Central Charges & International Taxation Charges Are Not Excluded From Purview Of Faceless Mechanism U/s 144B R/w/s 151A: Bombay High Court

However, the High Court clarified that it is only the assessment proceedings which would be required to be undertaken outside the faceless mechanism.

Section 151A of the Income Tax Act empowers the Central Government to make a scheme for purpose of assessment, reassessment, or recompilation u/s 147; issuance of notice u/s 148 for conducting income-escaping assessment; or conducting of inquiries or issuance of show-cause notice or passing of order u/s 148A; or sanction u/s 151 for the issue of notice u/s 148 for conducting income-escaping assessment.

The Division Bench of G. S. Kulkarni and Somasekhar Sundaresan observed that “mandatory faceless procedure for issuance of notice u/s 148 falling within the purview of the scheme notified by the Central Government dated 29 March, 2022 would not exclude the Central charges and international taxation charges from the application of the faceless mechanism as notified u/s 144B read with section 151A of the Act”.

Facts of the case

The assessee individual had preferred the present petition challenging the notice issued u/s 148A(b) as well as order passed u/s 148A(d) and the notice issued u/s 148 by the Jurisdictional Assessing Officer (JAO), International Tax Ward.

The counsel for assessee contended that notice issued u/s 148A(b) as also the order u/s 148A(d) leading to issuance of notice u/s 148 are in the teeth of the provisions of section 151A read with the provisions of section 144B along with the scheme of CBDT Notification dated Mar 29, 2022 u/s 151A whereunder the Department is under a mandate to follow the faceless mechanism, in resorting to any procedure/action u/s 148A.

On the other hand, the counsel for Revenue submitted that the provisions of section 151A and the scheme notified by the Central Government on Mar 29, 2022 cannot be applied to the present case which relates to an assessment falling under international taxation charge. In support of such contention, the counsel relied on CBDT Order dated Sep 06, 2021 issued u/s 119, providing for exclusion of such class of cases from the purview of section 144B, providing for faceless mechanism.

Observation of the Tribunal

The Bench observed that order dated Mar 31, 2021 cannot be read to mean that it would cover the proceedings u/s 148A and Section 148 of the Act so as to fall within the ambit of the said order, as it was only the assessment proceedings which were required to be undertaken as an exception to the faceless mechanism, under the said order.

The Bench referred to the order dated Sep 06, 2021 issued by the CBDT u/s 119 which was relied on by the Revenue's counsel to submit that such order reiterates an exception from the applicability of the provisions of section 144B in two categories of cases, firstly, in case of assessment orders in cases assigned to the Central Charges and secondly the assessment orders in cases assigned to international taxation charges.

Thus, from the reading of order dated Sep 06, 2021, the Bench found that CBDT has referred to the order dated Mar 31, 2021 issued in relation to the assessment orders in cases assigned to Central Charges and assessment orders in cases assigned to International Tax Charges, being not required to be passed under the National Faceless Assessment Centre (NaFAC).

However, what has been done by such order is to modify the order dated Mar 31, 2021 to the extent that in addition to such exceptions to the applicability of the faceless mechanism to assessment orders in relation to Central Charges and International Tax Charges, an additional exception was added, namely, to the assessment order in cases where pendency could not be created on ITBA because of technical reasons or cases not having a PAN, added the Bench.

Thus, the Bench emphasized that the position under order dated Mar 31, 2021 remained undisturbed and only non-applicability of faceless mechanism (NaFAC) to the “assessment orders” in cases assigned to Central Charges and International Tax Charges was brought within the purview of said order.

Thus, the Bench pointed that scheme as framed u/s 151A and notified under the notification dated Mar 29, 2022 does not include the applicability, inclusion or even reference to the orders dated Mar 31, 2021 and Sep 06, 2021.

The Bench clarified that the scheme notified u/s 151A under notification dated Mar 29, 2022 applying the procedure of faceless mechanism to the proceeding u/s 148A and Section 148 is neither subject to the applicability of the prior order dated Mar 31, 2021 r/w order dated Sep 06, 2021 nor is it explicit so as to include the applicability of the said orders to the scheme as notified u/s 151A.

The Bench accepted the submission of Amicus Curie that Section 151A is not subject to the other provisions of the Act when it empowers that the Central Government to make a scheme in the context of section 147 or for issuance of notice u/s 148A and for conducting a prior enquiry by issuance of a show-cause notice or passing order u/s 148A of the Act.

Referring to the Division Bench of the High Court of Telangana in Sri Venkataramana Reddy Patloola Vs. Deputy Commissioner of Income Tax, the Bench reiterated that only the actual assessment or reassessment would be laid in a face-to-face mode while the selection of cases and issue of notices could be in the faceless mode.

The High Court therefore allowed Assessee's petition and quashed the reassessment order as well as reassessment notice.

Counsel for Petitioner/ Assessee: Gunjan Kakkad

Counsel for Respondent/ Revenue: Swapna Gokhale, Shilpa Goel

Case Title: Abhin Anilkumar Shah versus ITO

Case Number: Writ Petition (L) No.16750 OF 2024

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