The Telangana High Court ruled that the Income Tax reassessment show cause notices issued in international tax charges are not exempted to follow statutory faceless procedure.
The bench opined that clause 3(b) of the notification, in specific, deals with issuance of notice under Section 148 of the Act. For that purpose, the notification seeks to apply e-assessment of income escaping assessment scheme, 2022.
The bench said that a microscopic reading of clause 3(b) shows that its only literal interpretation could be that issuance of notice under Section 148 of the Act is squarely covered under the scheme, and for the purpose of issuance of notice, the faceless procedure must be followed.
It was observed that lawmakers consciously provided two different sub clauses (a) and (b). Clause 3 ‘(a)’ specifically deals with assessment, reassessment and recomputation whereas sub-clause ‘(b)’ deals with notice under Section 148 of the Act and gives reference of Section 144B for providing ‘extent’ for the purpose of ‘assessment’ and ‘reassessment’.
The bench further observed that sub-clause (b) of Clause 3 of the scheme, before use of word ‘and’ is complete in itself and makes it obligatory to issue notice under Section 148 as per automated allocation procedure envisaged in clause 2 (b) of the scheme. The sentence after use of word ‘and’ in sub-clause (b) of clause 3 talks about ‘extent’ provided in Section 144B with reference to assessment and reassessment. The second portion of sub-clause (b) of clause 3 after ‘and’ does not deal with issuance of notice under Section 148 of the Act. Therefore, sub-clause (b) of clause 3 is in two parts. First part is confined to notice under Section 148 of the Act, whereas, second part after the word ‘and’ is confined to ‘assessment’ and ‘reassessment’.
It was observed by the court that the order of CBDT deals with “assessment orders”. The said order is passed in exercise of power under Section 144B of the Act. The order of CBDT is clear that direction was issued about passing of “assessment orders” by the National Faceless Assessment Centre under Section 144B of the Act except in two situations, one of which is passing of assessment orders in cases assigned to International Tax Charges.
The court held that there is no cavil of doubt that Section 144B of the Act and order of CBDT give exemption from following the mandatory faceless procedure only in relation to passing of assessment orders in cases of central charges and international tax charges.
The court held that the respondents have erred in not following the mandatory faceless procedure as prescribed in the scheme.
Facts
The singular and pivotal question raised in the Writ Petitions filed under Article 226 of the Constitution is whether show cause notices issued under Section 148 of the Income Tax Act, 1961 in matters relating to international tax charges are exempted to follow the statutory faceless procedure?
Counsel for the Petitioner urged that in exercise of power under Section 151A of the Act, a gazette notification (scheme) was issued. The scope of scheme clearly shows that it relates with issuance of notice under Section 148 of the Act in a faceless manner.
Vijhay K.Punna, Senior Standing Counsel for Income Tax Department, submitted that the matter relates with the interpretation of scheme, Section 144B and CBDT’s order.
Case Name: Sri Venkataramana Reddy Patloola v/s Deputy Commissioner of Income Tax, Circle 1(1), Hyderabad and Others
Citation: WRIT PETITION Nos.13353, 16141 AND 16877 OF 2024
Counsel for Petitioner : Sri Dundu Manmohan, Sri A.V.Raghu Ram, Sri A.V.A. Siva Kartikeya
Counsel for Respondent : Sri Vijhay K.Punna, Senior Standing Counsel for Income Tax
Court: Telangana High Court
Judge: Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao
Decision Date: 24/07/2024
