2023 (11) TMI 651 - HC - Income Tax

Validity of reopening of assessment u/s 147 r.w.s. 144B - not supplying the reasons for reopening and without issuing draft assessment order - as alleged respondent instead of supplying reasons for reopening, straightaway issued the show cause notice - HELD THAT - Section 144B prescribes for procedure to be adopted by the National Faceless Assessment Centre for making draft assessment order and provide details of the penalty proceedings to be initiated therein, if any. It further provides for supplying reasons and draft assessment order. In view of above, it can be safely be said that the impugned order was passed by the respondent in violation of principles of natural justice without providing reasons for reopening and the draft assessment order or in other words by not following the prescribed procedure laid down as per the provisions of section 144B of the Act, 1961 for Faceless assessment. This petition succeeds and is accordingly allowed. The impugned order of assessment passed by the respondent u/s 147 read with Section 144B and demand notice under section 156 of the Act are quashed and set aside. The respondent/Revenue will be at liberty to proceed with assessment under the provisions of section 144B of the Act, 1961, as permissible under the law for providing the reasons for reopening and the draft assessment order so as to provide an opportunity of hearing to the petitioner. Such exercise shall be completed within 12 weeks from the date of receipt of copy of this order.

Summary

Issues involved:
The issues in this case involve the validity of the assessment order passed without providing reasons for reopening and the draft assessment order, as well as the demand notice for the assessment year 2013-14.

Details of the Judgment:

Issue 1: Reasons for Reopening and Draft Assessment Order
The petitioner, a partnership firm, challenged the assessment order passed without the reasons for reopening being supplied. The petitioner argued that such an act is impermissible in the eyes of the law. The petitioner contended that the respondent failed to follow the mandatory requirement of supplying reasons for reopening and issuing a specific draft assessment order before passing the impugned assessment order. The petitioner's main prayer was to set aside the assessment order to have a proper opportunity to present the case before the assessing authority.

Issue 2: Compliance and Opportunity
The Revenue argued that the petitioner did not respond to the notices under Section 142(1) of the Act and the show cause notice issued by the Assessing Officer during the assessment proceedings. The Revenue contended that the AO provided ample opportunities to the assessee and followed the principles of natural justice while passing the assessment order. The Revenue highlighted that the assessee did not file the return of income in response to the notice under Section 148 of the Act and did not request reasons during the assessment proceedings, thus relieving the AO from the obligation to supply reasons.

Issue 3: Violation of Natural Justice
The Court considered whether the assessment order passed under Section 147 read with Section 144B of the Act violated principles of natural justice by not providing reasons for reopening and a draft assessment order. Section 144B of the Act provides a detailed procedure for Faceless Assessment, including the requirement to provide reasons and a draft assessment order. The Court held that the impugned order was passed in violation of natural justice by not following the prescribed procedure for Faceless assessment.

Conclusion:
The Court allowed the petition, quashing the assessment order and demand notice. The Revenue was directed to proceed with the assessment under the provisions of section 144B of the Act, providing reasons for reopening and the draft assessment order to allow for a hearing. The Court emphasized that the exercise should be completed within 12 weeks from the date of the order. The Court clarified that it did not examine the merits of the case.