Mandatory Faceless Assessment Rules Stand Firm: Punjab and Haryana HC Sides with Taxpayers

In a significant ruling for taxpayers, the High Court of Punjab and Haryana has underscored the primacy of statutory law over departmental instructions. The court, led by a Division Bench comprising Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth, struck down assessment notices issued by the Jurisdictional Assessing Officer (JAO) that bypassed the mandated faceless assessment procedure stipulated under Section 144B of the Income Tax Act, 1961.

The Breach of Procedural Protocol

The petitioner, M/s Sohan Lal & Co. , challenged notices issued under Sections 148 and 148A of the Income Tax Act. The core contention was that the Revenue authorities failed to adhere to the statutory scheme of faceless assessment, attempting instead to revert to traditional jurisdictional assessment methods sanctioned only by circulars, not by the Act itself.

The Court observed that the Revenue’s reliance on internal instructions to circumvent the faceless procedure created unnecessary confusion and placed undue hardship on the assessee.

Legal Analysis: Statutory Supremacy

The Bench drew heavily upon established precedents, specifically Jasjit Singh vs. Union of India (2024) and Jatinder Singh Bhangu vs. Union of India (2024). The court reiterated that while the Board (CBDT) has the power to issue circulars under Sections 119 and 120, these are intended only to supplement statutory provisions—never to override or render them "otiose" (useless).

The Court’s reasoning was sharp: legislative enactments, especially those impacting financial liability, demand strict compliance. Any attempt by the authorities to "usurp the legal provisions to their own satisfaction and convenience" constitutes a violation of the taxpayer’s rights and the legal framework.

Key Observations

Highlighting the gravity of the procedural lapse, the Court noted:

• "Such circular or instructions by the Board could not have been issued to override statutory provisions or to make them otiose or obsolete."
• "Legislative enactments having financial implications are required to be followed strictly and mandatorily."
• "In the opinion of this Court, instructions and circulars can be issued only for the purpose of supplementing the statutory provisions and for their implementation."
• "Notices issued by the JAO under Section 148 of the Act, 1961 and the proceedings initiated thereafter without conducting the faceless assessment... have been found to be contrary to the provisions of the Act."

The Decision: A Lesson in Jurisdictional Bounds

The Court allowed the writ petition, resulting in the categorical setting aside of notices dated 18.03.2024 and 30.01.2024, as well as all consequential proceedings initiated against the petitioner.

While the order provides immediate relief to the petitioner, it leaves the Revenue with a narrow path: it may proceed with assessments only if it does so in full compliance with the procedural mandates laid out in the Income Tax Act. For tax professionals and the general public, this ruling acts as a definitive shield against arbitrary procedural bypasses, reinforcing that the "faceless" nature of modern tax assessments is a mandatory safeguard, not a discretionary option for the tax department.

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Headlines under Review

• Headline 1 : Punjab and Haryana HC: Tax Assessment Notices Quashed for Ignoring Statutory Faceless Procedure under Section 144B of IT Act. (Evaluation: Direct, precise, and meets all criteria).
• Headline 2 : Revenue Circulars Cannot Override Statutory Faceless Assessment Rules, Rules Punjab and Haryana HC. (Evaluation: Focuses on the principle but lacks the specific section citation in the headline).
• Headline 3 : Court Sets Aside Assessment Proceedings Initiated Without Faceless Protocol: M/S Sohan Lal & Co. vs Union of India. (Evaluation: Good, but a bit descriptive rather than principled).