INCOME TAX OFFICER, KRISHNAGIRI vs. PAZHANI KALAISELVI, KRISHNAGIRI

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ITA 1862/CHNY/2026Status: DisposedITAT Chennai14 October 2026AY 2020-2116 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted the subsequent legislative amendment by the Finance Act, 2026, which inserted Section 147A retrospectively from April 1, 2021. This new provision clarifies that for the purposes of Sections 148 and 148A, the AO shall mean an AO other than the National Faceless Assessment Centre (NFAC) or any assessment unit referred to in Section 144B(3). The Tribunal also took note of the Supreme Court's order in Income Tax Officer v. Tej Partap Singh, which set aside High Court judgments favouring assessees on the JAO's competence to issue Section 148 notices, due to the insertion of Section 147A, and remitted matters for fresh consideration. The Tribunal further acknowledged the Punjab and Haryana High Court's decision declaring Section 147A unconstitutional, which is stayed by the Supreme Court. Given the pending authoritative judicial determination on the constitutional validity and effect of Section 147A and the competent authority for issuing notices, the Tribunal deemed it inappropriate to express a concluded opinion. Consequently, the Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A) for fresh consideration, directing the CIT(A) to keep the appeal in abeyance and await the final decision of the jurisdictional High Court or the Supreme Court on the JAO-FAO issue in light of Section 147A. The CIT(A) is to reconsider the validity of the notice under Section 148 after such determination.

What were the facts?

The Revenue appealed the order of the CIT(A) dated January 13, 2026, which had quashed a reassessment order dated March 5, 2025, passed by the AO under Section 147 read with Section 144B of the Income-tax Act, 1961 (the Act) for Assessment Year 2020-21. The assessee, an individual, had not filed a return for AY 2020-21. Information revealed cash deposits of Rs. 39,15,925/-. The assessee later filed an updated return under Section 139(8A) disclosing income under Section 44AD. The AO issued a notice under Section 148A(d) and Section 148 on March 25, 2024. The assessee's business involved chit funds, with cash receipts of Rs. 45,33,900/- and UPI transfers of Rs. 79,34,525/-. The AO treated Rs. 1,34,41,772/- as unexplained money under Section 69A.

What were the issues?

1. Whether the reassessment proceedings initiated by the Jurisdictional Assessing Officer (JAO) are bad in law, in light of the mandatory faceless assessment regime under Section 151A and the e-Assessment Scheme, 2022? (Question of law and fact, concerning Section 148A, 148, 151A, 144B). Assessee's contention: The JAO lacked the authority to issue notices under Section 148A(b) and Section 148, and pass orders under Section 148A(d), as these actions must be undertaken by a Faceless Assessing Officer (FAO) through automated allocation, as per Section 151A and the e-Assessment Scheme, 2022. Reliance was placed on decisions of the Bombay High Court in Hexaware Technologies Limited, Telangana High Court in Kankanala Ravindra Reddy, and Madras High Court in Mark Studio Indian Private Limited. Revenue's contention: The JAO was competent to issue the notice under Section 148 in accordance with applicable statutory provisions and the notification issued under Section 151A.

Which sections of the Income-tax Act were involved?

Section 139(1),Section 139(8A),Section 147,Section 148,Section 148A,Section 148A(b),Section 148A(d),Section 144B,Section 151A,Section 69A,Section 44AD,Section 147A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA

Hearing: 13.08.2026Pronounced: 14.10.2026

आयकरअपीलीयअधिकरण,‘बी ’न्यायपीठ,चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI श्रीमनुकुमारगिरर, न्याययकसदस्यएवंश्रीएस.आर.रघुनाथा, लेखासदस्यकेसमक्ष BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./ITA No.1862/Chny/2026 ननिाारणवर्ा / Assessment Year: 2020-21 The Income Tax Officer Pazhani Kalaiselvi Krishnagiri. vs. 282 M, Cholur, Kadhiripuram Mittanahalli Krishnagiri – 635 112 Tamil Nadu. (अपीलाथी/Appellant) [PAN:GVXPK2022J] (प्रत्यथी/Respondent) अपीलाथीकीओरसे/Appellant by : Shri. E.Elango, JCIT प्रत्यथीकीओरसे/Respondent by : Shri. S.Sridhar (Erode), Advocate (Virtually) सुनवाईकीतारीख/Date of Hearing : 13.08.2026 घोर्णाकीतारीख/Date of Pronouncement : 14.10.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : The present appeal has been preferred by the Revenue against the order dated 13.01.2026 passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as “the Ld. CIT(A)”], arising from the assessment order dated 05.03.2025 passed by the Assessing Officer, Assessment Unit, Income Tax Department [hereinafter referred to as “the AO”], u/s.147 r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year (A.Y) 2020-21.

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2.

The brief facts of the case emanating from records are that the assessee is an individual and did not file his return of income for A.Y. 2020-21. Based on information available with the department the assessee was found to have made cash deposit of Rs.39,15,925/- in his bank of baroda bank account apart from cash withdrawals of Rs.1,08,32,900/- and having TDS on cash withdrawal of Rs.11,718/-. However, the assessee filed an updated return submitted u/s.139(8A) of the Act on 27.03.2023, disclosing income and transactions in compliance with the presumptive taxation scheme u/s.44AD of the Act. Since the assessee had not filed the return of income u/s.139(1) of the Act, the AO issued an order u/s.148A(d) and a notice u/s 148 on 25.03.2024, to file return of income. Since the assessee filed the updated return of income and there is no change in the income, the assessee did not file the return of income u/s.148 of the Act.

3.

Subsequently, notices u/s.142(1) of the Act along with a detailed questionnaire were issued calling for information regarding nature of business activity, supporting evidences, bank statements and books of account. The assessee submitted his replies and supporting documents. In the normal course of appellant’s chit business, the assessee received cash to the tune of Rs.45,33,900/- (which was deposited later in the bank) and UPI transfers to the tune of Rs.79,34,525/- from members of the chit fund. The bank statements clearly reflect these routine transactions cash deposits and withdrawals made to settle chit fund winnings. Despite these being standard business operations, the department was not satisfied with the explanation for the transactions. As a result, an amount of Rs.1,34,41,772/- (Rs.45,33,900 plus Rs.79,34,525 plus Rs.9,70,887/- towards jewel loan plus Rs.2,460 towards interest) was treated as “unexplained money” u/s.69A of the Act and passed an order u/s.147 of the Act dated 05.03.2025. Aggrieved by the assessment order passed by the AO, the assessee preferred an appeal before the ld.CIT(A).

:-3-: ITA. No.1862/Chny/2026 4. During the appellate proceedings, the assessee submitted its written submissions stating as detailed below :

“Ground No.1 & 2: Reopening and consequent reassessment is bad in law. The appellant humbly submits that for the impugned Assessment Year 2020-21, the case was reopened by way of show-cause notice dated 01.02.2024 issued u/s.148A(b) of the Act by the Income Tax Officer, Ward-1, Krishnagiri. It is submitted that as per the provisions of Section 144B, a case randomly assigned to an AO and that it must be reopened in a faceless manner and carried by the Faceless Assessing Officer (FAO). However, in this instant case it can be seen that the Jurisdictional Assessing Officer (JAO) of the appellant, Income Tax Officer Ward-1, Krishnagiri, has issued the notice u/s.148(b) dated 01.02.2024. It can also be seen that order u/s.148A(d) and notice u/s.148 was served by the JAO of the appellant on the same date which was on 25.03.2024. Reliance is placed on the decision of the Hon’ble Bombay High Court in Hexaware Technologies Limited V. ACIT [2024 (5) TMI 302], which held that the provisions of Section 151A had clearly established a regime of faceless assessment. The court in that case ruled that it was not permissible for the JAO to issue a notice u/s 148, as it would amount to a breach of the provisions of Section 151A. Similar decision was taken by the Hon'ble High Court of Telangana in Kankanala Ravindra Reddy V. Income Tax Officer and Ors [2023 (9) TMI 951]. The court held that: “A plain reading of the aforesaid two notifications issued by the Central Board of Direct Taxes dated 28.03.2022 and 29.03.2022, it would clearly indicate that the Central Board of Direct Taxes was very clear in its mind when it framed the aforesaid two schemes with respect to the proceedings to be drawn under Section 148A, that is to have it in a faceless manner. There were two mandatory conditions which were required to be adhered to by the Department, firstly, the allocation being made through the automated allocation system in accordance with the risk management strategy formulated by the Board under Section 148 of the Act. Secondly, the re assessment has to be done in a faceless manner to the extent provided under Section 144B of the Act. The Hon'ble High Court, Madras in the case of Mark Studio Indian Private Limited V. ITO [WA No.781 of 2025] relied on the judgement of the Bombay High court in the case of Hexaware Technologies (Supra) and quashed the notices and order served by the JAO. Therefore, it can be seen that the impugned assessment order suffers from serious procedural lapses that vitiates the entire proceedings and hence the consequential impugned order is bad in law and liable to liable to quashed following the precedents given above.”

5.

On perusal of the submission of the assessee, the ld.CIT(A) relying on the various judicial precedents of Hon’ble courts quashed the notice issued u/s.148 of the Act by passing an order dated 13.01.2026 by holding as under:

:-4-: ITA. No.1862/Chny/2026 “6.2.2 I have carefully considered the submissions of the appellant and examined the legal position. Section 151A of the Act, read with the e-Assessment of Income Escaping Assessment Scheme, 2022 notified vide Notification No. 18/2022 dated 29.03.2022, mandates that notices u/s 148 shall be issued only through automated allocation by the Faceless Assessing Officer (FAO). The Hon’ble Bombay High Court in Hexaware Technologies Ltd. (162 taxmann.com 225) has categorically held that, after the issuance of the said notification, the Jurisdictional Assessing Officer (JAO) does not have authority to issue notices u/s 148/148A(b) or pass orders u/s 148A(d), and that such actions are required to be undertaken exclusively by the FAO. The Hon’ble ITAT Chennai Bench in the case of Abdul Kani Kareem [181 taxmann.com 62] has held as under : “9. We have heard the rival submissions perused the material available on record and CBDT circular and caselaw cited by the assessee. We find that the CBDT issued a Notification dated 29.03.2022 formulating "the e- assessment of income assessment Scheme, 2022". The Scheme provides that (a)the assessment/re-assessment are recomputation u/s.147 of the Act and (b)issuance of notice u/s.148 of the Act shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred u/s.148 of the Act for issuance of notice and in a faceless manner to the extent providing in Section 144B of the Act with reference to making assessment/re- assessment of total income or loss of the assessee. We find that the impugned notice u/s.148 of the Act dated 06.04.2022 and order u/s.148A(d) dated 06.04.2022 for theA.Y.2015-16 and impugned notice u/s.148 of the Act dated 14.03.2023 and order u/s.148A(d) dated 14.03.2023 for the A.Y.2016-17 have been issued by the Income Tax Officer, Non-Corp Ward 22(1),Tambaram [JAO] and not by the NFAC which is not in accordance with the aforesaid Scheme. We find that though the order under Clause(d) to Section 148A of the Act dated 06.04.2022 and 14.03.2023 have been passed for A.Y.2015-16 and A.Y.2016-17 respectively, the notice u/s.148 of the Act was issued on 06.04.2022for the A.Y.2015-16 and the notice u/s.148 of the Act was issued on 14.03.2023 for the A.Y.2016-17 after the CBDT Notification dated 29.03.2022. Hence, the aforesaid CBDT Notification dated 29.03.2022 is directly applicable in this case. 10. The Hon'ble Telangana High Court in Kankanala Ravindra Reddy v. ITO [2023] 156 taxmann.com 178/[2023] 295 Taxman 652 (TELANGANA) and Hon'ble Bombay High Court in Hexaware Technologies Ltd v. ACIT [2024] 162 taxmann.com 225 (Bombay)/[2024] 464 ITR 430 (Bombay) has decided the controversy in favour of the assessee. 11. Furthermore, the above view is affirmed by the Hon'ble Telangana High Court in Kings Pride Infra Projects (P.) Ltd. v. Dy. CIT [2025] 176 taxmann.com 704/479 ITR 651 (Telangana)/[Writ Petition Nos.26645,26654, 26667, 28497, 26788 of 2024 and 12437, 9561, 14549, 14664, 14674, 12873 of 2025 dated14.07.2025], following the judgments of the Hon'ble Telangana High Court in Kankanala Ravindra Reddy(supra) and Hon'ble Bombay High Court in Hexaware Technologies Ltd (supra) has set aside the notices issued u/s.148 by JAO. 12. Further, we take note of the decision of the Hon'ble Telangana High Court in Sri Venkataramana Reddy Patloola v. Deputy Commissioner of

:-5-: ITA. No.1862/Chny/2026 Income-tax [2024] 167 taxmann.com 411/468 ITR 181 (Telangana)/[Writ Petition Nos.13353, 16141 and 16877 of 2024 dated 24.07.2024], following the judgments of the Hon'ble Telangana High Court in Kankanala Ravindra Reddy (supra) and Hon'ble Bombay High Court in Hexaware Technologies Ltd (supra) wherein the notices issued u/s 148 of the Act has been set aside and held as under: 29. In view of foregoing analysis, it is clear that the respondents have erred in not following the mandatory faceless procedure as prescribed in the scheme dated 29.03.2022. Since notices under Section148 of the Act were not issued in a faceless manner, the entire further proceeding founded upon it and assessment orders stand vitiated. Thus, the impugned notices under Section 148 of the Act and all consequential assessment orders based thereupon are set aside. Liberty is reserved to the respondents to proceed against the petitioners in accordance with law. 13. The Hon'ble Telangana High Court in Deepanjan Roy v. ADIT (International Taxation) [Writ PetitionNo.23573 of 2024 dated 29.08.2024], following the judgment in Writ Petition No.13353 of 2024 and batch dated 24.07.2024 held as under: In view of the consensus arrived at, this Writ Petition is allowed in terms of order passed inW.P.No.13353 of 2024 and batch. The direction contained in the said order shall apply mutatis mutandis to this case with full force. No costs. 14. The revenue further filed Special Leave Petition (Civil) before the Hon'ble Supreme Court vide ADIT (Int. Taxn.) v. Deepanjan Roy [SLP(C) No. 018753 of 2025, Diary No (s).33956 of 2025] challenging the judgment of the Hon'ble Telangana High Court passed in Writ Petition No.23573 of 2024 dated 29.08.2024. However, the Hon'ble Supreme Court upon hearing the counsel made the following order 16.07.2025 as under: 13. The Hon'ble Telangana High Court in Deepanjan Roy v. ADIT (International Taxation) [Writ PetitionNo.23573 of 2024 dated 29.08.2024], following the judgment in Writ Petition No.13353 of 2024 and batch dated 24.07.2024 held as under: In view of the consensus arrived at, this Writ Petition is allowed in terms of order passed inW.P.No.13353 of 2024 and batch. The direction contained in the said order shall apply mutatis mutandis to this case with full force. No costs. 14. The revenue further filed Special Leave Petition (Civil) before the Hon'ble Supreme Court vide ADIT (Int. Taxn.) v. Deepanjan Roy [SLP(C) No. 018753 of 2025, Diary No (s).33956 of 2025] challenging the judgment of the Hon'ble Telangana High Court passed in Writ Petition No.23573 of 2024 dated 29.08.2024. However, the Hon'ble Supreme Court upon hearing the counsel made the following order 16.07.2025 as under: 1. Delay condoned. 2. Exemption Application is allowed. 3. Having heard the learned counsel appearing for the petitioners - Revenue and having gone through the materials on record, we find no

:-6-: ITA. No.1862/Chny/2026 good reason to interfere with the impugned order passed by the High Court. 3. The Special Leave Petition is, accordingly, dismissed. 4. Pending applications, if any, shall also stand disposed of. 15. We further note that the revenue's SLP(C) No. 021188/ 2024 in the case of Hexaware Technologies Ltd(supra) against the judgment of the Hon'ble Bombay High Court in Hexaware Technologies Ltd (supra) is still pending adjudication before the Hon'ble Supreme Court. 16. The Supreme Court in a landmark judgement in the case of Kunhayammed v. State of Kerala [2000] 113Taxman 470 /[2000] 245 ITR 360 (SC) has summarised the doctrine of merger as follows:- "Where an appeal or revision is provided before a superior forum against an order passed by a Court, Tribunal or any other authority and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges with the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law" 17. The Supreme Court in the aforesaid case has concluded as follows:- (i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. The first stage is up to the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal. (iii) The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter. (iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed.

:-7-: ITA. No.1862/Chny/2026 (v) If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent proceedings between the parties. (vi) Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation. 18. In the case of S. Shanmugavel Nadar v. State of Tamil Nadu [2003] 263 ITR 658 (SC), the Apex Court held that what merges is the operative part i.e. the mandate decree issued by the court which may have been expressed in positive or negative form. The application of the doctrine depends on the nature of the appellate or revisional order, the scope of the statutory provisions conferring jurisdiction and the subject matter of challenge with the following remarks: ".........Though loosely an expression "merger of judgement, order or decision of a Court or forum into the judgement, order or decision of a superior forum" is often employed, as a general rule, the judgment or order having been dealt with by a superior forum and having resulted in confirmation, reversal or modification, what merges is the operative part, i.e., the mandate or decree issued by the Court which may have been expressed in positive or negative form. For example, take a case where the subordinate forum passes an order and the same, having been dealt with by a superior forum, is confirmed for reasons different from the one assigned by the subordinate forum, what would merge in the order of the superior forum is the operative part of the order and not the reasoning of the subordinate forum, otherwise there would be an apparent contradiction. However, in certain cases, the reasons for the decision can also be said to have merged in the order of the superior Court if the superior Court has, while formulating its own judgment or order, either adopted or reiterated the reasoning, or recorded an express approval of the reasoning, incorporated in the judgment or order of the subordinate forum." 19. Hence, in the light of above discussion, simplicitor dismissal of revenue Special Leave Petition (Civil) at admission stage before the Hon'ble Supreme Court vide SLP(C) No.018753/2025, Diary No(s).33956/2025titled ADIT (Int. Taxn.) 2 Hyd & Anr v. Deepanjan Roy, challenging the judgment of the Hon'ble Telangana High Court passed in Deepanjan Roy (supra) has no declaration of law and binding effect under Article 141of the Constitution of India.

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20.

The Hon'ble jurisdictional High Court in the case of TVS Credit Services Ltd. (supra) on similar issue held as under: "2. Learned Single Judge in order dated 20.12.2024 in WP Nos.25223 of 2024 held that it does not matter if the Jurisdictional Assessing Officer (JAO) issues the notice and it is not mandatory that it should be issued by the Faceless Assessment Officer (FAO). Another learned Single Judge in order dated21.04.2025 in WP No.22402 of 2024 and batch cases, followed what was held by the Bombay High Court in Hexaware Technologies Ltd v. Assistant Commissioner of Income Tax'; and opined that it was mandatory for the FAO to issue notice and issuance of notice by JAO would make the notice invalid. 3. Learned Single Judge thereafter directed the matter to be placed before the Chief Justice for constituting a Division Bench to consider the divergent views. It is, therefore, all these matters were listed before us today. 4. We follow the law as laid down in Hexaware Technologies Ltd (supra), the said judgment was authored by one of us (Chief Justice), that it is mandatory for the FAO to issue the concerned notices and issuance thereof by the JAO would make the notice invalid. 5. Counsels for assessees are ad idem that the law as laid down in Hexaware Technologies Ltd (supra)will apply. Learned Additional Solicitor-General, however, submits that the Revenue does not accept the law as laid down in Hexaware Technologies Ltd (supra); and that there is a special leave petition filed against the order and judgment in Hexaware Technologies Ltd (supra) and the same is expected to be taken up after the Supreme Court reopens. 6. Admittedly, learned Additional Solicitor-General, in fairness, states that there is no stay. Therefore, the law as laid down by Hexaware Technologies Ltd (supra) applies. 7. It is clarified that if the Apex Court reverses the judgment of Hexaware Technologies Ltd (supra),parties will be governed by the decision of the Apex Court. 8. Keeping open all rights and contentions of parties, including liberty to apply to this Court, in case the Revenue succeeds before the Apex Court, for revival of these petitions, the notices issued in these petitions are quashed and set aside. 9. In these petitions, apart from the issue of notices issued by JAO instead of FAO, all or many of the issues which were considered in Hexaware Technologies Ltd (supra) are involved. 10. To the extent the issues raised in Hexaware Technologies Ltd (supra) are not covered, those are kept open to be raised at the appropriate stage.

:-9-: ITA. No.1862/Chny/2026 11. With the liberty as noted above, all petitions stand disposed of holding in favour of assessees. There will be no order as to costs. Consequently, the interim applications also stand disposed of." 21. The coordinate bench of this Tribunal has already considered the decision of the Hon'ble jurisdictional High Court in the case of TVS Credit Services Ltd. (supra) and decided the issue in favour of assessee in the identical set of facts and circumstances in the case of Loganathan Dhandapani v. ACIT [ITAppealNo.2240 (Chny) of 2024, dated 14-8-2025] by holding as under: "11. The Hon'ble Bombay High Court in the case of Hexaware Technologies Ltd., (supra) is noted to have has even dealt with the decision rendered by the Hon'ble Calcutta High Court in favour of the Revenue, but concurred with the view of the Hon'ble Telangana High Court in the case of Sri Venkataramana Reddy Patloola v. DCIT reported in [2023] 156 taxmann.com 178 (Telangana) and held that in view of the provisions of Sec.151A of the Act read with Faceless Scheme dated 29.03.2022,notices issued by the JAO u/s.148A(d)/148 of the Act was invalid and bad in law. We further note that aforesaid decision of the Hon'ble Telangana High Court has been followed not only by the Hon'ble Bombay High Court, but also by the Hon'ble Gauhati High Court in the case of Ram Narayan Sah v. Union of India reported in 163 taxmann.com 478, and the Hon'ble Punjab & Haryana High Court in the case of Jatinder Singh Bhangu v. Union of India reported in 165 taxmann.com 115 and other cited cases(supra). And as noted (supra) the Hon'ble jurisdictional High Court (Single Bench) order in the case of Mark Studio India (P.) Ltd. v. Incometax Officer, held in favour of Revenue, was reversed by the Hon'ble Division Bench by order dated 24.06.2025 by holding as under: This appeal impugns an order passed by the learned Single Judge. 2. The learned Single Judge was pleased to dismiss the petition on the ground that even if the notice has been issued by Jurisdictional Assessment Officer and not Faceless Assessment Officer, the notice issued under Section 148A/148 of the Income Tax Act will be valid. 3. Ms. Vardhini Karthik submitted that this Court has, in many matters, held, following the judgment of the Bombay High Court in Hexaware Technologies Limited v. Assistant Commissioner of Income Tax', that notice that has to be issued by Faceless Assessment Officer has to be issued Faceless Assessment Office and if issued by Jurisdictional Assessment Officer, the same is not valid. 4. Ms.Premalatha, who takes notice for the Revenue, states that the law as proposed by Ms.Vardini Karthick is correct and therefore, the Court may quash and set aside the notices, but keep open liberty of the Revenue to re-ignite the notices in case the Apex Court interferes with the order and judgment of the Bombay High Court in Hexaware Technologies (supra). 5. Keeping open the Revenue's rights and contentions, as noted above, the impugned notices dated15.04.2024 are quashed and set aside. The appeal is disposed of. There shall be no order as to costs. Consequently, the interim application is closed.

:-10-: ITA. No.1862/Chny/2026

12.

In the light of the aforesaid discussion, we find that in the case in hand, the JAO had issued notice u/s.148A(b) of the Act dated 14.03.2022 followed by order u/s.148A(d) of the Act dated 31.03.2022 and followed by notice u/s.148 dated 31.03.2022 which impugned notices have been issued despite faceless scheme was notified by Central Government on 29.03.2022 pursuant to section 151A of the Act, making it mandatory for the issuance of notice u/s.148A(b), 148A(d) as well as 148 of the Act by the Faceless Mechanism, the impugned notices especially issued u/s.148 dated 31.03.2022 is found to be invalid and bad in law, since it has been issued contrary to law and is against the 'Rule of Law'; which impugned action of the JAO vitiates the reopening of assessment for AY 2018-19 by issuance of impugned notice dated 31.03.2022 u/s.148 of the Act and is therefore held to be illegal and bad in law and therefore, assessment order dated 16.03.2023 is held to be null in eyes of law; and the assessee succeeds, on the legal issue which is held in favour of the assessee and therefore, we are inclined not to go into the merits of the addition made by the NFAC. 13. In the result, appeal filed by the assessee is allowed." 22. Therefore, respectfully following the decision of the Hon'ble jurisdictional High Court in the case of TVS Credit Services Ltd. (supra), we set aside the impugned notices u/s.148 of the Act and consequential orders thereof for both the A.Ys.2015-16 and 2016-17. However, in the light of the Para No.8 of the judgment of the jurisdictional High Court, we also keep open of rights and contentions of parties including liberty to approach this bench, in case, the Revenue succeeds before the Apex Court for revival of this appeal. In the case of revival, the assessee has a right to argue all the grounds raised in the present appeal. 23. In the result, both the appeals filed by the assessee for the A.Y.2015-16 and 2016-17 are allowed.” 6.2.3 In view of the above, respectfully following the decision of the Hon’ble Madras High Court in the case of TVS Credit Services Ltd. v DCIT (supra), the notice u/s.148 issued by the JAO i.e., ITO, Ward-1, Krishnagiri, Tamilnadu on 25.03.2024 is quashed subject to the final decision of the Hon’ble Supreme Court of India. Accordingly, this ground of appeal raised by the assessee is ALLOWED.”

6.

Aggrieved by the order of the ld.CIT(A) the revenue is in appeal before us by raising the following grounds of appeal: 1. The CIT(A) erred in quashing the notice u/s 148 of the Act issued by the Jurisdictional Assessing Officer (JAO) Ward-1, Krishnagiri on 25.03.2024, given that the Finance Act, 2021 introduced provisions for faceless assessment and the automated allocation of cases which does not explicitly prohibit the JAO from issuing such notices. 2. The Ld.CIT(A) erred in incorrectly interpreting the notification dated 29.03.2022 reads with Section 151A, of when the phrase "in a Faceless Manner" refers only

:-11-: ITA. No.1862/Chny/2026 to be procedure of assessment, reassessment of re-computation under section 147 of the Act and not to the issuance of Notice u/s 148 of the Act. 3. The Ld.CIT(A) erred in holding the decision that the scheme notified on 29.03.2022 does not authorize the Jurisdictional Assessing Officer (JAO) to issue notices under section 148 of the Income Tax Act, 1961. However, As per CBDT Notification No. 18 dated 29.03.2022, it is stated that the Scope of the Scheme – "For the purpose of this Scheme,- (a) assessment, reassessment or recomputation under section 147 of the Act, (b) issuance of notice under section 148 of the Act, shall be through automated allocation, in accordance with risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of notice, and in a faceless manner, to the extent provided in section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee". The Jurisdictional Assessing Officer issued notice u/s 148A(b) in faceless manner on 01/02/2024 and it is clearly mentioned in 3rd paragraph of the notice that : "3. You may submit your reply to this notice, along with supporting documents (if any) on the above mentioned issues on or before 13/02/2024 electronically at www.incomtetax.gov.in.” In view the above, consequential notice u/s.148 was issued in accordance to CBDT Notification No.18 dated 29.03.2022 as the case was selected through automated allocation, in accordance with risk management strategy formulated by the Board and notice was issued in faceless manner. 4. The CIT(A) erred in quashing the notices under section 148 as well as the orders passed under section 148A(d) of the Income Tax Act, 1961 issued by the Jurisdictional Assessing Officer (JAO) by holding that after the notification dated 29.03.2022, whereas, Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agarwal [2022] 444 ITR 1 (SC), implicitly recognized the "Assessing Officer" as an authority for reopening cases by directing the "Assessing Officer" to conduct an inquiry and pass orders in relation to the reopening of the cases. 5. The CIT(A) erred in limiting the authority of the Jurisdictional Assessing Officer (JAO) to the extent provided under Sub-sections (7) and (8) of Section 144B of the Income Tax Act, 1961, when the scheme notified on 29.03.2022 does not restrict the power to issue notices under section 148 of the Income Tax Act, 1961 within the scope of Section 144B of Income Tax Act, 1961.

7.

Aggrieved by the order of the ld.CIT(A), the revenue is in appeal challenging the order on legal grounds.

8.

The ld.DR submitted that the ld.CIT(A) erred in allowing the appeal of the assessee on jurisdictional grounds, contrary to the statutory provisions

:-12-: ITA. No.1862/Chny/2026 governing reassessment proceedings. The Ld.DR contended that the Ld.CIT(A) had erroneously restricted the powers of the JAO by reference to sub-sections (7) and (8) of section 144B of the Act, whereas the Scheme notified on 29.03.2022 does not, according to the Revenue, curtail the authority of the JAO to issue notices u/s.148 of the Act. The Ld.DR further submitted that, subsequent to the judicial decisions relied upon by the Ld.CIT(A), section 147A was inserted into the Act by the Finance Act, 2026, with retrospective effect from 01.04.2021, clarifying the meaning of the expression “Assessing Officer” for the purposes of sections 148 and 148A of the Act. According to the Ld.DR, the said retrospective amendment has a direct bearing on the jurisdictional issue raised in the present appeal and warrants reconsideration of the finding recorded by the Ld.CIT(A). The Ld.DR also relied upon the order of the Hon’ble Supreme Court in Income Tax Officer v. Tej Partap Singh dated 10.04.2026, wherein the matters concerning the competence of the JAO to issue reassessment notices were remitted to the respective High Courts for fresh consideration in the light of the amendment, while leaving the questions concerning its validity, scope, effect, retrospectivity and applicability open for adjudication. Placing reliance on the grounds of appeal raised by the Revenue and the aforesaid legislative amendment, the Ld.DR prayed that the impugned order of the Ld.CIT(A) be set aside and the matter be restored to the file of the Ld.CIT(A) for fresh consideration in accordance with law, having regard to the outcome of the pending judicial proceedings.

9.

Per contra, the Ld. AR for the assessee, opposing the grounds raised by the Revenue, submitted that the Ld.CIT(A) had rightly followed the decision of the Hon’ble jurisdictional High Court in the case of TVS Credit Services Ltd. v. DCIT (supra) in holding that the notice issued u/s.148 of the Act by the JAO was invalid. The Ld.AR contended that the impugned order was consistent with the judicial precedent relied upon by the Ld.CIT(A) and that no infirmity could be attributed to the findings recorded therein. Accordingly, the Ld.AR prayed that

:-13-: ITA. No.1862/Chny/2026 the grounds raised by the Revenue be dismissed and the impugned order passed by the Ld.CIT(A) be upheld.

10.

We have heard the rival submissions and perused the material available on record, including the orders of the authorities below. We note that the Ld.CIT(A), relying upon the decision of the Hon’ble jurisdictional High Court in the case of TVS Credit Services Ltd. v. Deputy Commissioner of Income-tax, held that the notice issued u/s.148 of the Act by the JAO was invalid and accordingly quashed the same. The Revenue is in appeal before us challenging the aforesaid finding of the Ld.CIT(A), contending that the JAO was competent to issue the notice u/s.148 of the Act in accordance with the applicable statutory provisions and the notification issued u/s.151A of the Act.

11.

We further take note of the subsequent legislative development whereby the Finance Act, 2026, inserted section 147A into the Act with retrospective effect from 01.04.2021. The newly inserted provision, notwithstanding anything contained in any judgment, order or decree of any Court or in section 151A or any scheme framed thereunder, clarifies that the AO for the purposes of sections 148 and 148A shall mean an AO other than the National Faceless Assessment Centre (NFAC) or any assessment unit referred to in section 144B(3) of the Act. The said amendment has a direct bearing on the controversy concerning the respective jurisdiction and authority of the JAO and the Faceless Assessing Officer (FAO) in initiating reassessment proceedings.

12.

We also take note of the order dated 10.04.2026 passed by the Hon’ble Supreme Court in Income Tax Officer v. Tej Partap Singh and connected matters, wherein, having regard to the insertion of section 147A by the Finance Act, 2026, the Hon’ble Supreme Court set aside, on the limited ground of the subsequent legislative amendment, the impugned judgments of the High Courts which had ruled in favour of the assessees on the issue of the JAO’s competence to issue notices u/s.148 of the Act. The matters were remitted to

:-14-: ITA. No.1862/Chny/2026 the respective High Courts for fresh consideration, with liberty to the assessees to challenge the constitutional validity of the newly inserted provision and other connected or consequential provisions. The Hon’ble Supreme Court expressly left open the questions relating to the validity, scope, effect, retrospectivity and applicability of the amended provisions for adjudication by the respective High Courts.

13.

We further note that the Hon’ble Punjab and Haryana High Court, in Jyoti Sareen v. Union of India and Others, by judgment dated 10.09.2026, declared section 147A of the Act unconstitutional. However, the said judgment has been carried before the Hon’ble Supreme Court in Union of India and Others v. Bharat Industrial Enterprises Pvt. Ltd., Civil Appeal No. 13059 of 2026, wherein, by order dated 18.09.2026, the Hon’ble Supreme Court granted leave and stayed the operation of the impugned judgment, subject to the condition that the assessment and reassessment proceedings pursuant to the notices in those proceedings shall not proceed further until the final disposal of the main matter. Thus, the constitutional validity and legal effect of section 147A, as well as the controversy concerning the authority competent to issue notices u/s.148 and 148A of the Act, remain matters requiring authoritative judicial determination.

14.

In view of the aforesaid subsequent legislative amendment and the judicial developments, we are of the considered view that the issue cannot be conclusively adjudicated merely by applying the judicial precedents rendered prior to the insertion of section 147A, without considering the effect of the amended provision and the subsequent directions of the Hon’ble Supreme Court. At the same time, it would not be appropriate for this Tribunal to express any concluded opinion on the constitutional validity or applicability of the amended provision while the matter is the subject of pending judicial proceedings.

:-15-: ITA. No.1862/Chny/2026 15. Accordingly, in the interest of justice and judicial discipline, we deem it appropriate to set aside the impugned order of the Ld.CIT(A) and restore the matter to the file of the Ld.CIT(A) for fresh consideration. The Ld.CIT(A) is directed to keep the appeal in abeyance and await the final decision of the Hon’ble jurisdictional High Court in the pending or connected proceedings concerning the JAO–FAO issue in the light of section 147A, or the final decision of the Hon’ble Supreme Court in the connected matters, as may be applicable. Upon such authoritative judicial determination, the Ld. CIT(A) shall reconsider the validity of the notice issued u/s.148 of the Act in the present case in accordance with the law so declared and pass a speaking order after providing a reasonable opportunity of being heard to both parties. We clarify that we have not expressed any opinion on the merits of the jurisdictional issue or the validity of the reassessment proceedings. All rights and contentions of both parties are kept open for consideration in accordance with the final judicial determination and the applicable provisions of law.

16.

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

Order pronounced in the open court on 14th October, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार गिरर) (एस. आर. रघुनाथा) (MANU KUMAR GIRI) (S. R. RAGHUNATHA) न्याययक सदस्य/Judicial Member लेखासदस्य/Accountant Member

चेन्नई/Chennai, दिन ांक/Dated, the 14th October, 2026 Devadas

:-16-: ITA. No.1862/Chny/2026 आदेश की प्रतिलिपि अग्रेपिि/Copy to: 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. ववभागीय प्रनतननधि/DR Digitally signed by DEVADAS DEVADAS 5. गार्ा फाईल/GF GOPALANACHARY GOPALANACHARY Date: 2026.10.16 15:57:31 +05'30'

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