Deepanjan Roy Vs ADIT(Int Taxn) (Telangana High Court)
The Telangana High Court, in Deepanjan Roy Vs ADIT (International Taxation), disposed of the writ petition by applying the ratio laid down earlier by the same Court in Venkataramana Reddy Patloola Vs DCIT (W.P. No. 13353 of 2024 and batch). The parties jointly agreed that the issue involved was squarely covered by the earlier decision, and accordingly, the writ petition was allowed in identical terms, with no order as to costs and with all pending interlocutory applications closed.
Read SC Order in this case: SC Refuses Interference With Telangana HC Relief Against Section 148 Notice
The core issue decided in the batch matter, which governed the present case, was whether show cause notices issued under Section 148 of the Income-tax Act, 1961, particularly in matters relating to international tax charges, were exempt from the mandatory faceless procedure prescribed under Section 151A and the e-Assessment of Income Escaping Assessment Scheme, 2022, notified on 29 March 2022.
In the batch decision, the petitioners challenged notices issued under Section 148 on the ground that they were issued by jurisdictional assessing officers through a physical process, in alleged violation of the faceless procedure mandated by law. It was argued that Section 151A expressly empowered the Central Government to frame a scheme for issuance of notices under Section 148, and pursuant to that power, the notification dated 29 March 2022 required such notices to be issued through automated allocation and in a faceless manner. Reliance was placed on earlier decisions of the Telangana High Court and the Bombay High Court to support this interpretation.
The Revenue contended that international tax charge cases were exempt from faceless procedures by virtue of Section 144B(2) and a CBDT order dated 6 September 2021, which excluded assessment orders in international tax cases from the faceless regime. It was further argued that the faceless scheme applied only to assessment or reassessment proceedings, and not to the issuance of notices under Section 148. The Revenue also asserted that the scheme did not apply to non-resident taxpayers.
The Court undertook a detailed examination of Section 151A, the notification dated 29 March 2022, Section 144B, and the CBDT order dated 6 September 2021. It held that Section 151A is an enabling provision that explicitly covers not only assessment and reassessment under Section 147 but also issuance of notices under Section 148, proceedings under Section 148A, and sanction under Section 151. The notification issued under Section 151A clearly mandated that issuance of notice under Section 148 must be through automated allocation and in a faceless manner.
The Court rejected the Revenue’s reliance on Section 144B(2) and the CBDT order to claim exemption for international tax cases at the notice stage. It clarified that the CBDT order dated 6 September 2021 dealt only with the passing of assessment orders under Section 144B and provided exemptions limited to that stage. It did not extend any exemption to the issuance of notices under Section 148. The expression “to the extent provided in Section 144B of the Act” appearing in the scheme was interpreted as applicable only to the assessment and reassessment process, and not to the issuance of notices.
The Court emphasized that Clause 3 of the scheme consciously separated assessment and reassessment under Section 147 from issuance of notice under Section 148, making faceless issuance of notice mandatory. Any contrary interpretation, according to the Court, would render the scheme otiose and defeat the object of introducing a transparent and faceless tax administration. The Court also held that the scheme made no distinction between residents and non-residents, and therefore applied uniformly.
Agreeing with the reasoning of the Bombay High Court in Hexaware Technologies Ltd., the Court concluded that notices issued under Section 148 without following the mandatory faceless procedure were invalid. Consequently, all proceedings and assessment orders founded on such notices were held to be vitiated. Liberty, however, was reserved to the Revenue to proceed afresh in accordance with law.
Applying these findings, the Telangana High Court in Deepanjan Roy Vs ADIT (International Taxation) allowed the writ petition by consensus, holding that the directions issued in W.P. No. 13353 of 2024 and batch would apply mutatis mutandis, with full force, to the present case.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
