2022 (6) TMI 1355 - AT - Income Tax

Stay on recovery of outstanding demand - proposing the draft assessment order National Faceless Assessment Centre (NFAC) has not followed the mandatory procedure of section 144B - HELD THAT - The case of the assessee qua the violation of section 144B is without issuing a show-cause notice and providing the assessee an opportunity of hearing AO has proposed the draft assessment order. As observed while disposing of assessee s objection in this regard DRP has directed the AO to pass a speaking order on assessee s allegation of violation of provisions of section 144B - In the final assessment order AO has remained completely silent on the issue. As observed the major addition resulting in the present demand being share capital received from non-resident shareholders treated as unexplained investment u/s 68 - While disposing of assessee s objection on this issue learned DRP while observing that the AO has not considered the evidences filed by the assessee directed him to consider the evidences and pass a speaking order. We find AO while passing the final assessment order on the issue has simply repeated the observations made in the draft assessment order. The aforesaid facts clearly reveal that while passing the final assessment order the AO has failed to implement the directions of DRP in letter and spirit. AO as it appears has not followed the mandatory provisions of sub-section (10) and (13) of section 144C of the Act. Though at this stage we are not required to dwell upon the merits of the disputed issues however on appreciation of facts and materials placed before us and keeping in view the relevant statutory provisions and ratio laid down in the judicial precedents cited before us we are convinced that the assessee has made out a strong prima facie case in its favour. Considering the prima facie case and balance of convenience we are inclined to grant stay on recovery of outstanding demand for a period of 180 days from the date of this order or till the disposal of the corresponding appeal whichever is earlier. Further accepting assessee s prayer for early hearing of appeal which was not opposed by learned Departmental Representative we direct the Registry to fix the appeal for hearing on 29.08.2022 on an out of turn basis. Paper-books if any must be filed by the parties sufficiently ahead of the date of hearing of appeal. Since the date of hearing of appeal was announced in open court in presence of both the parties there is no need for issuance of separate notice of hearing to the parties. It is made clear in case the assessee seeks unnecessary adjournment the stay granted will be vacated. We make it clear the observations made by us in this order are purely in the context of grant of stay on recovery of outstanding demand and will have no bearing on the decision to be taken in deciding the appeal.

Summary

Issues:
Stay on recovery of outstanding demand including interest charged under section 234B and 234D for assessment year 2018-19. Validity of draft assessment order under section 144B of the Income-tax Act, 1961. Final assessment order passed by jurisdictional Assessing Officer. Non-implementation of directions by DRP in final assessment order. Addition under section 68 of the Act. Stay of recovery and early hearing of appeal.

Validity of Draft Assessment Order under Section 144B:
The assessee sought a stay on the recovery of an outstanding demand, contending that the assessment order was unsustainable in law due to non-compliance with section 144B of the Income-tax Act, 1961. The counsel argued that the National Faceless Assessment Centre (NFAC) did not follow the mandatory procedure of section 144B, as there was no show-cause notice or personal hearing before passing the draft assessment order. The counsel relied on decisions of the Delhi High Court to support this contention. The Tribunal observed that the Assessing Officer had not addressed the violation of section 144B in the final assessment order, indicating a failure to follow the statutory provisions.

Final Assessment Order Passed by Jurisdictional Assessing Officer:
The assessee challenged the final assessment order passed by the jurisdictional Assessing Officer after the draft assessment order by NFAC. The counsel argued that since the case did not fall under section 144B(8) of the Act, the jurisdictional Assessing Officer could not have passed the final assessment order. The Tribunal noted that the Assessing Officer did not implement the directions of the Dispute Resolution Panel (DRP) in the final assessment order, which was deemed a violation of statutory provisions.

Non-Implementation of Directions by DRP in Final Assessment Order:
The DRP had directed the Assessing Officer to consider the evidences and submissions of the assessee, particularly regarding additions made under section 68 of the Act, and pass a speaking order. However, the Assessing Officer failed to implement these directions in the final assessment order, merely repeating observations from the draft assessment order. The Tribunal found this to be a failure to comply with the mandatory provisions of the Act, indicating a lack of due diligence in implementing DRP's directions.

Addition under Section 68 of the Act:
A significant addition to the demand was related to share capital received from non-resident shareholders treated as unexplained investment under section 68 of the Act. The DRP directed the Assessing Officer to consider the evidences provided by the assessee, but the final assessment order did not reflect this consideration. The Tribunal concluded that the Assessing Officer had not followed the directions of the DRP in spirit, highlighting a failure to adhere to statutory provisions.

Stay of Recovery and Early Hearing of Appeal:
Considering the prima facie case made by the assessee and the balance of convenience, the Tribunal granted a stay on the recovery of the outstanding demand for 180 days or until the disposal of the corresponding appeal, whichever was earlier. The Tribunal also directed an early hearing of the appeal, which was not opposed by the Departmental Representative, setting a specific date for the hearing and emphasizing that unnecessary adjournments could lead to the vacation of the stay.

In conclusion, the Tribunal allowed the stay application, emphasizing that the observations made in the order regarding the stay would not influence the final decision on the appeal. The detailed analysis of the issues highlighted the failure to comply with statutory provisions, the importance of implementing DRP's directions, and the significance of ensuring due process in assessment proceedings under the Income-tax Act, 1961.