HC sets aside assessment proceeding against NRI over faceless issue

The Telangana High Court has quashed the assessment proceeding against a non-resident Indian (NRI) by the Income Tax Department on the ground that it was not faceless.

The court observed that the official concerned erred in not following the mandatory faceless procedures prescribed by the relevant notification issued by the Central Board of Direct Taxes (CBDT).

It rejected the revenue's contention that the assessee was an NRI and that the faceless scheme was applicable only to residents.

It should be noted that the notification by the CBDT carved out an exception for international taxation cases, including NRIs, for reassessment.

However, the department must conduct an enquiry and give the assessee an opportunity of being heard regarding why his case should not be reopened. This is done by issuing a notice under Section 148 of the Income Tax Act. This must be done in a faceless manner, irrespective of whether the assessee is a resident or an NRI.

Amit Maheshwari, partner at the tax and consulting firm AKM Global, said the tax department issues these notices in a physical manner in a significant number of cases for NRIs and foreign companies.

"This was increasing unnecessary litigation on the ground of procedural non-compliance despite the CBDT circular being binding on tax officers," he said.