Court route in faceless scheme gets more taxing

MUMBAI: The Finance Bill seeks to streamline the process and overcome many operational challenges related to the ‘Faceless Assessment Scheme’. However, one of the proposed provisions is likely to adversely impact taxpayers who could seek relief from the courts. A non-obstante provision, which rendered faceless assessments invalid if these were not in consonance with the provisions of the scheme, is proposed to be deleted. This is a retrospective amendment from financial year 2021-22.

However, Gaurav Singhal, partner at the tax boutique firm Heads Up Consulting, said, “It is proposed to omit the specific provision that helped several taxpayers seek relief from courts, where they had been subjected to assessments and demands without following the prescribed procedure of the scheme. At the same time, it is vital to understand that such omission will not grant a seal of approval to similar other deficient orders.”

His argument is that these prescribed procedures entailed the very principles of natural justice — such as service of show-cause notice, and allowing an opportunity for personal hearing. “Where any proceedings have not followed this fundamental principle of natural justice, it cannot be held to be valid.”


Courts have been quick to address the grievances of taxpayers. For instance, in the case of Suresh Kumar Lakhotiya, the Bombay high court quashed a faceless assessment order that gave only 30 hours to the taxpayer to respond to a show-cause notice. In the case of Chander Manwani, the Bombay high court set aside the faceless assessment order as a request for personal hearing was denied. The courts had held that these actions were violative of the faceless assessment scheme.

Owing to this retrospective proposed amendment, it prima facie appears that it may be more challenging for taxpayers to seek redress from the courts.