In a recent case, the Telangana High Court has held that the Non-Resident India ( NRIs) are not exempted from following mandatory faceless procedure under the Income Tax Act, 1961.
Sri Venkataramana Reddy Patloola, the petitioner/assessee has challenged the reassessment notices under Sections 148 of the Income Tax Act issued in utter violation of the prescribed procedure of faceless assessment.
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Section 151A of the Income Tax Act, 1961 permits the Central Government to frame a scheme by notifying the same in the official gazette for various purposes, including the issuance of notice under Section 148, in order to ensure greater efficiency, transparency, and accountability. The whole exercise is done to eliminate the interface between the income tax authority and the assessee.
It was contended by the petitioner that in exercise of power under Section 151A, a gazette notification dated 29.03.2022 (scheme) was issued. The scope of the scheme clearly shows that it relates to the issuance of notice under Section 148 of the Act in a faceless manner. A conjoint reading of Section 151A and scheme makes it crystal clear that for the purpose of issuance of notice under Section 148, the department is bound to follow the prescribed faceless procedure. The show cause notices were issued by a faced authority, and the notices run contrary to the mandatory procedure prescribed in the notification dated 29.03.2022.
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The department contended that the petitioners are non-resident Indians (NRIs) and the faceless scheme is applicable only for residents, and that too for conducting assessment proceedings.
The issue raised was whether show cause notices issued under Section 148 of the Income Tax Act, 1961, in matters relating to international tax charges are exempted from following the statutory faceless procedure.
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The division bench of Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao has observed that the taxpayer is nowhere distinguished between NRIs and Indian citizens. The reassessment notice issued under Section 148 of the income tax law must comply with the requirement of the scheme whether or not the taxpayer is an NRI or Indian citizen.
The court held that the department has erred in not following the mandatory faceless procedure as prescribed in the scheme. Since the department failed to issue notices under income tax Section 148 in a faceless manner, the entire further proceeding founded upon it and assessment orders stand vitiated.
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Dundu Manmohan appeared for the petitioner and Vijhay K.Punna appeared for the respondent.
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