Invalidation of Reassessment Proceedings: ITAT Visakhapatnam Quashes Section 148 Notice Issued by JAO Outside Faceless Mechanism

The transition to a faceless tax administration regime in India has fundamentally altered the procedural landscape of income tax assessments and reassessments. A pivotal issue that has repeatedly surfaced before appellate forums is the jurisdictional validity of notices issued by a Jurisdictional Assessing Officer (JAO) instead of a Faceless Assessing Officer (FAO) under the newly notified faceless schemes.

In a significant judicial pronouncement, the Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench, in the case of No.368 Kolakaluru Primary Agricultural Cooperative Credit Society Limited Vs ITO (ITAT Visakhapatnam) (Appeal Number ITA No. 456/Viz/2025), has unequivocally struck down reassessment proceedings initiated by a JAO. The Tribunal held that following the implementation of the "E-Assessment Scheme of Income Escaping Assessment Scheme, 2022" and the "Faceless Jurisdiction of the Income Tax Authorities Scheme, 2022", the statutory authority to issue notices under Section 148 of the Income Tax Act, 1961, rests exclusively with the FAO.

This comprehensive analysis delves into the factual matrix, the competing legal arguments regarding inherent versus territorial jurisdiction, the interpretation of Section 124(3), and the judicial precedents that guided the Tribunal's decision.

Factual Background of the Dispute

The appellant in this matter, an agricultural cooperative credit society, became the subject of scrutiny based on intelligence gathered through the Income Tax Department's Risk Management Strategy (RMS). The RMS data indicated that during the Assessment Year 2019-20, the assessee had executed substantial cash transactions, specifically cash deposits and withdrawals aggregating to Rs. 12,01,74,652 in its bank account maintained with The Guntur District Co-operative Central Bank Limited. Despite the magnitude of these transactions, the assessee had not filed its original return of income for the relevant assessment year.

Acting on this information, the ITO, Ward-1, Tenali—acting in the capacity of the Jurisdictional Assessing Officer (JAO)—initiated income escaping assessment proceedings. Consequently, a notice under Section 148 of the Income Tax Act, 1961, dated 30.03.2023, was issued to the assessee.

In response to the reassessment notice, the assessee filed its return of income on 31.03.2023. In this return, the assessee declared its total income as NIL, having claimed a deduction of Rs. 16,30,461 under Section 80P of the Act.

During the subsequent assessment proceedings, the Assessing Officer scrutinized the deduction claim. The AO formed the view that the benefits of Section 80P were not available to a cooperative bank governed by the Banking Regulation Act, 1949. Consequently, the AO disallowed the assessee's claim for deduction under Section 80P(2)(d) amounting to Rs. 16,30,461. The assessment culminated in an order passed under Section 147 read with Section 144B of the Act on 15.03.2024.

Aggrieved by the disallowance and the reassessment, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. However, vide order dated 08.07.2025, the CIT(A) dismissed the appeal, prompting the assessee to escalate the matter to the ITAT Visakhapatnam.

Before the Tribunal, the primary thrust of the assessee's argument was not merely on the merits of the Section 80P deduction, but rather on a fundamental jurisdictional flaw. The assessee challenged the very assumption of jurisdiction by the JAO.