Rajasthan HC invalidates S. 148 notice by JAO, disagrees with Gujarat HC Decision that Faceless Scheme omits Search Cases [Read Order]

The Rajasthan High Court has quashed a reassessment notice issued under Section 148 of the Income Tax Act, 1961 by a Jurisdictional Assessing Officer (JAO), holding that such notices must mandatorily be issued through the Faceless Assessing Officer (FAO) under the 2022 e-assessment scheme.

The Division Bench of Justice Sanjeet Purohit and Justice Pushpendra Singh Bhati has disagreed with the Gujarat High Court’s contrary position in Talati & Talati LLP, which had held that search-based information under Sections 132/132A falls outside the faceless framework.

The petitioner, Mani Ram challenged a Section 148 notice dated 24 March 2024 and a consequential reassessment order dated 12 March 2025, arguing that once the faceless regime under the Notification dated 29 March 2022 became operative, jurisdiction shifted entirely to the FAO.

The Bench agreed with earlier precedents, Shree Cement Ltd. and Sharda Devi Chhajer, as well as the Bombay High Court decision in Hexaware Technologies, which all the rulings has held that a JAO lacks authority to issue reassessment notices under the new faceless architecture.

The Rajasthan High Court, while rejecting the Gujarat High Court’s reasoning, observed that Talati & Talati LLP proceeded on the mistaken assumption that FAOs cannot draw satisfaction notes in search-related cases under Explanation 2 to Section 148.

Section 148 of the Income Tax Act 1961 gives power to the Assessing Officer to send notice to an income taxpayer for income escaping assessment.

The Court noted that the Gujarat Bench had not considered the Bombay High Court’s detailed reasoning in Abhin Anilkumar Shah, which clarified that CBDT’s 2021 orders created limited exceptions only for assessment orders under specific charges, not for reassessment notices.

The bench said that “It is pertinent to note that the Gujarat High Court was not made aware of the reasoning adopted by Bombay High Court in the case of Abhin Anilkumar Shah vs. Income Tax Officer, International Tax Ward Circle-4(2)(1), Mumbai and Ors.; [2024] 468ITR350 (Bom) where the orders dated 31st March 2021 and 06th September 2021 issued by the CBDT creating exception for the assessment proceedings undertaken by the International taxation charges/Central Charges were subject matter of deliberation.”

“Thus the judgment passed by the Gujarat High Court is not based on the reading of notification dated 29th March 2022 along with orders dated 31st March 2021/ 06th September 2021 but is based on the simple reading of Explanation 2 to Section 148 along with understanding that the pre-requisites for issuing notice under Section 148 in search cases cannot be met by the FAO. With due respect, we do not agree” said the court.

Additionally, the bench noted the Telangana High Court’s contrary view in Venkataramana Reddy, confirmed by the Supreme Court through dismissal of the Revenue’s SLP, adding more solidity to the conclusion that faceless reassessment applies broadly and without exception unless expressly carved out in the statutory scheme.

Since the 29 March 2022 Faceless Scheme contains no exclusion for search-based reassessment notices, a JAO issuing a Section 148 notice acts without jurisdiction, observed the judges .

Accordingly, the High Court quashed both the Section 148 notice and the reassessment order. It allowed the Revenue to revive proceedings if the Supreme Court later overturns Hexaware, Shree Cement, or Sharda Devi Chhajer. The petition was disposed of with the petitioner undertaking to withdraw the related appeal.

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