2021 (7) TMI 1388 - HC - Income Tax

Validity of faceless assessment u/s 144B - no show cause notice-cum-draft assessment order was issued - HELD THAT - As revenue states that the record presently placed before the Court would show that though no show cause notice-cum-draft assessment order was issued, yet several opportunities had been granted by the respondents/revenue to the petitioner, before the said date, to explain its case, this argument of the respondent/revenue is contrary to the statutory scheme, as provided in Section 144B of the Act. In our opinion, petitioner is correct in submitting that Section 144B of the Act has been violated and the assessment proceeding has been completed in the present case in violation of the principles of natural justice. The impugned assessment order dated 22nd April, 2021 issued under Section 144 read with Section 144B of the Act for the assessment year 2018-2019 as well as demand notice issued under Section 156 of the Act and notice for initiating penalty proceedings issued under Section 270A and 271AAC(I) of the Act are set aside. However, the respondent/revenue is given liberty to pass a fresh assessment order in accordance with law. The petitioner is also given liberty to challenge any action of the respondent/revenue in accordance with law, in the event she is aggrieved by the same.

Summary

Issues:
Challenge to assessment order under Section 144 of the Income Tax Act, 1961 for assessment year 2018-19 based on violation of Section 144B procedures and principles of natural justice.

Analysis:
The petitioner challenged the assessment order dated 22nd April, 2021 passed by the National Faceless Assessment Center, Delhi under Section 144 of the Income Tax Act, 1961 for the assessment year 2018-19. The petitioner sought to restrain the respondent from proceeding further pursuant to the impugned order, demand notice, and penalty notice. The petitioner contended that despite replying to the Notice under Section 142(1) of the Act and providing relevant details, the assessment order was issued without a mandatory draft assessment order or a show cause notice. Reference was made to a previous case where a similar assessment order was quashed by the Court.

The respondent argued that opportunities were granted to the petitioner to explain its case, even though no show cause notice-cum-draft assessment order was issued. However, the Court found this argument to be contrary to the statutory scheme outlined in Section 144B of the Act. The Court highlighted the provisions of Section 144B regarding faceless assessment procedures, emphasizing the need for following the specified procedure to ensure assessments are valid. The Court agreed with the petitioner's counsel that the assessment proceeding in the present case violated Section 144B and the principles of natural justice.

As a result, the Court set aside the impugned assessment order dated 22nd April, 2021, along with the demand notice and penalty proceedings notices. The respondent was given the liberty to pass a fresh assessment order in compliance with the law. The petitioner was also granted the liberty to challenge any future actions of the respondent if aggrieved. The writ petition and pending applications were disposed of, with the directive to upload the order on the website and forward a copy to the counsel via email.