2024 (2) TMI 608 - HC - Income Tax

Validity of Faceless assessment - procedure contemplated u/s 144B - Preliminary Objections that the writ petition ought not to be entertained inasmuch as there is an effective alternate remedy - HELD THAT - This Court is conscious of the fact that writ petition under Article 226 of the Constitution of India would not be entertained normally, if statutory remedy is available. However, existence of alternate remedy is not an embargo or an absolute bar for exercise of power under Article 226 of the Constitution of India, but a self-imposed restriction and the following circumstances viz., violation of principles of natural justice or lack of jurisdiction or error apparent on the face of the record are some of the exceptions carved out to the rule of alternate remedy for exercise of discretion under Article 226 of the Constitution of India. Notice under section 144B (1)(iii) of the Act was not furnished - The petitioner had filed its return of income under section 139 of the Act and the 2nd Respondent had issued notice under section 143 (2) of the Act on 22.09.2019, thus the petitioner case falls under clause (iii)(a) of Section 144B(1). As the expression employed in Section 144B (1) (iii) of the Act viz., shall , is prima-facie indicative of being mandatory, though the same may be rebutted by other considerations such as the object and scope of the enactments and the consequences flowing from such construction. We do not propose to get into the above question for the present. The intimation u/s 144B(1)(iii) of the Act, informs an assessee of the fact that the assessment would be made in terms of Section 144B of the Act, which is important if one bears in mind that Faceless Assessments u/s144B of the Act comes with its own set of obligations and rights in making the assessment. Non-consideration of reply - Violation of procedure u/s 144B(1)(vii) read with (xiv) and (xvi)(b) of the Act - The petitioner had responded to the notice dated 19.08.2021 vide letter dated 07.09.2021 and sought for time till 22.09.2021.1st Respondent without considering the above reply, issued a show cause notice cum draft assessment order on the same the day i.e. 22.09.2021 proposing huge addition and sought reply from the petitioner by 24.09.2021 for which a reply was submitted by the petitioner on 24.09.2021. However, the impugned order of assessment under Section 143(3) read with Section 144(3) of the Act was passed two days thereafter i.e., on 27.09.2021. Violation of the procedure under Section 144B(1)(xi) to (xiv) / Non-consideration of Petitioner's Reply - In the event of an assessee failing to comply with the notice referred to Clause (vi) of Section 144 B of the Act or notice under sub-Section (1) of Section 142 of the Act or with a direction issued under sub-Section (2) of Section 142 of the Act, the National Faceless Assessment Center shall serve upon such assessee, a notice under Section 144B giving an opportunity to show cause as to why the assessments should not be completed to the best of the judgment of the assessing officer. The assessee would then have to respond to the notice - In the event of failure, the National Faceless Assessment Center shall intimate the failure of the assessee to respond to the notice under Clause (xi) to sub-Section(1) of Section 144B of the Act to the concerned assessment unit. In the instant case admittedly the draft assessment order has been made without taking into account the objections filed by the petitioner on 24.09.2021, which vitiates the entire proceeding. In any view even if the Petitioner had failed to reply to the notice dated 19.08.2021, the 1st Respondent should have issued notice u/s 144B as contemplated under Section 144B(1)(xi) of the Act before preparing the Draft Assessment order u/s 144B(1)(xiv). Importantly, a duty is cast on the assessing authority in terms of Section 144B(1)(xiv) to take into account all relevant material and thereafter frame the draft assessment order. The respondent has erred in not complying with the above mandatory requirement inasmuch as the draft assessment order has been made without even examining/taking into account the objections / response of the petitioner made vide letter dated 22.09.2021. Thus the draft assessment order suffers from non-application of mind to matters that are relevant and on record, thus stands vitiated. We are inclined to set aside the impugned proceedings while leaving it open to the respondent authority to proceed, to frame the assessment in accordance with law, after following the procedure contemplated u/s 144B. Decided in favour of assessee.

Summary

Issues Involved:

1. Maintainability of the Writ Petition due to availability of alternate remedy.
2. Non-furnishing of intimation under Section 144B(1)(iii) of the Income Tax Act.
3. Non-consideration of the petitioner's reply, violating Section 144B(1)(vii) read with (xiv) and (xvi)(b) of the Act.
4. Violation of procedure under Section 144B(1)(xi) to (xiv) of the Act.

Summary:

1. Maintainability of the Writ Petition:
The respondent argued that the writ petition is not maintainable due to the availability of an alternate remedy. However, the court noted that while a writ petition under Article 226 of the Constitution of India is generally not entertained if a statutory remedy is available, exceptions exist for violations of natural justice, lack of jurisdiction, or errors apparent on the face of the record.

2. Non-furnishing of Intimation under Section 144B(1)(iii):
The petitioner contended that the mandatory intimation under Section 144B(1)(iii) of the Act was not furnished, which is critical as it informs the assessee that the assessment would be made under the faceless assessment scheme. The court acknowledged the importance of this intimation, emphasizing that the term "shall" in the provision indicates its mandatory nature, impacting the obligations and rights of the assessee under the faceless assessment process.

3. Non-consideration of Petitioner's Reply:
The petitioner argued that its reply dated 22.09.2021 was not considered in the impugned order, violating the mandate of Section 144B(1)(vii) read with (xiv) and (xvi)(b) of the Act. The court found that the 1st Respondent issued a show cause notice cum draft assessment order on 22.09.2021 without considering the petitioner's reply, which was submitted the same day. This non-consideration vitiated the proceedings as it contravened the statutory requirements.

4. Violation of Procedure under Section 144B(1)(xi) to (xiv):
The court observed that the impugned order disregarded the procedure outlined in Section 144B(1)(xi) to (xiv) of the Act. Specifically, the draft assessment order was made without considering the petitioner's objections filed on 24.09.2021. The court highlighted that the assessment unit must take into account all relevant material before making a draft assessment order. The failure to do so rendered the proceedings invalid.

Conclusion:
The court set aside the impugned proceedings and allowed the respondent authority to reframe the assessment in accordance with the law, following the procedure under Section 144B of the Act. The writ petition was disposed of without costs, and connected miscellaneous petitions were closed.