Faceless Assessment Mechanism: Upholding the Sanctity of Statutory Provisions

Reported as:

2024 (9) TMI 219 - BOMBAY HIGH COURT

Introduction

This article delves into a recent judgment rendered by the High Court, which addresses the intricate interplay between statutory provisions and administrative mechanisms in the realm of income tax proceedings. The court's decision sheds light on the jurisdictional limitations imposed by the faceless assessment scheme, a pioneering initiative aimed at enhancing transparency and efficiency in tax assessments.

Arguments Presented

The primary contention raised by the revenue authorities centered around the applicability of the faceless assessment mechanism, as outlined in the scheme notified by the Central Government vide a Notification dated March 29, 2022. Specifically, the revenue argued that the scheme should not extend to cases involving international taxation charges, citing orders issued by the Central Board of Direct Taxes (CBDT) u/s 119 of the Income Tax Act (the Act) on March 31, 2021, and September 6, 2021.

Discussions and Findings of the Court

Jurisdictional Limits under the Faceless Assessment Scheme

The court meticulously examined the provisions of Section 151A of the Act, read in conjunction with Sections 144B and 148A, as well as the scheme notified on March 29, 2022. The court's analysis led to the following key findings:

1. The orders dated March 31, 2021, and September 6, 2021, issued u/s 119 of the Act, apply exclusively to "assessment orders" to be passed and do not extend to proceedings u/ss 148A and 148 of the Act.
2. The scheme notified u/s 151A, through the notification dated March 29, 2022, is not subject to the applicability of the aforementioned orders, nor does it explicitly include their applicability.
3. Reading the applicability of the orders dated March 31, 2021, and September 6, 2021, into the scheme dated March 29, 2022, would amount to rewriting the scheme and contravening the legislative intent behind Section 151A.

Doctrine of Faceless Assessment

The court upheld the principle that the mandatory faceless procedure for issuing notices u/s 148 of the Act, as envisaged by the scheme notified on March 29, 2022, cannot exclude central charges and international taxation charges from the application of the faceless mechanism u/ss 144B and 151A of the Act.

Analysis and Decision by the Court

Considering the discussions and findings, the court arrived at the following conclusions:

1. The notices issued by the Jurisdictional Assessing Officer (JAO) in the present case fell outside the purview of the faceless mechanism and were, therefore, illegal and without jurisdiction.
2. The court reiterated its earlier decisions in Hexaware Technologies Limited and CapitalG LP, which consistently held that proceedings u/ss 148A and 148 of the Act, even in cases involving central charges and international taxation charges, must be conducted in a faceless manner, as mandated by Sections 144B and 151A of the Act.
3. The court rejected the revenue's contention that the present case would fall outside the applicability of the faceless assessment provisions and the scheme notified on March 29, 2022.

Consequently, the court allowed the petition and quashed the impugned notices and orders issued by the JAO, upholding the sanctity of the statutory provisions and the faceless assessment mechanism.

Comprehensive Summary

The judgment reinforces the primacy of statutory provisions and the faceless assessment scheme in income tax proceedings. The court's analysis underscores the jurisdictional limitations imposed by the scheme, ensuring that administrative mechanisms align with the legislative intent. By rejecting the revenue's contention and upholding the applicability of the faceless mechanism to central charges and international taxation charges, the court has provided clarity and upheld the principles of transparency and accountability enshrined in the faceless assessment regime.

 

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Full Text:

2024 (9) TMI 219 - BOMBAY HIGH COURT

Faceless Assessment: statutory scheme governs jurisdiction and extends to central and international taxation proceedings. The court analysed Section 151A read with Sections 144B and 148A and held that administrative instructions dated March 31, 2021 and September 6, 2021 issued under section 119 apply only to assessment orders and do not extend to proceedings under Sections 148A and 148; those instructions cannot be read into the scheme notified on March 29, 2022. The mandatory faceless procedure under Sections 144B and 151A applies to notices and proceedings, including central charges and international taxation charges, and notices issued outside that mechanism fall outside the statutory jurisdictional framework.