2023 (8) TMI 1260 - HC - Income Tax

Validity of assessment Order passed u/s 144C - Order of NFAC - non transfer pricing issues which are regular corporate issues are concerned, the respondents were required to comply with the requirements of Section 144B(1) (xvi)(b) - HELD THAT - As the procedure that is contemplated under the provisions of Section 144B(1) has not been complied with. These procedures are intended to safeguard the interest of the Income Tax Assessees so that they are not put to any prejudice. As evident that under Sub clause (xvi) to Sub section (1) to Section 144B as it stood in case any variation prejudicial to the interest of the assessee, National Faceless Assessment Centre is required to serve a notice calling upon the assessee to Show Cause as to why the proposed variation should not be made. As impugned order has been passed over looking as safeguard prescribed under the above provision, the Court is inclined to quash the Impugned Order and remit the case back to the respondents to pass a fresh order within a period of sixty (60) days from the date of receipt of a copy of this order. The petitioner shall be heard in accordance with the procedure prescribed in force. The respondents are directed to enable the portal to facilitate the petitioner to file a reply within a period of thirty (30) days from the date of receipt of a copy of this order.

Summary

Issues Involved: Challenge to Impugned Assessment Order under Section 144C of the Income Tax Act, 1961 for the Assessment Year 2017-2018.

Summary:
The petitioner challenged the Impugned Assessment Order dated 27.05.2021, which added amounts to the income disclosed in the Returns under Section 139 of the Income Tax Act, 1961. The petitioner contended that non-transfer pricing issues required compliance with Section 144B(1)(xvi)(b), which was not done before passing the Impugned Order. The respondents admitted that no Show Cause Notice was sent along with the Draft Assessment Order to the petitioner. The petitioner argued based on the provisions of Section 144B as it stood prior to 01.04.2022. The court considered arguments from both sides.

The provisions of Section 144B prior to the substitution with new provisions from 01.04.2022 required the assessment unit to make a Draft Assessment Order and send it to the National Faceless Assessment Centre. The National Faceless Assessment Centre was to examine the Draft Assessment Order as per Risk Management Strategy. The procedures under Section 144B(1) were intended to safeguard the interests of Income Tax Assessees. The National Faceless Assessment Centre was required to serve a notice to the assessee in case of any variation prejudicial to their interest.

The court found that the Impugned Order overlooked the safeguards prescribed under the provisions of Section 144B(1). As a result, the court decided to quash the Impugned Order and remit the case back to the respondents to pass a fresh order within sixty days. The petitioner was directed to be heard in accordance with the prescribed procedure, and the respondents were instructed to enable the portal for the petitioner to file a reply within thirty days. The writ petition was allowed with the mentioned observations and directions, with no costs incurred. Connected miscellaneous petitions were closed.