2021 (12) TMI 825 - HC - Income Tax

Validity of assessment u/s 144B - final notice along with the draft assessment order has not been served upon the petitioner - HELD THAT - It is admitted that only draft assessment order was served upon the Assessee on 23.09.2021 without fixing any date for furnishing the reply and the final show cause notice availing the opportunity of hearing to the petitioner has not been served upon the Assessee. The Assessment Order was finalized and submitted for approval of Range Head on 24.09.2021. Thus, it is clear that as per the provision of Income Tax Act, 1961 under Section 144B(1) (xvi) and 114B(1)(xx)(ii), the final notice along with the draft assessment order has not been served upon the petitioner. As decided in GANDHI REALTY (INDIA) PRIVATE LIMITED VERSUS ASSISTANT/JOINT/DEPUTY/ASSITANT COMMISSIONER OF INCOME TAX/INCOME TAX OFFICER 2021 (12) TMI 313 - GUJARAT HIGH COURT if there is any variation prejudicial to the assessee, final notice with the draft assessment order needs to be served necessarily as per the mandate of the statute and otherwise the order passed is non-est as provided under the said provisions itself. The present petition is allowed. The impugned order of assessment and consequent notice of demand is quashed and set aside. The respondent/revenue will be at liberty to proceed with the process of assessment under the provisions of Section 144B read with section 144C of the Income Tax Act, 1961 as permissible under the law obviously after issuance of the final notice-cum-draft assessment order and on availing an opportunity to the petitioner

Summary

Issues Involved:
Challenge under Article 226 of the Constitution of India regarding Assessment order passed under Section 143(3) read with Section 144B of the Income Tax Act for non-compliance of the law's provisions.

Detailed Analysis:

1. Compliance with Section 144B:
The petitioner challenged the assessment order, alleging non-compliance with Section 144B of the Income Tax Act. The petitioner contended that the respondent failed to adhere to the procedure under Section 144B by not issuing a show cause notice cum draft assessment order for providing an opportunity of hearing. The Court noted the absence of a show cause notice for the proposed variation and emphasized the importance of following the provisions of Section 144B, particularly highlighting clauses 144B(1)(xxv) to (xxxii).

2. Interim Relief and Jurisdictional Assessing Officer:
An order was passed to join the Jurisdictional Assessing Officer as a party respondent. The Court granted an interim relief staying the implementation and operation of the assessment order until a specified date. The Court considered the nature of the litigation and the alleged noncompliance with the law's provisions in deciding to grant the stay.

3. Chronology of Events and Compliance with Law:
The respondent provided a detailed chronology of events related to the draft assessment order's processing. It was acknowledged that only the draft assessment order was served on the Assessee without fixing a reply date or providing a final show cause notice for an opportunity of hearing. The Court emphasized the necessity of serving the final notice along with the draft assessment order as per the provisions of the Income Tax Act to ensure compliance.

4. Legal Precedent and Decision:
Referring to a previous case, the Court reiterated the importance of issuing a prior notice-cum-draft assessment order and providing an opportunity for the assessee to respond. The Court allowed the petition, quashed the impugned assessment order and demand notice, and directed the revenue to proceed with the assessment process under Section 144B read with Section 144C after issuing the final notice-cum-draft assessment order and granting the petitioner an opportunity to respond and seek a hearing.

5. Conclusion and Directions:
The Court allowed the petition, setting aside the assessment order and demand notice. The revenue was directed to follow the procedures under Section 144B and Section 144C of the Income Tax Act diligently, ensuring the petitioner's opportunity to respond and seek a hearing. The revenue was instructed to file the final order within a specified timeframe and permitted direct service through speed post and e-mode in addition to regular modes of service.