Faceless Assessment Order Recalled: Orissa High Court Allows Review Due to Missed Notification

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Case Name

M/s. Sri Gopal Store, Sambalpur vs. Assessing Officer, Assessment Unit of National Faceless Assessment Centre, New Delhi and another (High Court of Orissa at Cuttack)

RVWPET No.269 of 2024

Date: 04th February 2025

Key Takeaways

• Faceless Assessment Mandate: The case highlights the legal requirement for certain income tax assessments to be conducted in a faceless manner under Section 144-B (of Income Tax Act, 1961), 1961.
• Importance of Notifications: The outcome turned on a government notification (dated 1st March 2021) that specified which authorities had jurisdiction for faceless assessments. This notification was not presented during the original hearing.
• Review Power: The court demonstrated its willingness to review and recall its own judgment when new, relevant evidence is presented—even if it was missed earlier despite due diligence.
• Restoration of Petition: The original writ petition is now restored for a fresh hearing, giving the applicant another chance to argue their case with the new evidence.

Issue

Did the assessment order, issued manually instead of through the faceless assessment process as required by law and government notification, violate the legal procedure, thereby justifying the quashing of the order?

Facts

• Parties:
• Applicant: M/s. Sri Gopal Store, Sambalpur
• Opposite Parties: Assessing Officer, Assessment Unit of National Faceless Assessment Centre, New Delhi, and another
• Timeline:
• The assessment order in question was dated 1st July 2024, for the assessment year 2021-22.
• The applicant originally challenged the order, arguing it was done manually instead of via the faceless assessment scheme.
• The High Court initially dismissed the petition, noting that no Board specification (notification) was shown to support the applicant’s claim.
• Later, the applicant filed for review, presenting a notification dated 1st March 2021 (Annexure-2), which they could not produce earlier despite due diligence.
• Key Event:
• The notification specified the jurisdiction for faceless assessments, which was central to the applicant’s argument.

Arguments

Applicant (M/s. Sri Gopal Store, Sambalpur)

• The assessment order and related demand notices should be quashed because they were made manually under Section 143(3) (of Income Tax Act, 1961), instead of through the faceless assessment process as required by law.
• Relied on the notification dated 1st March 2021, which conferred jurisdiction for faceless assessments to the Principal Commissioner of Income Tax for the Regional Faceless Assessment Centre (ReFAC).
• Argued that the notification was not available during the original hearing despite due diligence.

Revenue (Assessing Officer, etc.)

• Acknowledged that the notification exists.
• Did not dispute the applicant’s claim regarding the notification during the review hearing.

Key Legal Precedents & Statutory References

• Section 143(3) (of Income Tax Act, 1961): Deals with the procedure for regular assessment.
• Section 144-B (of Income Tax Act, 1961): Mandates that certain assessments must be conducted in a faceless manner, overriding other provisions.
• Sub-section (1): Requires faceless assessment for cases specified by the Board.
• Sub-section (2): Specifies that the Board will determine the territorial area, persons, incomes, or cases to which faceless assessment applies.
• Section 120 (of Income Tax Act, 1961): Empowers the Board to issue notifications regarding jurisdiction.
• Notification dated 1st March 2021: (Annexure-2) Specifies the authority for faceless assessments, which was central to the review.

Judgement

• The court accepted the applicant’s explanation that the notification could not be produced earlier despite due diligence.
• The court found that the notification was indeed relevant and had not been considered in the original judgment.
• As a result, the court allowed the review, recalled its earlier judgment dated 22nd October 2024, and restored the writ petition for a fresh hearing.
• The review application was thus allowed and disposed of.

FAQs

Q1: Why was the original judgment recalled?

A: Because a crucial government notification, which specified the authority for faceless assessments, was not presented during the original hearing. The court accepted that this was not due to negligence but because the applicant could not obtain it despite due diligence.

Q2: What is a faceless assessment?

A: It’s a process under Section 144-B (of Income Tax Act, 1961), 1961, where income tax assessments are conducted electronically, without direct interaction between the taxpayer and the assessing officer, to promote transparency and efficiency.

Q3: What happens next in this case?

A: The writ petition is restored, meaning the applicant will get another opportunity to argue their case before the court, this time with the benefit of the notification as evidence.

Q4: Does this mean the assessment order is quashed?

A: Not yet. The court has only restored the petition for a fresh hearing. The final decision on the validity of the assessment order will be made after the rehearing.

Q5: What legal sections were central to this case?

A: Sections 143(3), 144-B, and 120 of the Income Tax Act, 1961, and the government notification dated 1st March 2021.