2024 (8) TMI 123 - HC - Income Tax

Validity of assessment order passed u/s 144B - difference between the show cause notice in form of a draft assessment order and the impugned assessment order passed by the AO after issuance of notice u/s 133 - HELD THAT - It is not in dispute that the AO has not issued notice u/s133 (6) of the Act prior to the issuance of show cause notice u/s 144B of the Act comprising the draft assessment order. Therefore, the assessee could not respond to the findings which are accorded in the impugned assessment order by the Assessing Officer on the basis of the inquiry made by him pursuant to the notice under Section 133 (6) of the Act. Accordingly, the impugned assessment order is in clear violation of the principles of natural justice. There is a clear variance between the show cause notice in form of a draft assessment order and the impugned assessment order passed by the Assessing Officer after issuance of notice u/s 133 (6) of the Act. Therefore, the entire assessment order passed by the AO is contrary to the scheme of the faceless assessment as prescribed u/s 144B of the Act. Thus, quash and set aside the impugned assessment order and remit the entire matter back to the Assessing Officer for de novo consideration and to pass a fresh assessment order after providing all the relied upon documents like the reply received pursuant to the summons and notice under Section 133 (6) of the Act as well as the other relevant documents of the parties who did not reply to the summons providing opportunity of cross-examination, if requested, and after giving an opportunity of hearing to the petitioner, fresh de novo assessment order may be passed in accordance with law.

Summary

Issues:
Challenge to assessment order under Income Tax Act for Assessment Year 2022-23.

Analysis:
The petitioner, engaged in metal manufacturing business, filed income tax return in November 2022. Subsequently, received notices for scrutiny assessment and show cause notices regarding unsecured loans and sundry creditors. The respondent Assessing Officer made additions under Section 69C read with Section 115BBE of the Act, along with initiating penalty proceedings under Section 271AAC (1) for a substantial amount. The petitioner contended that no opportunity of hearing was provided post-reply to show cause notice, leading to a vitiated assessment order. Citing a relevant court decision, the petitioner argued for quashing the assessment order.

On the other hand, the respondent argued that the petitioner did not cooperate during assessment proceedings, necessitating third-party inquiries. The respondent asserted that non-disclosure of third-party inquiries to the petitioner was part of the investigation process. The respondent highlighted the petitioner's failure to provide documentary evidence to substantiate transactions, leading to the necessity of third-party inquiries to establish the genuineness of loans and purchases.

The court observed a clear variance between the show cause notice and the assessment order, indicating a violation of the faceless assessment scheme under Section 144B of the Act. Notably, the Assessing Officer did not issue a notice under Section 133 (6) before the draft assessment order, depriving the petitioner of responding to the findings based on such inquiries. Citing precedents, the court quashed the assessment order, directing a fresh assessment with full disclosure of relevant documents and an opportunity for cross-examination within 12 weeks.

In conclusion, the court quashed the assessment order, remitting the matter back to the Assessing Officer for a fresh assessment in compliance with the law. The court emphasized providing all relied-upon documents, including responses to summons and notices under Section 133 (6), to ensure a fair assessment process. The petitioner was granted an opportunity for a hearing and cross-examination, if requested, to facilitate a just assessment.