2025 (2) TMI 91 - HC - Income Tax

Failure to provide a draft assessment order to the petitioner under section 144B - violation of the Faceless Assessment Scheme 2019 - HELD THAT - As asssessment was made invoking provision in section 143(3) read with section 144B on the assessee having complied with both notices firstly issued under section 143 (2) and then u/s 142 (1). We accept contention of revenue that the sequence does not matter inasmuch as power to issue notice provided for in section 143 (2) and section 142 (1) is for purpose of making the assessment. There is no dispute that petitioner s return was picked up for scrutiny assessment. The assessment had to be done. Commencement of the exercise of assessment was by issuance of section 143 (2) and then further enquiry felt necessary for purpose of the assessment and therefore second notice under section 142 (1). Petitioner having complied with both notices the allegation of not having had full opportunity particularly in view of statements made in the counter are without basis. As the return filed was picked up for scrutiny assessment. Procedure provided for in section 144B on faceless assessment was adopted. It not being a case of best judgment assessment there was no draft assessment order made and thus no question of furnishing it to the National e-Assessment Centre arose. No merit in the contentions raised on behalf of petitioner.

ISSUES PRESENTED and CONSIDERED

The primary issues considered by the Court were:

Whether the failure to provide a draft assessment order to the petitioner under section 144B of the Income Tax Act, 1961, constituted a violation of the Faceless Assessment Scheme, 2019.
Whether the issuance of a notice under section 142(1) after a notice under section 143(2) was procedurally incorrect or violated principles of natural justice.
Whether the petitioner was denied a sufficient opportunity to present their case, thus violating principles of natural justice.

ISSUE-WISE DETAILED ANALYSIS

1. Provision of Draft Assessment Order under Section 144B

Relevant Legal Framework and Precedents: Section 144B of the Income Tax Act, 1961, pertains to the procedure for faceless assessment. The Faceless Assessment Scheme, 2019, outlines the process, including any amendments made to it.
Court's Interpretation and Reasoning: The Court noted that the assessment was not a best judgment assessment and thus did not require a draft assessment order to be furnished to the assessee. The Court accepted the revenue's contention that there was no mandate under section 144B or the Faceless Assessment Scheme requiring a draft assessment order to be sent to the assessee.
Application of Law to Facts: Since the assessment was based on evidence and not on best judgment, the requirement for a draft assessment order did not arise.
Conclusions: The Court found no merit in the petitioner's contention regarding the non-provision of a draft assessment order.

2. Issuance of Notices under Sections 143(2) and 142(1)

Relevant Legal Framework and Precedents: Section 143(2) allows for scrutiny of the return to ensure the assessee has not understated income, while section 142(1) allows for inquiry before assessment.
Court's Interpretation and Reasoning: The Court held that there is no sequential mandate in issuing notices under sections 143(2) and 142(1). The power to issue these notices is for the purpose of making the assessment.
Key Evidence and Findings: The petitioner complied with both notices, and the assessment was made under section 143(3) read with section 144B.
Application of Law to Facts: The issuance of a notice under section 142(1) after a notice under section 143(2) was deemed appropriate for further inquiry necessary for assessment.
Conclusions: The Court found the sequence of notices to be irrelevant and the procedure followed by the revenue to be appropriate.

3. Alleged Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: Principles of natural justice require that a party be given a fair opportunity to present their case.
Court's Interpretation and Reasoning: The Court noted that opportunities, including video conferencing, were provided to the petitioner, as stated in the counter-affidavit by the revenue.
Key Evidence and Findings: The petitioner had complied with both notices and was provided opportunities to present their case.
Application of Law to Facts: The Court found that the petitioner had not been denied a fair opportunity, and the allegation of violation of principles of natural justice was baseless.
Conclusions: The Court dismissed the petitioner's claim of insufficient opportunity and violation of natural justice principles.

SIGNIFICANT HOLDINGS

Core Principles Established: The Court reinforced that the procedural requirements under the Income Tax Act and the Faceless Assessment Scheme were adhered to, and there was no requirement for a draft assessment order in non-best judgment assessments.
Final Determinations on Each Issue: The Court dismissed the writ petition, finding no merit in the petitioner's contentions regarding the draft assessment order, the sequence of notices, and the alleged violation of natural justice.

The Court concluded that the assessment process followed by the revenue was in accordance with the law, and the petitioner's claims were unfounded. The petitioner was advised to pursue a statutory appeal if desired, with the possibility of seeking exclusion of time taken for the writ petition's adjudication.

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