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2021 (12) TMI 313 - HC - Income TaxValidity of order u/s 144B - Faceless assessment - violation of principles of natural justice - Argument of Non service of any Draft Assessment Order as well as show cause notice - HELD THAT - As the chronology of the events presented before us by the respondent authority that the return of the petitioner Company was selected for scrutiny and notice u/s 143(2) of the Act was issued on 22.09.2019. Date of hearing was fixed on 07.10.2019. Various responses have been given by the petitioner. It also sought time and review was also filed. Opportunity for filing reply and furnishing the document was granted. The assessee was also informed on 15.10.2020 about transfer of proceedings to the NFAC and notice was also issued to the assessee by the Regional Reassessment Centre on 04.01.2021 u/s. 142(1) of the Act. Notice of NFAC to the petitioner was issued on 03.02.2021 under section 142(1) of the Act. It appears from the assessment order which is claimed to have been placed for transfer on 08.04.2021 and averred to have been served upon the assessee under the communication dated 12.04.2021, is missing on the Web Portal of the Income Tax Department. Assessment order issued u/s 144B of the Act on 20.04.2021 along with the Demand Notice have been served upon the petitioner. Barring the Draft Assessment Order, rest of all the documents are already found on the web portal of the respondent department. Sub-sections (7) of section 144B provides that for the purposes of faceless assessment an electronic record shall be authenticated by the National Faceless Assessment Centre by affixing its digital signature and by assessee or any other person, by affixing if required his digital signature if he is required under digital signature. There is specific requirement for service by electronic mode and in absence of placing before this Court any proof of virtual exchange or authenticated copy of service to the assessee, there is no reason for this Court to accept the version of the respondent about the service. We are in total disagreement with the revenue that on account of issuance of notice u/s. 143(2) dated 22.09.2019 and opportunities provided earlier to the assessee, acceding to his request would be a mitigating circumstance so far as non-service of the Draft Assessment Order is concerned. The opportunity of furnishing the documents and hearing which has been given time and again and requests acceeded to by the authority to the assessee at that stage would not eventually culminate into furnishing of the final assessment order without service of prior notice along with draft assessment order, if any additions are made to the prejudice of the assessee. We have sought assistance from the learned advocate of both the sides to point out to us due service of the draft assessment order, as has been claimed by the respondent, however, the said order dated 12.04.21 has been duly served to the petitioner, show cause notice which is claimed to have been issued along with the draft assessment order are surely missing. This being a simple case of statutory non-compliance of the provision, the same would amount to breach of not only principles of natural justice, but also, of the action in complete disregard to the statutory provision. And therefore, the order of the respondent passed without following the mandate given by the statute under section 144B of the Act deserves to be interfered with by quashing and setting aside the same. We quash the impugned assessment order 20.04.2021 so also the notice of demand issued by the respondent authority and any other proceedings initiated pursuant to the said . We direct that the respondent/revenue will be at liberty to proceed with the assessment process under the provisions of Section 144B of the Act, as permissible under the law obviously after issuance of the prior notice-cum-draft assessment order and on availing an opportunity to the petitioner. The petitioner shall file response and the objection to the same. - Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment order under Section 143(3) read with Section 144B of the Income Tax Act. 2. Compliance with the principles of natural justice. 3. Requirement of issuing a Draft Assessment Order and show cause notice. 4. Availability and adequacy of alternative remedies. 5. Jurisdiction and procedural compliance under Section 144B of the Income Tax Act. Detailed Analysis: 1. Validity of the Assessment Order: The petitioner challenged the assessment order dated 20.04.2021 under Section 143(3) read with Section 144B of the Income Tax Act, arguing that it was issued without following the mandatory procedural requirements, making the order illegal and deserving of quashment. 2. Compliance with Principles of Natural Justice: The petitioner argued that the assessment order was passed without issuing a show cause notice or a Draft Assessment Order, which violated the principles of natural justice. The respondent contended that sufficient opportunities were provided to the petitioner to furnish information and documents. However, the Court noted that the absence of a Draft Assessment Order and show cause notice constituted a clear violation of the principles of natural justice. 3. Requirement of Issuing a Draft Assessment Order and Show Cause Notice: Section 144B mandates that before finalizing an assessment order, a Draft Assessment Order must be issued to the assessee, providing an opportunity to respond to any proposed variations. The Court emphasized that this procedural requirement is statutory and non-compliance renders the assessment order non-est (invalid). The Court found that the Draft Assessment Order was not served on the petitioner, as required by law, and this omission was not mitigated by previous opportunities to furnish information. 4. Availability and Adequacy of Alternative Remedies: The respondent argued that the petitioner had the alternative remedy of filing an appeal under Sections 253 and 246 of the Act. However, the Court held that the availability of an alternative remedy does not bar the exercise of jurisdiction under Article 226 of the Constitution, especially in cases of violation of natural justice or statutory provisions. The Court cited precedents, including the Supreme Court's decisions in Whirlpool Corporation vs. Registrar of Trade Marks and Radha Krishan Industries vs. State of Himachal Pradesh, to support this view. 5. Jurisdiction and Procedural Compliance under Section 144B: The Court examined the procedural framework under Section 144B, which requires faceless assessment and mandates specific steps, including the issuance of a Draft Assessment Order and show cause notice. The Court found that these procedural safeguards were not followed in the present case. The Court also referred to similar judgments from the Orissa High Court and the Delhi High Court, which set aside assessment orders for non-compliance with Section 144B. Conclusion: The Court quashed the impugned assessment order dated 20.04.2021 and the consequent demand notice, directing the respondent to proceed with the assessment process afresh under Section 144B, ensuring compliance with all procedural requirements, including issuing a Draft Assessment Order and providing an opportunity for the petitioner to respond. The petition was allowed, emphasizing the importance of adhering to statutory procedures and principles of natural justice in faceless assessment regimes.
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