2023 (9) TMI 1460 - HC - Income Tax

Validity of Faceless assessment u/s 144B - non issue of draft assessment order - challenge to the impugned Assessment Order on the ground that there is a violation of principles of natural justice and failure to pass a Draft Assessment Order as is contemplated under Section 144B(1)(xvi) - DR stated not only the Draft Assessment Order was passed but also the Show Cause Notice was issued, to which, the petitioner has failed to reply - HELD THAT - The procedure u/s 144B of the IT Act is structured. It contemplates different stages of assessment and eventualities where, returns are filed or where returns are not filed and replies filed or not filed. At each stage, the matter has to go to the Assessment Unit and the Draft Assessment Order has to be passed. In this case, the Department has combined the Show Cause Notice as is contemplated under Section 144B(11) with the procedure under Section 144(1)(xiv) of the IT Act - The proceedings cannot be short circuited particularly when the provisions are categorical notwithstanding the fact that the petitioner may have failed to reply to some of the notices that were issued u/s 142(1) of the IT Act or there was a failure on the part of the petitioner to file the returns immediately after a notice under Section 148 of the IT Act issued on 23.03.2020. The matter is that the impugned Assessment Order has been passed directly without issuance of a Draft Assessment Order. Combining of the Draft Assessment Order and the Show Cause Notice is not permissible under the provisions of the IT Act. The impugned Assessment Order is set aside and the case is remitted back to the respondents to refer the matter to the Assessment Unit to pass a Draft Assessment Order within a period of three months from the date of receipt of a copy of this order.The petitioner shall upload all the informations which have not been uploaded so far within a period of thirty days from the date of receipt of a copy of this order.

Summary

Issues involved:
The challenge to the impugned Assessment Order based on violation of principles of natural justice and failure to pass a Draft Assessment Order as per Section 144B(1)(xvi) of the Income Tax Act, 1961.

Details of the Judgment:

Violation of Principles of Natural Justice:
The petitioner contested the Assessment Order, arguing that there was a breach of natural justice principles and failure to issue a Draft Assessment Order as required by Section 144B(1)(xvi) of the IT Act. The petitioner had initially engaged with the jurisdictional Assessment Officer, but the case was later transferred to the first respondent under the E-Assessment Scheme, 2019 and Section 144B of the IT Act. Despite providing a response to a notice under Section 142(1) of the IT Act on 04.08.2021, the petitioner's input was allegedly disregarded in the final Assessment Order.

Combining Draft Assessment Order and Show Cause Notice:
The respondents argued that they had followed the necessary procedures, including issuing a Show Cause Notice under Section 144 of the IT Act on 31.08.2021. However, the court noted that the Department had improperly combined the Show Cause Notice with the Draft Assessment Order, which is not permissible under the provisions of the IT Act. The court emphasized the structured nature of the assessment process under Section 144B of the IT Act, which mandates specific stages of assessment and the passing of a Draft Assessment Order.

Setting Aside the Assessment Order:
In light of the procedural irregularities and the failure to adhere to the statutory requirements, the court set aside the impugned Assessment Order. The case was remitted back to the respondents with a directive to refer the matter to the Assessment Unit for the proper passing of a Draft Assessment Order within three months. The petitioner was instructed to upload any outstanding information within thirty days, and provisions were to be made by the respondents to facilitate this upload. Additionally, the belatedly filed return by the petitioner was permitted to be uploaded, with a clarification that the issue would be independently decided based on current procedures.

Disposition of the Writ Petition:
The court disposed of the Writ Petition with the above observations, emphasizing that no costs were to be incurred. Connected Writ Miscellaneous Petitions were closed as well, concluding the legal proceedings in this matter.