Bombay High Court Reaffirms Mandatory Faceless Assessment for International Taxation

In a significant ruling that reinforces administrative transparency and procedural compliance, the Bombay High Court has set aside a reassessment notice issued by an Income Tax Officer. The court held that the failure to adhere to the mandatory "faceless" assessment procedure, as prescribed under the Income Tax Act, 1961, renders such notices void in law.

The Origin of the Dispute

The petitioner, Shabana Aijaz Khan, challenged a notice issued under Section 148 of the Income Tax Act. The core of her grievance was that the notice was issued by a Jurisdictional Assessing Officer rather than a Faceless Assessing Officer, a shift in procedure intended to reduce human interface in tax disputes. The Revenue, however, argued that the "faceless" mandate was inapplicable to international taxation cases and further requested that the proceedings be stayed pending a final verdict from the Supreme Court on related matters.

Judicial Analysis: No Escape from the 'Faceless' Mandate

The Division Bench, comprising Hon’ble Justices B. P. Colabawalla and Amit S. Jamsandekar, rejected the Revenue's attempt to bifurcate the law. The court held that the legislative intent behind the faceless mechanism is broad and inclusive of central and international charges.

The Bench relied heavily on the precedent set in Hexaware Technologies Ltd. v/s Assistant Commissioner of Income-tax and further solidified the position in Abhin Anilkumar Shah v/s Income-tax Officer . The court underscored that procedural mandates in tax statutes are not mere formalities; they are statutory safeguards meant to ensure uniformity and objectivity.

Key Observations from the Bench

The court offered sharp clarity on the scope of the faceless regime, stating:

> “We have thus reached a considered conclusion that the mandatory faceless procedure for issuance of notice under section 148 of the Act 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 under section 144B read with section 151A of the Act.”

Addressing the Revenue's argument regarding the necessity of the Jurisdictional Assessing Officer's involvement, the bench noted: > "This, as per the decision in the case of Hexaware Technologies Ltd (supra), would be fatal to the Notice."

The Court concluded that: > "We, therefore, find that the contention of the Revenue that in the present case the Jurisdictional Assessing Officer could have issued Notice under Section 148 is contrary to the law laid down by this Court."

A Conditional Liberty for the Revenue

While the court quashed the notice and all associated proceedings, it provided a limited window for the Revenue to revive the petition. Should the landmark Hexaware ruling be overturned or modified by the Supreme Court in the future, the Revenue may approach the Bombay High Court to restore the petition. Until such a reversal occurs, however, the current order stands as a clear directive that the income tax department cannot bypass the faceless assessment mechanism simply because a case involves international taxation.

For taxpayers and legal professionals, this judgment serves as a stern reminder that procedural adherence is paramount. Errors in the manner of serving a notice can be just as fatal to the Revenue's case as errors in the legal assessment itself.