay. The assessee argued that although the Commissioner (Appeals) had passed the order on 3 June 2024, he became aware of it only on 13 March 2025 after receiving an email regarding outstanding tax demand. He claimed that he believed his Chartered Accountant was handling the matter and discovered the appellate order only when he later approached the accountant regarding another tax matter.
After examining the explanation, the Tribunal held that sufficient cause had been shown and condoned the delay. It noted that once the assessee became aware of the appellate order and obtained a copy from the portal, the appeal was filed promptly. Accordingly, the appeal was admitted for adjudication on merits.
The principal legal challenge raised before the Tribunal concerned the validity of the reassessment order passed by NFAC on 26 March 2022.
The assessee argued that NFAC lacked jurisdiction to pass reassessment orders before the notification dated 29 March 2022, which operationalised the faceless reassessment scheme under Section 151A. Reliance was placed on several decisions of the Kolkata, Cuttack and Patna Benches, including Md. Mahimud SK, Nand Kumar Choudhury and Kalawati Enterprises Pvt. Ltd., where reassessment orders passed before 29 March 2022 had been quashed on jurisdictional grounds.
The Revenue, however, contended that those decisions had proceeded solely on the basis of a notification and had failed to consider the statutory framework, particularly the pre-existing faceless assessment provisions contained in Section 144B.
The Tribunal undertook an extensive analysis of the legislative history of Sections 144B and 151A.
It observed that Section 144B, introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, had already established a comprehensive faceless assessment mechanism with effect from 1 April 2021. The provision vested jurisdiction in the National Faceless Assessment Centre and prescribed a complete framework for conducting assessments electronically.
The Bench noted that earlier coordinate bench decisions had focused primarily on the notification issued under Section 151A without adequately examining the existing statutory framework under Section 144B. According to the Tribunal, the faceless assessment structure was already operational and the reassessment proceedings in the present case had commenced before NFAC in November 2021.
In a significant observation, the Tribunal remarked that subsequent decisions had largely followed the first Kolkata Bench ruling without independently examining the statutory provisions governing faceless assessments.
The Tribunal further referred to the newly inserted Section 147A by the Finance Act, 2026, which retrospectively clarified from 1 April 2021 that the Assessing Officer for purposes of Sections 148 and 148A would mean an officer other than NFAC or any assessment unit under Section 144B(3). On that basis, it rejected an alternative argument that only the jurisdictional Assessing Officer could have conducted the proceedings.
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