2021 (11) TMI 822 - HC - Income Tax

Validity of National Faceless Assessment - as argued respondents have not issued the mandatory draft assessment order as required under Section 144B(1)(xvi)(b) - HELD THAT - This court has in many orders held that provisions of Section 144B are mandatory. Under Section 144B(1)(xvi)(b), if there is going to be a variation prejudicial to the assessee, a draft assessment order has to be issued. Admittedly it has not been issued. It has also been held by this court that non compliance with the procedure laid down under Section 144B of the Act would make the assessment order non est in view of the provisions of sub Section 9 of Section 144B of the Act. Since admittedly, there has been non compliance with the mandatory procedure laid down under Section 144B, the assessment order dated 13 th May 2021 is also non est. The order impugned is hereby quashed and set aside. Consequent demand notice and penalty notice both dated 13th May 2021 are also quashed and set aside.

Summary

Issues:
Impugning assessment order due to non-issuance of mandatory draft assessment order under Section 144B(1)(xvi)(b) of the Income Tax Act, 1961.

Analysis:
The petitioner challenged the assessment order dated 13th May 2021 on the basis that the mandatory draft assessment order required under Section 144B(1)(xvi)(b) of the Income Tax Act, 1961 was not issued by the respondents. In response, the respondents argued that the Risk Unit did not indicate the necessity for a show cause notice or draft order, leading to the finalization of the assessment without issuing the draft order. However, the court emphasized that Section 144B provisions are mandatory. It was noted that according to Section 144B(1)(xvi)(b), if there is a variation prejudicial to the assessee, a draft assessment order must be issued, which was not done in this case. The court reiterated that non-compliance with the Section 144B procedure renders the assessment order non est under Section 144B(9) of the Act.

The court, considering the admitted non-compliance with the mandatory procedure of Section 144B, declared the assessment order dated 13th May 2021 as non est. Consequently, the impugned order, demand notice, and penalty notice issued on the same date were quashed and set aside. The court clarified that no observations were made on the merits of the case, leaving the Revenue to take further steps as advised by law. The petition was disposed of, resolving the issue raised by the petitioner regarding the absence of the mandatory draft assessment order.