2021 (10) TMI 1213 - HC - Income Tax

Assessment u/s 144B - no draft assessment order was served - HELD THAT - Sub Section 5 reproduced earlier provides that all communication among the assessment unit, review unit, verification unit or technical unit or with the assessee or any other person with respect to the information or documents or evidence or any other details, as may be necessary for the purposes of making a faceless assessment shall be through the National Faceless Assessment Centre. Even the final assessment order has been issued by the National Faceless Assessment Centre. Therefore, even for a moment we accept what the affidavit in reply says that Regional Unit sent draft assessment order under Section 143(3) of the Act, it could not have sent any such communication to the assessee. The said communication should have originated from the National Faceless Assessment Centre. Affidavit in reply has not been filed by the person who passed the assessment order. Nobody knows, even counsel does not know, who is the faceless person who passed the assessment order. The only person who could have answered this point categorically was the person who wrote and pass the assessment order and not some other officer who is relying upon input received from the National Faceless Assessment Center. We have to hold that the assessment order has been issued without following the mandatory procedure prescribed under Section 144B of the Act, in as much as, if the review unit of respondents had reviewed the draft assessment order, it should have followed the procedure laid down under sub clause (b) of clause (xvi) of sub-Section (1) of Section 144B.

Summary

Issues:
Impugning assessment order, demand notice, and penalty notice for A.Y. 2018-2019 due to failure to follow mandatory procedure under Section 144B of the Income Tax Act, 1961.

Analysis:
The petitioner challenged the assessment order, demand notice, and penalty notice dated 19th April 2021 for A.Y. 2018-2019, contending that the respondents did not adhere to the prescribed procedure under Section 144B of the Income Tax Act, 1961. The petitioner argued that they were not provided with an opportunity to show cause as to why proposed variations should not be made, as required by clauses (xiv), (xvi), (xvii), (xviii), (xix), (xx), and (xxi) of Sub Section (1) of Section 144B. The National Faceless Assessment Centre plays a crucial role in the assessment process, including examining draft assessment orders, finalizing assessments, and assigning cases for review, all in accordance with the specified risk management strategy.

The petitioner had responded to communications under Section 143(2) and Section 142(1) of the Act, but the respondents proposed variations without issuing a show cause notice with a draft assessment order. The assessment order in question did not mention the issuance of any show cause notice with a draft assessment order, indicating a procedural lapse on the part of the respondents. The respondents claimed to have issued a draft assessment order on 12th April 2021, but the court found discrepancies in the explanations provided, emphasizing the mandatory nature of the provisions under Section 144B.

The court highlighted the mandatory nature of Section 144B, emphasizing that assessments not conducted in accordance with the prescribed procedure would be considered non est. The communication between different units and the assessee must go through the National Faceless Assessment Centre, as per Sub Section 5 of Section 144B. The court noted that the assessment order was issued without following the mandatory procedure, as even if a draft assessment order was issued, it should have originated from the National Faceless Assessment Centre, not a regional unit.

The court found that the assessment order was issued without following the prescribed procedure under Section 144B, specifically sub clause (b) of clause (xvi) of Sub Section (1). Consequently, the impugned order, demand notice, and penalty notice for A.Y. 2018-2019 were quashed and set aside as non est. The respondents were given the liberty to take appropriate steps for making a faceless assessment in compliance with the law, with the court clarifying that no observations were made on the merits of the case. The petition was disposed of accordingly.