2021 (10) TMI 235 - HC - Income Tax

Faceless Assessment - procedure for making assessment - As argued no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order - HELD THAT - Sub-section (a) of Section 144B makes it amply clear that the Section 144B is a mandatory provision and non-compliance thereof would make the assessment order non-est. The notice issued on 9th April, 2021 under Section 142 sub-section (1) of the Act called upon Petitioner to submit by 6.54 p.m. on 13th April 2021 the accounts and documents specified in the annexure to the said notice. Petitioner had issued its response on 13th April, 2021 and in view of the short time given for filing of the response as well as prevailing Covid-19 situation, Petitioner had been able to provide only partial details and requested for further time. Petitioner thereafter filed additional submissions dated 17th April, 2021 giving details and explanation in relation to the points raised in the notice dated 9th April, 2021. Respondent No.2, however, in haste, passed the impugned assessment order dated 18th April, 2021, u/s 143 (3) read with Section 144B of the Act without granting Petitioner the opportunities as provided in Section 144B viz., issuance of show cause notice mandated under the said section for faceless assessment as well as serving the draft assessment order. Although, the relevant paragraph 24 of the Petition has adverted to the fact that Section 144B of the Act had not been complied with by Respondent No.2 not issuing any show cause notice to Petitioner inspite of the impugned assessment order containing additions / disallowances, the said Affidavit in Reply of the Respondents is silent in that respect. It only mentions that Petitioner had been given ample opportunities to respond to the notices issued and that Petitioner was unable to address four out of seven issues properly. The impugned assessment order that there are variations from the return filed by Petitioner by containing additions / disallowances. The final assessment order is not made in accordance with the procedure laid down u/s 144B (xvi)(b) of the Act as inspite of the variation being prejudicial to the interest of assessee, no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order calling upon him to show cause as to why the proposed variation should not be made. The impugned assessment order dated 18th April, 2021 is non est as the assessment is not made in accordance with procedure laid down under Section 144B.

Summary

Issues Involved:
1. Validity of the impugned assessment order dated 18th April 2021.
2. Compliance with the Faceless Assessment Scheme under Section 144B of the Income Tax Act.
3. Adequacy of time provided to the Petitioner for response.
4. Principles of natural justice and procedural fairness.

Issue-wise Detailed Analysis:

1. Validity of the Impugned Assessment Order:
The Petitioner sought the quashing and setting aside of the impugned assessment order dated 18th April 2021, which computed the total income at ?62,18,03,460 and issued a consequent demand notice of ?63,35,29,950. The court found that the assessment order was passed without adhering to the mandatory procedures under Section 144B of the Income Tax Act, making the order non est (invalid).

2. Compliance with the Faceless Assessment Scheme under Section 144B:
The Faceless Assessment Scheme, introduced by the Finance Act, 2018 and incorporated into the Act via Section 144B, mandates specific procedures to ensure fairness and transparency. The court highlighted the necessity of issuing a show cause notice and a draft assessment order to the assessee when variations prejudicial to their interest are proposed. The court noted that the Respondent failed to issue such notices and draft orders, violating Section 144B, rendering the assessment order non est.

3. Adequacy of Time Provided to the Petitioner for Response:
The notice dated 9th April 2021 gave the Petitioner until 6.54 p.m. on 13th April 2021 to furnish the required information. Given the intervening holidays and the prevailing Covid-19 lockdown, the Petitioner effectively had only one working day to respond. Despite the Petitioner’s request for additional time due to these constraints, the Respondent proceeded to finalize the assessment hastily on 18th April 2021 without granting the requested extension, thus failing to provide a reasonable opportunity for the Petitioner to respond adequately.

4. Principles of Natural Justice and Procedural Fairness:
The court emphasized that the principles of natural justice are embedded in the Faceless Assessment Scheme, requiring the issuance of a show cause notice and draft assessment order before passing any order prejudicial to the assessee. The Respondent's failure to comply with these procedural requirements violated the principles of natural justice. The court underscored that procedural fairness is crucial, and non-compliance with Section 144B mandates renders the assessment order invalid.

Conclusion:
The court concluded that the impugned assessment order dated 18th April 2021 was non est due to non-compliance with the mandatory procedures under Section 144B of the Income Tax Act. Consequently, the assessment order and the consequential demand notice were quashed and set aside. The Respondents were permitted to undertake denovo proceedings in accordance with the law. The writ petition was disposed of with no order as to costs.