Income Tax: Section 148 Notices Must Follow Faceless Procedure, Says Supreme Court

Income Tax: Section 148 Notices Must Follow Faceless Procedure, Says Supreme Court

On July 16, 2025, the Supreme Court of India rejected a Special Leave Petition (Civil) Diary No. 33956/2025 filed by the Revenue (ADIT (International Taxation) 2, Hyderabad & Anr.). The department was challenging a decision made by the Telangana High Court on August 29, 2024, in case WP No. 23573/2024. The High Court had ruled in favour of the taxpayer, saying that the faceless reassessment scheme under Section 148 of the Income Tax Act, 1961, must be followed properly by the income tax department.

The main dispute in this case was whether the Income Tax Department can issue reassessment notices under Section 148 in international tax matters without following the faceless procedure. Specifically, it questioned if a Jurisdictional Assessing Officer (JAO) could send such notices directly, instead of using the automated and faceless system laid down in the Notification dated March 29, 2022, issued under Section 151A of the Income Tax Act.

The Telangana High Court ruled that the law requires all Section 148 notices to be issued via an automated and faceless process according to the Faceless Reassessment Scheme 2022. It said that the previous CBDT order dated September 06, 2021, which allowed international tax units to conduct non-faceless assessments, does not give them permission to skip the faceless process while sending Section 148 notices.

The Court ruled that sending a notice under Section 148 is a separate step from the actual reassessment. While some exemptions exist under Section 144B for faceless assessment orders, these do not apply to the issuance of notices under Section 148. The Court also took reference from previous cases such as Kankanala Ravindra Reddy and Hexaware Technologies Ltd. v. ACIT, to support its view. In conclusion, the High Court said any Section 148 notice not issued via the faceless process is invalid and should be quashed.

The Supreme Court reviewed the Revenue Department’s appeal (SLP Diary No. 33956/2025) but decided not to change the Telangana High Court’s decision. The court accepted the delay in filing the appeal and also agreed to let them skip submitting a certified copy. However, it still did not notice any strong evidence to interfere with the High Court’s ruling. Hence, the Supreme Court dismissed the appeal and all connected applications.

Key Takeaways from Case

• Faceless Procedure Mandatory: All reassessment notices issued under Section 148 are compulsory to follow the faceless process introduced in 2022 for international tax cases.
• No Special Exemption for International Tax: The CBDT order from 2021 only applies to faceless assessments, not to the issuance of notices. So, international tax units must also follow the faceless notice process.
• Strict Interpretation of Law: The courts followed the literal meaning of the rules and notifications, making sure that every part of the faceless scheme was properly followed and not ignored.
• NRIs Not Treated Differently: The status of a taxpayer as an NRI or a foreign resident does not make a difference. The faceless process still applies.

The decision of the Supreme Court has made it clear that all notices related to Section 148 must follow the faceless procedure, even in international cases. If notices are issued without using faceless procedures, they can now be challenged in court. The income tax department must make sure that all reassessment notices are issued through the correct automated system, or they risk having them declared illegal. Even past reassessment actions based on non-faceless notices might now be open to legal challenge.