Income Tax Reassessment without Faceless Procedure Illegal: Telangana HC Quashes Notices u/s 148A and 148 [Read Order]

The Telangana High Court recently quashed an income tax reassessment notice, noting that the Department failed to initiate proceedings as per the mandatory faceless procedure, in violation of binding judicial precedents on the issue.

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Nitin Enterprises filed a writ petition against the Union of India and the Income Tax Department challenging the legality of notices issued under Sections 148A and 148 of the Income Tax Act, 1961. The notices pertained to the assessment year 2021–22 and were issued by the jurisdictional Assessing Officer without adhering to the faceless assessment scheme as mandated under the Finance Act, 2021.

The petitioner, represented by Rutuja Pawar and Dundu Sashank Manmohan referenced the decision of the Telangana High Court in Kanakala Ravindra Reddy v. ITO (2023) wherein the Court held numerous proceedings under Section 148A and 148 to be bad in law with the consequential reliefs being violative of Section 151A of the Act read with Notification 18/2022 dated 29.03.2022.

K. Sudhakar Reddy, representing the Revenue, submitted that the issue was pending before the Supreme Court in a batch of over 1,200 Special Leave Petitions including ITO v. Kanakala Ravindra Reddy (SLP No. 3574 of 2024) and accepted that no interim order was granted by the Supreme Court in any of these matters. The Department argued that quashing the notices would only increase litigation and burden the Department with filing further SLPs.

The Division Bench of Justice P. Sam Koshy and Justice Narsing Rao Nandikonda took note of its own ruling in Kanakala Ravindra Reddy (supra) where similar notices had been quashed on identical grounds. It was further noted that several High Courts across the country had ruled against non-faceless reassessment proceedings in line with the statutory framework introduced by the Finance Act, 2021 and CBDT Notification No. 18/2022 dated 29.03.2022.

The Court further remarked that despite the repeated and unambiguous rulings in the matter, the Revenue continued to issue reassessment notices in a non-faceless manner, contributing to judicial backlog and undermining established precedent.

The Court also referenced the Bombay High Court’s decision in Bank of India v. ACIT (2025) where it was laid down that the Department cannot deviate from an order passed by the adjudicating authority only on the ground that appeals are pending.

Accordingly, the Telangana High Court allowed the writ petition and quashed the impugned notices under Sections 148A and 148 along with any consequential orders. However, the Court clarified that the decision would be subject to the final outcome of the pending SLPs before the Supreme Court, and granted liberty to either party to seek revival of the matter depending on the verdict of the Apex Court.

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