2024 (6) TMI 219 - HC - Income Tax

Income tax department must follow Section 151A faceless assessment scheme when issuing Section 148 notices

Ram Narayan Sah Versus The Union Of India, The Principal Commissioner Of Income Tax Meghalaya, The Income Tax Officer Ward-1, Assam

The HC held that the income tax department must strictly adhere to the faceless assessment scheme under Section 151A when issuing notices under Section ... Faceless assessment of income escaping assessment - adherence to procedure prescribed under the Scheme framed under 151A or not? - department is required to issue notices in a faceless manner as mandated - respondent contended that the notices were issued online without physical interface, and the petitioner did not raise this issue before the departmental authorities - HELD THAT:- A careful perusal of the scheme reveals that the scope of the scheme is for the purpose of the assessment, re-assessment, re-computation under section 158 of the Act and issuance of notices u/s 148 of the Act and the same shall be by a process through automated allocation in accordance with the risk management strategy formulated by the Court as referred to u/s 148 of the Act for issuance of the notice and in a faceless manner and to the extent provided u/s 144 B of the Act with reference to make the assessment, re-assessment of total income or loss of the assessee. Perusal of the Section 151A along with the scheme reveals that the statute in order to obviate prejudice and bias has resorted to issuance of notices by the automated allocation through the risk management strategy. The Judgments referred to by the learned counsel for the petitioner supports the contention raised by the writ petition and hold that the notices are required to be issued in an automated manner without there being any interface between the department and the assessee. Whether there is any vested or any fundamental right in respect of the assessee remand for automated issuances of notice ? - The Delhi high Court [2023 (5) TMI 1118 - DELHI HIGH COURT] has categorically held that there is no fundamental right or legal right available to an assessee to demand that the notices though automated digital allocation should be issued. The question of whether the petitioner has the fundamental right or not may not be required to be answered to the present proceedings inasmuch as Mr. Keyal has fairly submitted that in terms of the provisions under Section 151A, the Department has already framed a scheme and the same is notified by notification dated 29.03.2022. As discussed above, the scope of the scheme is for the purposes of the assessment, re-assessment, computation under Section 147 and for issuances of notices under 148 and which shall be done through automated allocations by the department. If that be so then the department is required to follow the procedure prescribed in terms of the scheme and accordingly the department will withdraw the notices and thereafter issue fresh notices if permissible under law as per the scheme read with Section 151A. In the event the department proceeds to issue fresh notices then the petitioner shall also be granted liberty to file their appropriate reply under the provision of Section 148. Issues:1. Challenge to the impugned Notice dated 26.03.2024 seeking to reopen assessment under Section 147 of the Income Tax Act.2. Compliance with Section 151A and schemes framed thereunder for faceless proceedings.3. Interpretation of Section 151A and relevant scheme by Ministry of Finance for automated allocation and faceless assessment.4. Dispute over the necessity of faceless notices under the scheme.5. Examination of judgments supporting automated issuance of notices and absence of fundamental right for manual notices.Detailed Analysis:1. The writ petition challenges the impugned Notice dated 26.03.2024, seeking to reopen assessment under Section 147 of the Income Tax Act. The petitioner contests the inclusion of the Income Tax Officer's name in the notices, contrary to the provisions of Section 151A and related schemes mandating faceless proceedings to eliminate interface between the authority and the assessee.2. The petitioner argues that Section 151A, effective from 01.11.2020, requires the Central Government to establish a scheme for assessment, reassessment, or issuance of notices under Section 147 or 148 in a faceless manner. The Ministry of Finance has framed schemes for automated allocation and faceless proceedings, aiming at efficiency and transparency. The petitioner relies on judgments from Bombay and Andhra Pradesh High Courts supporting adherence to the scheme under Section 151A.3. The Standing Counsel for the Department contends that the notices were issued online without physical interaction, and the petitioner's failure to raise this issue before the authorities initially. However, he acknowledges the existence of the scheme and does not dispute its applicability to the case.4. The core issue is whether the Department must issue notices in a faceless manner as per the scheme under Section 151A of the Income Tax Act. Section 151A emphasizes faceless assessment to enhance efficiency, transparency, and accountability, eliminating direct contact between the authority and the assessee where technologically feasible.5. The scheme titled E-assessment of Income Escaping Assessment Scheme, 2022, introduced by the Ministry of Finance, outlines the process for automated allocation and faceless assessment for Section 147 and 148 proceedings. The scheme emphasizes dynamic jurisdiction and optimized resource utilization through automated processes.6. The judgment emphasizes the statutory requirement for automated allocation and faceless proceedings under Section 151A and the Ministry's scheme. It directs the Department to withdraw the notices and reissue them following the prescribed procedure, granting the petitioner the opportunity to respond under Section 148 if fresh notices are issued.7. In conclusion, the writ petition is disposed of, emphasizing compliance with the scheme under Section 151A for faceless assessment procedures, ensuring transparency and efficiency in income tax proceedings.