2022 (1) TMI 245 - HC - Income Tax

Assessment u/s 144B - National assessment scheme - as argued AO proposed to modify the return filed by the petitioner without issuing the mandatory show-cause notice contemplated under Clause 5(xvi)(b) of the Scheme and hence, according to the petitioner, the assessment order itself is bad in law - HELD THAT - As revealed that the assessing Officer had, after calling for the objections of the assessee, decided to modify the return submitted by the assessee. By virtue of modification contemplated by the National assessment Centre the provisions of Clause 5(xvi)(b) of the Scheme gets automatically attracted thereby entitling the assessee to be served with a notice calling upon him to show-cause, as to why the assessment should not be completed as per the draft assessment order. On a perusal of the assessment order, thus find that, the assessee was never served with a draft assessment order or the show-cause notice while proposing to modify the return submitted by the petitioner. There is a clear violation of the procedure involved in arriving at the assessment order. The respondents failed to serve the show-cause notices or the draft assessment order upon the assessee. When the decision making process is contrary to law or is vitiated, jurisdiction under Article 226 of the Constitution of India can be invoked. Accordingly, as find that there is violation of the procedure while issuing the assessment order Ext.P7. Therefore Ext.P7 is set aside and the 1st respondent- Assessing Officer is directed to reconsider the case of the petitioner by issuing the draft assessment order and the necessary show-cause notice as contemplated under the Faceless Assessment Scheme in Ext.P8 and after eliciting the objections/explanations of the assessee within a reasonable time, pass fresh orders thereon, in accordance with law, in a time bound manner.

Summary

Issues:
Challenge to assessment order under Income Tax Act 1961 for the assessment year 2018-19. Violation of procedure under the Faceless Assessment Scheme leading to a flawed assessment order.

Analysis:
The petitioner challenged the Ext.P7 assessment order issued under the Income Tax Act 1961 for the assessment year 2018-19. The assessment was purportedly carried out under the Faceless Assessment Scheme, which was transformed into Section 144B of the Act from 1/04/2021. The petitioner's grievance was that the Assessing Officer proposed to modify the return without issuing the mandatory show-cause notice as required by the Scheme, rendering the assessment order legally flawed.

The procedure under the Scheme mandates issuing a show-cause notice if a modification to the return is proposed. The National e-assessment Centre is required to finalize the draft assessment order through two modes: finalizing the proposed assessment if it does not prejudice the assessee, or granting another opportunity if a modification prejudicial to the assessee is proposed. The petitioner contended that the assessing Officer failed to follow this procedure by not serving the show-cause notice or the draft assessment order upon the assessee.

The court noted that the assessing Officer decided to modify the return without serving the necessary notices to the assessee, thereby violating the procedure under the Scheme. The court held that when the decision-making process is contrary to law or vitiated, invoking jurisdiction under Article 226 of the Constitution of India is appropriate. Consequently, the assessment order Ext.P7 was set aside, and the Assessing Officer was directed to reconsider the case by issuing the draft assessment order and necessary show-cause notice as per the Faceless Assessment Scheme. The Assessing Officer was instructed to pass fresh orders after considering the objections/explanations of the assessee in a time-bound manner.

In conclusion, the court found a clear violation of the procedure under the Faceless Assessment Scheme in issuing the assessment order, leading to its setting aside and the directive for a fresh assessment following the correct procedure.