In the batch of matters concerning faceless reassessment under the Income Tax Act, the Supreme Court today dealt with challenges arising from thousands of reassessment notices that had been quashed by various High Courts on the ground that they were not issued through the faceless mechanism mandated under Section 151A, while also considering the impact of subsequent legislative amendments brought in by the Union to cure the defect.

The case arose after High Courts across the country invalidated reassessment notices on the basis that they were issued by jurisdictional assessing officers instead of faceless authorities, with assessees arguing that the statutory scheme required complete faceless issuance. The Union, however, contended that its intent was always that the pre-notice stage could be handled by jurisdictional officers, and that only post-notice assessment would be faceless. It further relied on a retrospective amendment to assert that the very basis of the High Court judgments had been removed.

The Union thus urged the Court to give effect to the amended law. On the other hand, assessees contended that the original statutory scheme mandated faceless issuance itself, and High Courts had quashed notices on that precise jurisdictional defect.

The Bench of Chief Justice Surya Kant, Justice BV Nagarathna and Justice Joymalya Bagchi, however, resisted entering into the merits of the legislative amendment at this stage and made it clear that its role was limited, observing that “it’s a new legislation… the High Courts will examine it,” and indicating that challenges to the amendment must be pursued independently. It also pressed the Revenue for clarity on its stand, pointedly asking, “make a statement that legality of the notice does not depend on… whether it was issued by JAO or FAO.”

In relation to Assessment Year 2015–16 cases, the Court was informed that these matters were distinct as they raised only limitation issues, with the Revenue effectively conceding difficulty. The Court accordingly segregated these matters, directing that “the following matters are to be listed, after two weeks,” and asked parties to collate and furnish details for focused adjudication.

Appearances: 

For Revenue: N. Venkatraman, ASG
For Taxpayers: Senior Advocates Jehangir Mistri, Percy Pardiwala, Sachit Jolly along with a team of counsels.