Faceless Assessment Scheme – Constitutional Challenges

The faceless assessment scheme is arguably one of the biggest tax reforms in the country. It eliminates the
interaction between the taxpayer and the income tax officers as the former can e-file his reply to an assessment
on the IT portal without any need to meet the assessing officer in person. Moreover, a personal hearing through
video conferencing would be given if the taxpayer's request for the same is approved by the prescribed
authority. The scheme prima facie raises certain constitutional problems. It is well established that an assessing
officer is a quasi-judicial authority who fulfils a judicial function when he makes an assessment. Consequently,
the Courts have stressed time and again that is imperative to follow the principles of natural justice while
making an assessment. The principles of natural justice are those fundamental rules, the breach of which will
prevent justice from being seen to be done. They are the rules laid down by the Courts for the minimum
protection of the rights of individuals against any arbitrary act of a judicial, quasi-judicial or administrative
authority. The fact that a personal hearing is an exception under the scheme, rather than a right of the taxpayer
appears to offend one of the fundamental principles of natural justice – audi alteram partem. Moreover, the
assessment officer does not have the power to grant such a hearing by himself. He has to obtain the approval of
the Chief Commissioner or Director-General of Income-tax in charge of the regional e-assessment centre. This
makes a hearing which should be granted as a matter of right an optional privilege subject to the discretion of an
officer. Further, the scheme leaves no room for solving any queries that the assessing officer may have during
the assessment. The lack of constructive engagement with the assessing officer may find justice delivery in the
form of assessment of tax liability severely hamstrung. Considering the vital issues raised by the scheme, it has
been challenged before the Bombay High Court as being violative of the Constitution. The judicial
pronouncement in this case will have far-reaching consequences for all quasi-judicial and administrative bodies
carrying out a judicial function.