Written By: Apoorv Agarwal
The introduction of the faceless assessment regime under Section 144B of the Income-tax Act 1961 with effect from 1 April 2021 marked a change in the administration of direct taxes in India. The goal was to reduce interaction between taxpayers and tax authorities and replace the traditional assessment process with a technology-driven and largely anonymous system. However, while the move to assessment was clear in the context of regular assessments it left an important question unanswered in the context of reassessment proceedings: could the Jurisdictional Assessing Officer (“JAO”) continue to issue notices under Section 148 and conduct proceedings under Section 148A or had these powers moved to the faceless assessment machinery?
The source of the problem came from the framework itself. Section 144B outlined the process for assessment but did not clearly deal with the issuance of notices under Sections 148 and 148A. At the same time Section 151A allowed the Central Government to create schemes for assessment, reassessment, the issuance of notices under Section 148 and the conduct of proceedings under Section 148A. Based on this the CBDT announced the e-Assessment of Income Escaping Assessment Scheme, 2022. The scheme included allocation and faceless handling of reassessment cases but it also said that the faceless process would apply only to what was covered in Section 144B. Since Section 144B did not clearly extend to the pre-assessment stage under Sections 148 and 148A the JAO continued to issue notices and conduct proceedings in some cases.
This led to a legal challenge from taxpayers. Their claim was that once the faceless reassessment system was in place the JAO could no longer use powers that were supposed to be handled through the system. The High Courts did not all agree. Some courts said that the JAO and the faceless authorities had shared power arguing that the faceless system mainly covered the assessment and did not take away the JAOs role in the early stages of reassessment. Other courts took a view saying that the faceless system was required, meaning the power to issue notices under Section 148 and handle proceedings under Section 148A belonged only to the faceless authority. On this view a notice issued by the JAO had no basis and could make the entire reassessment invalid.
The confusion was big. The validity of a reassessment notice could depend on which High Court handled the case. What one court called an act of power could be seen as an invalid one in another. It was in this situation that the dispute reached the Supreme Court.
The Legislative Intervention
The situation changed after the Finance Act, 2026. Parliament added Section 147A, which had effect from 1 April 2021. It said that for Sections 148 and 148A the word “Assessing Officer” meant someone than the National Faceless Assessment Centre or the assessment unit in Section 144B(3). In effect the change made it clear that the JAO, not the system was intended to handle the early part of reassessment.
The Government said that reassessment always had two steps. The first was the check, where the JAO looked at information about possible income not being taxed held proceedings under Section 148A made the right decision and if needed issued a notice under Section 148. The second stage came after the notice, when the reassessment itself was handled by the system. According to this view the JAO was never meant to be left out of the part; the faceless system was always meant to come later.
There is a problem. Section 147A was made effective from 1 April 2021. That is important because some courts had already said that JAO-issued notices had no authority. The law changed after that. It brings up the question of whether Parliament just made the law clearer or actually changed it to make things valid that had already been ruled invalid by the courts.
The Revenue says Section 147A is just making things clear. Their argument is that Parliament did not give the JAO power but only made clear what was always intended in the reassessment system. Taxpayers say the change is real. Their worry is strongest in cases where a court already said the JAO had no power. If the law is changed to say that the JAO did have power the change may go beyond just making things clear and instead fix a problem that had already been decided by the courts.
The Supreme Courts Approach
In ITO v. Tej Partap Singh the Supreme Court did not end the JAO–FAO fight. Instead the Court kept an approach and left both the original question of JAO jurisdiction and more importantly the constitutional validity, scope, effect and retrospectivity of Section 147A open. The earlier High Court decisions that had canceled reassessment notices because the JAO had no power were overturned on that point since the law had changed with the retrospective amendment. The cases were sent back to the High Courts for a look.
This does not mean the Supreme Court has approved Section 147A. The constitutional question is still much there. Taxpayers can still change their petitions to challenge the law. The Supreme Court has also said that while the petitions are being looked at no new reassessment cases can go forward based on the notices. The High Courts are asked to finish the cases by 30 September 2026.
The importance of the Supreme Courts decision is not that it ended the fight but that it changed what the fight is about. Before the main question was about the law: who had the right to start reassessment. Now the bigger question is whether Parliament could with a law that goes back in time say the JAO always had that right from 1 April 2021.
The Road Ahead
The High Courts will now look at the limits of changing laws after they have been passed. The main issue will be whether Section 147A is really just making things clear or if it changes the law and says old cases were okay even though courts had said they were not. This difference matters because changing laws after the fact is not always wrong. It becomes more complicated when a change says the law was always different even though courts had already decided it was not.
The JAO–FAO fight is more than a small disagreement about who has power. It brings up a question about how the law and the courts work together in tax matters. Parliament has a lot of power to change tax laws. That power must still be within the rules of the Constitution. The current cases will ask the High Courts to balance Parliaments power to change the law with the idea that courts should not be ignored by laws that say things were different along.
What started as a question about who could issue a Section 148 notice has now become a constitutional issue. The final question is whether the law can say, after the fact that the JAO always had a power that some courts had said it did not. The answer to that question will decide not what happens to many reassessment cases since 2021 but also how much power Parliament has to change the law in a way that ignores what courts have already decided.
