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

The HC held that the income tax department must strictly adhere to the faceless assessment scheme under Section 151A when issuing notices under Section 148. The court found that notices must be issued through automated allocation following the risk management strategy as prescribed in the scheme notified on 29.03.2022. While acknowledging that assessees have no fundamental right to demand automated notice issuance, the court ruled that once the department has framed and notified the faceless scheme, it must follow the prescribed procedure. The department was directed to withdraw the improperly issued notices and issue fresh notices in compliance with the scheme provisions.

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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.

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