INCOME TAX OFFICER WARD 1/ JAO, NAGERCOIL vs. ARUNA ANTONY KAMAL KUMAR, AZHAGAPPAPURAM

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ITA 1366/CHNY/2026Status: DisposedITAT Chennai15 October 2026AY 2019-206 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the basis on which the FAA allowed the assessee's legal ground no longer survived due to subsequent developments. The Supreme Court, acknowledging the retrospective amendment by the Finance Act, 2026, had set aside the High Court judgments relied upon by the FAA. Consequently, the FAA's finding that the notice issued by the JAO was invalid could not be sustained. The Tribunal set aside the impugned order of the FAA. Since the FAA had not adjudicated the grounds on merits, and considering the assessee's plea to restore the matter to the AO for both legal and merit issues due to an ex-parte assessment, the Tribunal restored the matter to the file of the AO. The AO was directed to await the outcome of appeals before the Jurisdictional High Court concerning the validity of the retrospective amendment and then adjudicate afresh. If the assessee did not press the legal issue, the AO could adjudicate remaining grounds on merits after affording a hearing. The appeal was allowed for statistical purposes.

What were the facts?

The Revenue filed an appeal against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2019-20. The FAA had quashed the reassessment proceedings on the legal ground that the Jurisdictional Assessing Officer (JAO) lacked the power to issue a notice under Section 148 of the Income Tax Act, 1961, arguing it should have been issued by a Faceless Assessing Officer (FAO). The FAA relied on High Court and ITAT decisions. However, subsequent to the FAA's order, the Finance Act, 2026, introduced a retrospective amendment validating such notices issued by the JAO. The Supreme Court, acknowledging this amendment, set aside the High Court judgments that held JAO notices invalid after March 29, 2022, while permitting taxpayers to challenge the retrospective amendment.

What were the issues?

1. Whether the notice issued under Section 148 of the Income Tax Act, 1961, by the Jurisdictional Assessing Officer (JAO) was valid, considering the assessee's contention that it should have been issued by a Faceless Assessing Officer (FAO)? - Assessee's Contention: The notice under Section 148 ought to have been issued by the FAO, not the JAO, rendering the reassessment proceedings liable to be quashed. - Revenue's Contention: The appeal filed by the Revenue was maintainable despite the tax effect being below the prescribed monetary limit, as it fell within the exceptions provided under CBDT Circular No. 5/24 dated 15.03.2024 (referring to para 3.1 clause (a) and para 3.2 clause (b)). 2. Whether the appeal filed by the Revenue was maintainable in light of CBDT Circulars regarding the monetary limit for filing appeals?

Which sections of the Income-tax Act were involved?

Section 148,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI GAGAN GOYAL

Hearing: 14.10.2026Pronounced: 15.10.2026

आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 13.01.2026, passed under section 250 of

- 2 - ITA No.1366/CHNY/2026 Aruna Antony Kamal Kumar the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2019-20.

2.

At the outset, we notice that the FAA had not decided the issues on merits but quashed the reassessment on legal ground raised namely Jurisdictional Assessing Officer (JAO) does not have the power to issue notice u/s.148 of the Act. The FAA has considered the specific contention of the assessee that the notice u/s. 148 of the Act ought to have been issued by the Faceless Assessing Officer (FAO), instead of the Jurisdictional Assessing Officer (JAO), and consequently the proceedings initiated u/s.148 of the Act were liable to be quashed. The FAA, after considering the decisions of the Hon’ble Bombay High Court in the case of Hexaware Technologies Ltd., reported in 162 taxmann.com 225, the order of the ITAT, Chennai in the case of Abdul Kani Karreem reported in 181 taxmann.com 62 and the judgment of Hon’ble Jurisdictional High Court in the cases of TVS Credit Services Ltd. in WP No.22402 of 2024, dated 24.06.2025 and following the ratio laid down therein, has held that the notice issued u/s.148 by the JAO was not valid and, consequently, quashed the reassessment proceedings.

- 3 - ITA No.1366/CHNY/2026 Aruna Antony Kamal Kumar 3. However, we note that the Revenue had preferred appeals before the Hon’ble Apex Court against the various decisions of the Hon’ble High Courts referred to (supra), wherein the notices issued under section 148 of the Act by the JAO on or after 29.03.2022 were held to be invalid. In the meantime, the Finance Act, 2026 has introduced a retrospective amendment validating the issuance of such notices by the JAO. The Hon’ble Apex Court, vide its order dated 10.04.2026, has taken note of the aforesaid retrospective amendment and set aside the judgments of the Hon’ble High Courts holding that the JAO could not have issued notices u/s. 148 of the Act on or after 29.03.2022. It is further noted that the Hon’ble Apex Court has permitted the taxpayers to approach the respective High Courts by way of writ petitions challenging the validity of the retrospective amendments introduced by the Finance Act, 2026. The Hon’ble Apex Court has directed the respective High Courts to decide such petitions filed on or before 31.07.2026 and has also stayed the assessment proceedings in the meanwhile.

4.

In view of the aforesaid subsequent developments, the basis on which the FAA had allowed the legal ground raised by the assessee no longer survives. The decisions of the Hon’ble High Courts relied upon

- 4 - ITA No.1366/CHNY/2026 Aruna Antony Kamal Kumar by the FAA having been set aside by the Hon’ble Apex Court, the impugned finding of the FAA cannot be sustained. It is a settled principle that when the very foundation on which an order has been passed is removed, the order founded thereon cannot survive.

5.

Accordingly, we set aside the impugned order of the FAA. We further note that the FAA has not adjudicated the grounds raised by the assessee on merits, as the appeal was allowed on the aforesaid legal issue. During the course of hearing before us, the Ld. AR contended that the appeal filed by the Revenue was not maintainable, as the tax effect was below the monetary limit prescribed under CBDT Circular No.5/24 dated 15.03.2024 and Circular No.09/24 dated 17.09.2024. In response, the Ld. DR submitted that the case falls within the exceptions provided under Circular No.5/24 dated 15.03.2024, wherein an appeal may be filed irrespective of the tax effect. In this context, the Ld.DR referred to para 3.1 clause (a) and para 3.2 clause (b) of the said circular. The Ld. AR, in turn, pleaded that both the legal issues and the issues on merits be restored to the file of the AO, as the assessment had been completed ex-parte. In light of the submissions of the Ld.AR, we deem it appropriate to restore the matter to the file of the AO. The AO shall await the

- 5 - ITA No.1366/CHNY/2026 Aruna Antony Kamal Kumar outcome of the appeals before the Hon’ble Jurisdictional High Court. After Hon’ble High Court has passed judgment, concerning the validity of the retrospective amendment introduced by the Finance Act, 2026 particularly on the issue as to whether the notice issued by the JAO u/s.148 of the Act on or after 29.03.2022 is valid in law or not, the AO is directed to adjudicate the appeal afresh in accordance with judgment so rendered by the Hon’ble High Court. In the event the assessee does not wish to press the aforesaid legal issue, the AO shall be at liberty to adjudicate the remaining grounds on merits and other legal issues raised, after affording reasonable opportunity of hearing to the assessee and in accordance with law. It is ordered accordingly.

6.

In the result, the appeal of the Revenue is allowed for statistical purposes.

Order pronounced in the open court on 15th October,2026 at Chennai.

Sd/- Sd/- (जॉज� जॉज� के) (गगन गोयल) (GAGAN GOYAL) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 15th October, 2026 RSR, Sr.PS

- 6 - ITA No.1366/CHNY/2026 Aruna Antony Kamal Kumar आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Madurai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order

Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.10.16 17:06:41 +05'30'

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