Faceless assessment scheme draws legal ire

Shishir Sinha New Delhi | Updated on October 19, 2021

Courts pull up I-T department for orders passed without application of mind

The Central government’s faceless assessment scheme is finding itself on the wrong side of the law with unhappy assessees dragging the Income-Tax Department to the courts and multiple judicial pronouncements flaying it.

For instance, recently, the Bombay High Court issued a warning to an Assessing Officer even as it set aside the IT notice and directed the order to be circulated “right from the Revenue Secretary to everybody in the Finance Ministry”.

“If such orders are continued to be passed, this Court will be constrained to impose substantial costs on the concerned Assessing Officer to be recovered from his/her salary and also direct the department to place such judicial orders in the career records of such Assessing Officer,” said a division bench of the Bombay High Court in a matter pertaining to an assessee who was given just two days’ time to respond to a notice-cum-draft assessment order.

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The assessee prayed for time and a personal hearing but was slapped with an assessment order that was an exact replica of its earlier draft, without any consideration for his two responses. The HC set aside the order, noting that it was passed without any application of mind.

Technical glitches

Experts say court cases are piling up because of the lack of human interface, and technical glitches are resulting in a number of orders that have been branded irrational by the courts. In May, the Calcutta HC quashed a faceless assessment order because the password required for video conferencing was not provided by the National Faceless Appeal Centre, Delhi. In the same month, the Madras HC quashed another faceless assessment order as being “violative of principles of natural justice”.

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The scheme was launched as E-Assessment Scheme in September 2019 but later got rechristened. It was unveiled by Prime Minister Narendra Modi as Faceless Assessment Scheme in August 2020 with the catchphrase “Transparent Taxation - Honouring the Honest.”

According to Vinod Jain, a Member of the Finance Ministry’s high-powered Committee to simplify the IT Act, the Delhi HC alone has quashed over 50 orders of the tax department. Jain says the scheme is good, but “there are vested interests and corrupt practices which want it to fail.”

Neha Malhotra, Director with Nangia Andersen LLP, is of the view that the real test of the government’s intent to transform the taxation regime is enforcement, not policy formation. “The court rulings will ultimately ensure that tax officers who function in fiduciary capacity will honour their commitment and follow the procedures prescribed by the law,” she said.

Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm, said there have been several instances of assessees not being given adequate time to respond to tax notices. “The Bombay HC has specifically mentioned this as a prerequisite for adhering to the principles of natural justice,” he said.

Published on October 19, 2021

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