Clauses 8 and 62 of the Finance Bill, 2026 introduce a clarificatory amendment to resolve litigation on who is legally competent to initiate reassessment proceedings where income is alleged to have escaped assessment.
The amendments clarify that the powers under sections 148 and 148A (pre-reassessment inquiry and issuance of notice) are to be exercised only by the jurisdictional Assessing Officer (AO) and not by the National Faceless Assessment Centre (NaFAC) or its assessment units. To ensure consistency:
- the clarification is introduced retrospectively in the Income-tax Act, 1961, and
- mirrored prospectively in the Income-tax Act, 2025, effective from 1 April 2026.
Background: Reassessment and Faceless Assessment Framework
A. Two Distinct Stages in Reassessment
Under the Income-tax Act, 1961, reassessment involves two clearly demarcated stages:
1. Pre-reassessment stage
Governed by sections 148A and 148, involving:
- inquiry into information suggesting escapement of income,
- issuance of a show-cause notice under section 148A,
- passing of a reasoned order under section 148A(3)/(d),
- issuance of notice under section 148 with prior approval of the specified authority.
2. Assessment/ reassessment stage
Once notice under section 148 is issued, reassessment proceedings are conducted.
B. Faceless Assessment Scheme
- Section 144B, inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, mandates faceless assessment with effect from 1 April 2021.
- After issuance of notice under section 148, the case is transferred to NaFAC for faceless reassessment.
- Assessment units are deemed to have powers of the Assessing Officer only for the purposes of section 144B.
The Jurisdictional Dispute
Conflicting judicial views emerged on whether:
- the NaFAC/ its assessment units could conduct the pre-reassessment inquiry and issue notices under sections 148 and 148A, or
- such powers were confined to the jurisdictional Assessing Officer.
Some High Courts upheld faceless initiation, while others quashed reassessment proceedings on jurisdictional grounds. The issue is pending before the Supreme Court.
Clause 8: Insertion of Section 147A (Income-tax Act, 1961)
What Does Clause 8 Insert?
Clause 8 inserts a new section 147A in the Income-tax Act, 1961. It clarifies the meaning of “Assessing Officer” specifically for sections 148 and 148A.
Statutory Clarification
Section 147A provides that:
For the purposes of sections 148 and 148A, the term “Assessing Officer” shall mean an Assessing Officer other than the National Faceless Assessment Centre or any of its assessment units.
Legal Effect
- Pre-reassessment inquiry under section 148A
- Passing of order under section 148A(3)/(d)
- Issuance of notice under section 148
➡️ must be carried out only by the jurisdictional Assessing Officer.
Faceless assessment under section 144B applies only after issuance of notice under section 148.
Retrospective Operation
- Effective retrospectively from 1 April 2021
- Operates notwithstanding any judgment, order or decree of court
This date aligns with:
- introduction of section 148A, and
- commencement of faceless assessments.
Clause 62: Corresponding Amendment in the Income-tax Act, 2025
What Does Clause 62 Do?
Clause 62 amends section 279 of the Income-tax Act, 2025 (income escaping assessment). It clarifies that, for the purposes of sections 280 and 281, the expression “Assessing Officer” shall mean:
an Assessing Officer other than the National Faceless Assessment Centre or any assessment unit referred to in section 273(3).
Effective Date
- Applicable from 1 April 2026
- Applies to tax year 2026-27 and subsequent years
Legislative Intent Behind the Amendments
The amendments reaffirm that:
- Initiation of reassessment is a jurisdictional and quasi-judicial function
- Satisfaction under section 148A must be recorded by a human, jurisdictional AO
- Facelessness is procedural, not jurisdiction-conferring
- The e-Assessment of Income Escaping Assessment Scheme, 2022 under section 151A never intended to shift initiation powers to NaFAC
What the Amendments Do and Do Not Do
What They Do
- Clarify jurisdiction for issuing notices under sections 148 and 148A
- Resolve conflicting High Court rulings
- Reduce reassessment-related litigation
- Align the 1961 Act and 2025 Act
What They Do Not Do
- ❌ Do not expand reassessment powers
- ❌ Do not dilute safeguards under section 148A
- ❌ Do not eliminate faceless reassessment after notice issuance
The amendments are clarificatory and jurisdictional, not substantive.
Effective Dates at a Glance
| Provision | Act | Effective Date |
| Section 147A | Income-tax Act, 1961 | Retrospective from 1 April 2021 |
| Section 279 amendment | Income-tax Act, 2025 | 1 April 2026 |
Conclusion
Clauses 8 and 62 of the Finance Bill, 2026 conclusively clarify that reassessment initiation is a jurisdiction-based function, reserved for the Assessing Officer, and not for faceless assessment units. By clearly separating pre-reassessment jurisdiction from faceless reassessment execution, the amendments restore legislative intent, reduce uncertainty, and bring much-needed stability to reassessment proceedings.
The changes reinforce a key principle: faceless assessment enhances efficiency, but jurisdiction remains personal and statutory.
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