Introduction
The Punjab and Haryana High Court at Chandigarh, in CWP-32705-2024 (O&M), decided on 04.12.2024, delivered a significant ruling in Kalra Arya Public School, Gurdaspur v. Union of India and Others. The Division Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth allowed the writ petition and set aside a notice dated 31.08.2024 (Annexure P-2) issued by the Jurisdictional Assessing Officer under Section 148 of the Income Tax Act, 1961, along with all consequential proceedings. The core issue was whether the Assessing Officer could proceed under Section 148 without conducting faceless assessment under Section 144B. The High Court held that the faceless assessment scheme is mandatory and that CBDT circulars or instructions cannot override statutory provisions.
Facts
The petitioner, Kalra Arya Public School, Gurdaspur, challenged the notice dated 31.08.2024 under Section 148. The respondents were the Union of India and others. Mr. Sandeep Goyal and Mr. Sameesh Bassi appeared for the petitioner; Mr. Varun Issar, Senior Standing Counsel, appeared for the Income Tax Department and accepted notice.
Both counsel agreed that the issue was already concluded by the High Court in Jasjit Singh v. Union of India and Others (CWP No.21509 of 2023, decided on 29.07.2024) and by the Coordinate Bench in Jatinder Singh Bhangu v. Union of India and Others (CWP No.15745 of 2023, decided on 19.07.2024). In Jasjit Singh, the Court held that circulars or instructions issued by the Board cannot override statutory provisions or make them otiose or obsolete. Legislative enactments having financial implications must be followed strictly and mandatorily. By exercising powers under Sections 119 and 120 and Section 144B(7 & 8), authorities cannot usurp legal provisions to their own satisfaction and convenience, causing hardship to assessees and confusion among taxpayers. Instructions and circulars can be issued only for supplementing statutory provisions and for their implementation. Notices under Section 148 and proceedings without faceless assessment were held contrary to the Act. Notices dated 28.02.2023, 16.03.2023, 20.03.2024 and order dated 30.03.2023 were set aside for want of jurisdiction. Revenue was granted liberty to follow the statutory procedure. In the present case, the Court applied these observations mutatis mutandis, set aside notice dated 31.08.2024 and consequential proceedings, and disposed of all pending applications.
Reasoning
The High Court’s reasoning rests on the supremacy of statutory provisions over administrative circulars. It found no occasion to distinguish or take a different view from the Coordinate Bench, as suggested by the revenue. This affirmance reinforces the mandatory nature of faceless assessment under Section 144B(7 & 8).
First, circulars or instructions issued by the Board cannot override statutory provisions or make them otiose or obsolete. Administrative instructions are subordinate to the statute. Legislative enactments having financial implications must be followed strictly and mandatorily. The faceless assessment scheme, with its significant procedural and financial implications, cannot be bypassed by executive action.
Second, the Court examined powers under Sections 119 and 120 as well as Section 144B(7 & 8). It held that authorities cannot be allowed to usurp legal provisions to their own satisfaction and convenience. The Assessing Officer cannot pick procedures based on convenience. Deviation causes hardship to assessees and confusion among taxpayers. Instructions and circulars can be issued only for supplementing statutory provisions and for their implementation; they cannot supplant the statute.
Third, applying the law, notices issued by the JAO under Section 148 and proceedings initiated without faceless assessment under Section 144B were contrary to the Act. Notices dated 28.02.2023, 16.03.2023, 20.03.2024 and order dated 30.03.2023 were set aside for want of jurisdiction. In the present case, notice dated 31.08.2024 and all consequential proceedings were set aside. The Court did not examine the merits of any assessment order or tax liability; it quashed the proceedings solely for want of jurisdiction due to non-compliance with the faceless assessment mandate.
Fourth, the revenue was granted liberty to follow the procedure laid down under the Act and proceed accordingly, if so advised. This means the revenue is not permanently barred but must restart the process in accordance with the statutory faceless assessment scheme. The Court allowed all writ petitions, and the interim order stood merged with the present order.
The decision clarifies that faceless assessment is not a mere procedural formality but a mandatory statutory requirement. The High Court’s refusal to distinguish the precedent indicates a settled legal position. The observations about hardship to assessees and confusion among taxpayers highlight the practical consequences of non-compliance. The judgment upholds the rule of law and ensures that statutory provisions with financial implications are strictly followed.
Conclusion
The Punjab and Haryana High Court’s decision in Kalra Arya Public School v. Union of India is a significant victory for procedural regularity and taxpayer rights. By setting aside the notice dated 31.08.2024 under Section 148 and all consequential proceedings for want of jurisdiction, the High Court reinforced the mandatory nature of faceless assessment under Section 144B(7 & 8) of the Income Tax Act, 1961. CBDT circulars or instructions cannot override statutory provisions or make them otiose. The revenue has liberty to follow the statutory procedure if it chooses to proceed. This case adds to the jurisprudence on faceless assessment and will guide future challenges to reassessment notices issued outside the statutory scheme.