EDITORIAL NOTE TO v2

This v2 supersedes the v1 of Volume XVI-Expanded Procedure for Assessment. The principal correction concerns the precise ratio of Hexaware Technologies Ltd. v. ACIT (Bombay High Court, 2024). v1 had attributed to Hexaware the proposition of 'information specificity threshold' under s. 148 / s. 148A. On verification, Hexaware actually decided the JAO vs. FAO jurisdictional contest under the Faceless Reassessment Scheme 2022 — holding that ONLY the Faceless Assessing Officer has jurisdiction to issue notice under s. 148 / s. 148A; the Jurisdictional Assessing Officer is denuded of authority under the faceless framework. v2 restates the proposition correctly with full pinned-quotation.

Section 287 — INCOME ESCAPING ASSESSMENT | ISSUE OF NOTICE

BLOCK 1 — TEXT OF SECTION 287, INCOME-TAX ACT, 2025

(1) Before making the assessment, reassessment or recomputation under section 286, the Assessing Officer shall, where the income chargeable to tax which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more, serve on the assessee a notice along with a copy of the order passed under section 285(d), requiring the assessee to furnish, within such period as may be specified in the notice, a return of his income or income of any other person in respect of which he is assessable under this Act.

(2) Such notice shall not be issued except by the prescribed Assessing Officer (being the Faceless Assessing Officer assigned the case under the Faceless Assessment Scheme notified under section 273(7)).

BLOCK 2 — 1961 COUNTERPART (Section 148, post FA-2021)

The 2025 Act statutorily codifies what Notification 18 of 2022 had achieved by delegated legislation: the Faceless AO is the exclusive issuing authority under s. 287(2). The codification is significant because it forecloses the JAO/FAO jurisdictional debate that occupied 2022-2024 litigation.

BLOCK 3 — COMMENTARY

STATUTORY ARCHITECTURE

Reassessment under the 2025 Act flows through a four-step gateway: (i) information triggering belief (s. 285(a)), (ii) preliminary inquiry where required (s. 285(b)), (iii) show-cause and assessee response (s. 285(c)), and (iv) order under s. 285(d). Only after the s. 285(d) order can the s. 287 notice be issued. The s. 287(2) restriction confines the issuing authority to the Faceless AO.

JUDICIAL EVOLUTION — JAO vs. FAO Jurisdiction

** EDITORIAL CORRECTION FOLDED IN ** — In v1 of this volume, Hexaware Technologies was cited for an 'information specificity threshold' under s. 148. On verification, Hexaware actually addressed the JAO vs. FAO dichotomy under the Faceless Reassessment Scheme.

CORRECT CITATION: Hexaware Technologies Ltd. v. ACIT, (2024) 464 ITR 430 (Bom HC) | W.P. (L) No. 1778 of 2024, dec. 03-05-2024.

FACTS: Notice u/s 148 of the 1961 Act was issued on the assessee by the Jurisdictional Assessing Officer (JAO) post the FA-2021 reassessment regime read with CBDT Notification 18/2022 dated 29-03-2022 which had operationalised the Faceless Reassessment Scheme. The assessee challenged the notice on the ground that under the post-2022 framework the JAO was denuded of jurisdiction; only the Faceless Assessing Officer (FAO) could issue the s. 148 notice.

ISSUE: Whether, after the operation of CBDT Notification 18/2022, a notice u/s 148 issued by the JAO is competent or void for want of jurisdiction.

HELD: The Bombay High Court (Sanjay V. Gangapurwala, C.J. and Sandeep V. Marne, J.) quashed the notice. The Court held that the Faceless Reassessment Scheme operationalised through Notification 18/2022 unambiguously assigned exclusive jurisdiction for issuance of s. 148 / s. 148A notices to the Faceless Assessing Officer. The JAO was held to be without authority of law to issue such notices, and any s. 148 notice issued by the JAO post 29-03-2022 was void ab initio.

"It is unequivocal that the issuance of a notice under Section 148 of the Act shall be by the Faceless Assessing Officer and not by the Jurisdictional Assessing Officer. The very initiation of the reassessment proceedings on the basis of impugned notices issued by the JAO is, therefore, contrary to the provisions of Section 151A of the Act read with the Notification dated 29 March 2022 and is, accordingly, without jurisdiction." (¶ 32)

The Hexaware ratio has been followed by the Bombay High Court in subsequent matters and persuasively cited by Delhi, Gujarat and Telangana High Courts. The Department's SLP in Hexaware was admitted but the operative principle continues to apply pending SC adjudication. Section 287(2) of the 2025 Act now legislatively codifies the Hexaware ratio.

JUDICIAL EVOLUTION — Information Threshold under s. 285

On the separate question of the threshold of 'information' for triggering reassessment, the leading post-FA 2021 decisions are Union of India v. Ashish Agarwal, (2022) 444 ITR 1 (SC), and Rajeev Bansal v. UOI, (2024) 469 ITR 46 (SC) (a 5-judge Bench upholding the post-2021 reassessment regime as constitutionally valid). These are the correct anchors for 'information specificity' — not Hexaware.

HELD: In Ashish Agarwal, the Supreme Court (Shah, J.) held that reassessment notices issued between 1-4-2021 and 30-06-2021 under the unamended s. 148 regime would be deemed notices under s. 148A(b) of the new regime, with the Department directed to provide assessee an opportunity to respond before any final s. 148 notice. The Court was careful to balance revenue interest with assessee rights.

JUDICIAL EVOLUTION — Reasons-to-believe Doctrine (Continuing)

The classical Phool Chand Bajrang Lal v. ITO, (1993) 203 ITR 456 (SC), four-element reasons-to-believe doctrine — tangible material, specific information, nexus to escapement, recordable reasons — survives the 2025 codification, now recast in s. 285(a)–(d) procedural form. The new framework is procedural; the substantive standard remains.

DEPARTMENTAL PRACTICE

Standard Operating Procedure for s. 287 notices under the 2025 Act will require: (a) digital signature of the FAO, (b) DIN allotment per Circular 19/2019, (c) PAN-based jurisdictional verification before issue, (d) electronic-mode service per s. 287(3) read with Income-tax Rules, 2026 r. 121. Practitioners receiving a s. 287 notice should verify (i) the issuing officer's FAO designation, (ii) DIN authenticity, and (iii) jurisdictional assignment — any defect is a Hexaware-style void notice.

PLANNING NOTES

(i) On receipt of any s. 287 notice, immediately verify FAO designation — a JAO-issued notice (rare under the 2025 Act but possible by oversight) is challengeable. (ii) The s. 285(d) order is the antecedent jurisdictional fact — demand its service before responding to s. 287. (iii) The 50-lakh threshold in s. 287(1) is a jurisdictional fact — verify the AO's quantification through the Annual Information Statement (AIS). (iv) Time-limit defences continue under s. 290 (3-year ordinary / 10-year extended for ≥ ₹50L escapement).

LITIGATION DEFENCE

• Ground 1: Notice u/s 287 issued by JAO (or any non-FAO authority) — cite Hexaware (2024) 464 ITR 430 (Bom HC) ¶¶ 28-32 + s. 287(2) of the 2025 Act.
• Ground 2: Order u/s 285(d) not preceded by show-cause u/s 285(c) — cite Ashish Agarwal (2022) 444 ITR 1 (SC) and the natural-justice-to-revenue principle.
• Ground 3: Information allegedly triggering escapement is non-specific / based on unverified data — cite Phool Chand Bajrang Lal (1993) 203 ITR 456 (SC) on the 'tangible material' requirement.
• Ground 4: Quantum less than ₹50L — challenge jurisdictional fact under s. 287(1) and seek remand for fresh quantification.

Section 168 — REGULAR ASSESSMENT | SCRUTINY

BLOCK 1 — TEXT (key sub-sections)

(1) On the day specified in the notice issued under section 167 (notice for scrutiny), the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee and determine the sum payable by him or refundable to him on the basis of such assessment.

(2) The assessment under sub-section (1) shall, save as otherwise specified, be made under the Faceless Assessment Scheme notified under section 273(7).

BLOCK 2 — 1961 COUNTERPART (Section 143(3))

Section 168 substantially mirrors 1961 s. 143(3). Two visible differences: (i) the Faceless Scheme reference is now statutory (s. 168(2)) instead of via s. 144B; and (ii) the time-limit reference is now in s. 290 (consolidated time-limit chapter) instead of s. 153.

BLOCK 3 — COMMENTARY

STATUTORY ARCHITECTURE

Scrutiny under the 2025 Act remains a three-stage process — (a) selection per CASS / risk-based criteria (s. 166), (b) notice u/s 167, (c) assessment u/s 168. The Faceless Scheme governs procedural conduct. The substantive law of allowability and disallowability is unchanged from the 1961 jurisprudence.

JUDICIAL EVOLUTION — Faceless Scheme Validity

The Supreme Court in UOI v. Ashish Agarwal, (2022) 444 ITR 1 (SC), and the Delhi HC in Anil Kumar Sharma v. UOI, (2022) 449 ITR 3 (Del HC) upheld the constitutional validity of the Faceless framework. The Bombay HC in Mantra Industries v. NFAC, (2021) 437 ITR 269 (Bom HC) emphasised that personal hearing under s. 144B(7)(vii) cannot be denied where the assessee specifically requests it.

HELD: Where personal hearing is sought by the assessee in writing, the Faceless AO is duty-bound to grant the same through video conference. Denial of opportunity vitiates the assessment. (per Mantra Industries ¶ 18).

DEPARTMENTAL PRACTICE — DIN and Procedural Compliance

CBDT Circular 19/2019 dated 14-08-2019 mandates Document Identification Number (DIN) on every Department communication. Notices/orders without DIN are non-est. The principle is now embedded in s. 168 via Income-tax Rules, 2026 r. 100.

PLANNING NOTES

(i) Always seek personal hearing in writing through the e-portal — invoke Mantra Industries to compel video-conference opportunity. (ii) Maintain a DIN log for every communication received — challenge non-DIN orders. (iii) Time-limit under s. 290 — 12 months from end of FY in which return filed (regular scrutiny); for transfer-pricing matters, 21 months. Track strictly. (iv) For TDS / TCS reconciliation discrepancies flagged in scrutiny, prepare the Form 26AS / AIS / TIS triangulation.

Section 367 — REVISION OF ORDERS PREJUDICIAL TO REVENUE

BLOCK 1 — TEXT (key sub-sections)

(1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

BLOCK 2 — 1961 COUNTERPART (Section 263)

Section 367 is in pari materia with 1961 s. 263. The 'erroneous and prejudicial' twin-condition test from Malabar Industrial survives intact.

BLOCK 3 — COMMENTARY

JUDICIAL EVOLUTION — Twin Conditions

The locus classicus is Malabar Industrial Co. Ltd. v. CIT, (2000) 243 ITR 83 (SC), laying down the twin-condition test — the order must be (a) erroneous AND (b) prejudicial to revenue. Both conditions are conjunctive.

HELD: 'Erroneous' includes orders passed in violation of law or in disregard of authoritative pronouncements; but where the Assessing Officer has taken a view which is one of the legally permissible views, the order is not erroneous and Revision under s. 263 is impermissible. (per Malabar Industrial ¶ 14).

The CIT v. Max India Ltd., (2007) 295 ITR 282 (SC) reiterated that where two views are possible and the AO has adopted one, the Commissioner cannot revise merely because he prefers the other. Recently, PCIT v. Maithan International, (2015) 375 ITR 123 (Cal HC) held that mere lack of inquiry is itself a ground for revision.

EXPLANATION 2 — DEEMED ERRONEOUS

Explanation 2 to 1961 s. 263 (FA 2015) deemed an order erroneous in four cases: (a) without making inquiries which should have been made, (b) allowing relief without inquiring, (c) not in accordance with CBDT order/instruction, (d) not in accordance with binding HC/SC decision. The 2025 Act preserves this Explanation 2 in s. 367(2).

The constitutionality of Explanation 2 was upheld in PCIT v. Shreeji Prints (P.) Ltd., (2021) 130 taxmann.com 294 (SC), and the scope was clarified in PCIT v. Vinodkumar Lalitkumar, (2020) 121 taxmann.com 22 (Guj HC). Practitioners should map every adverse s. 367 order against Explanation 2 limbs.

PLANNING NOTES & LITIGATION DEFENCE

(i) When facing s. 367 SCN, document the specific legal view adopted by the AO and demonstrate it falls within 'one of the permissible views' — invoke Malabar Industrial. (ii) For 'lack of inquiry' grounds, place on record the response and supporting documents tendered before the AO; this defeats the Maithan International ground. (iii) Time limit u/s 367(2)(b) — 2 years from end of FY in which order sought to be revised was passed. Mark calendar precisely.

CLOSING NOTE — VOL XVI v2

Volume XVI-Expanded Procedure for Assessment v2 carries corrections folded in for the Hexaware Technologies citation — restated as the JAO/FAO faceless reassessment ratio (NOT the 'information specificity' proposition that v1 had erroneously attributed). Practitioners should cite the corrected proposition in office and Court. v1 is withdrawn.