2023 (2) TMI 863 - HC - Income Tax

Revision u/s 263 - validity of Assessment u/s 144B - non-compliance of mandatory statutory provisions and for grant of less than four hours to respond to the notice - HELD THAT - This is in gross violation of the principles of natural justice as to ask some one to respond to the same in less than four hours, amounts to nearly achieve impossible. When it is being terms as violation of principles of natural justice, it is mild expression to the conduct of the respondent. The least that could have been done was to regard the objective and very purport of introducing service of show-cause notice cum draft assessment order u/s 144B. Such Faceless Assessment Scheme 2019 has been incorporated under the Tax regime vide Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, whereby, Section 144B was inserted from 1st April 2021. The circular of Central Board of Direct Taxes (CBDT) deals with the procedure of faceless assessment, scope of work to be done by different units such as assessment unit, verification unit, technical unit etc. Non-compliance of sub-section (9) of Section 144B of the Act would render the issue non est. Our attention is drawn that the provisions of sub-section (9) of Section 144B of the Act though have been omitted from the statute book, there is no running away from the fact that the time given is in no manner can be said to be in due compliance of the statutory provisions or in satisfaction of fulfilling the objectives of newly introduced provisions. Resultantly, this petition is allowed quashing and setting aside the action of the respondent of passing the order of assessment for the Assessment Year 2016-2017 with all consequential actions and notices.

Summary

Issues:
Challenge to validity of assessment order under Income Tax Act for AY 2016-2017 based on Section 143(3) read with Section 263 and Section 144B.

Detailed Analysis:

1. Validity of Assessment Order:
The petitioner challenged the assessment order dated 31.03.2022 under Section 143(3) read with Section 263 and Section 144B of the Income Tax Act for AY 2016-2017. The respondent assessed the total income at Rs.2,28,98,030/- after making an addition of Rs.39,87,750/-. The petitioner, a partner, had filed the Return of Income declaring total income at Rs.1.89 lakh. The Principal Commissioner of Income Tax set aside the previous assessment and directed an inquiry into exempt LTCG. The fresh assessment made an additional addition, raising a demand of Rs.1.5 crore for AY 2016-2017.

2. Prayers in the Petition:
The petitioner sought various reliefs, including quashing the impugned assessment order, notice of demand, and penalty under Section 274 read with Section 271(1)(c) of the Act. The petitioner also requested to maintain status quo until the final disposal of the petition and to pass any further orders as deemed proper in the interest of justice.

3. Arguments and Decision:
The petitioner contended that the assessment order and consequential notices were in violation of natural justice as there was insufficient time granted to respond to the notice. The Court noted that the time given for response was less than four hours, which was deemed a violation of natural justice. The Court emphasized the importance of complying with statutory provisions, specifically Section 144B of the Act, related to faceless assessment schemes. The non-compliance of statutory provisions and the inadequate time provided for response led the Court to interfere and quash the assessment order dated 31.03.2022 for AY 2016-2017.

4. Final Judgment:
The Court allowed the petition, setting aside the assessment order and all consequential actions and notices. However, the respondent was not precluded from initiating further actions from the stage where it was left, provided the petitioner cooperates. The judgment highlighted the significance of adhering to statutory provisions and principles of natural justice in assessment proceedings under the Income Tax Act.

By: *Helpful Assistant*