The Gujarat High Court bench of Justice J.B. Pardiwala and Justice Nisha M. Thakore has held that the issuance of a show cause notice along with the draft assessment order is absolutely necessary before passing an order under Section 144B of the Income Tax Act.
The writ petitioner/assessee filed its return of income for the A.Y. 2018-19 at Rs. 197,12,28,420. Later, the return was revised at Rs. 197,12,28,420. The case of the assessee was selected for scrutiny under the CASS to verify a few issues.
A notice under Section 143(2) of the Income Tax Act was issued to the assessee, and notices under Section 142(1) were issued from time to time. Those were replied to by the assessee accordingly.
When the income tax department finds discrepancies, minor or major, in the income tax returns, a notice will be issued under Section 143(2).
Section 142(1) of the Income Tax Act 1961 empowers income tax authorities to issue a notice for making an assessment where a return has been filed or, if a return has not been filed, to furnish the required information in the prescribed manner.
In the meantime, with the introduction of the Faceless Assessment Scheme, a fresh notice under Section 142(1) of the Income Tax Act was issued on 03.12.2020 and the same was replied to by the assessee. A “show-cause-before-assessment” was issued on 17.04.2021. The reply was filed by the assessee on May 28, 2021.
The Central Government introduced the Faceless Assessment Scheme to provide greater transparency, efficiency, and accountability in Income Tax assessments. In the Union Budget 2019, the Finance Minister proposed the introduction of a scheme of faceless e-assessment. The scheme seeks to eliminate the human interface between the taxpayer and the income tax department. The scheme lays down the procedure for carrying out a faceless assessment in electronic mode. From August 13, 2020, the e-assessment scheme of 2019 will be amended and hence known as the Faceless Assessment scheme.
Section 144B of the Income Tax Act, 1961, was introduced into the Income Tax Act by the National e-Assessment Scheme. Section 144B of the Income Tax Act,1961 lays out the procedure for assessment of a return of income. As per the procedure when an assessee has not furnished his return of income or in response to a notice under section 142(1) (inquiry) or under section 148 (assessment notice). Then, the case is assigned to an assessment unit (AU). If any document related to the case is required, the AU requests the National Faceless Assessment Centre (NFAC), which further issues a relevant notice to the assessee under section 144B(1)(vi). For their respective purposes, the AU has technical and verification teams at its disposal.When an assessee fails to comply with a notice or a direction, the NFAC serves a show-cause notice under section 144B(1)(xi). Still, if no response is received, the AU under subclause (xiv) prepares a draft assessment order and sends it to the NFAC, who can then accept, change, or send it for review to a review unit. Finally, a copy of the finalised assessment order along with a demand notice is served to the assessee for initiating penalty proceedings, if applicable.
The assessee received a communication from the department granting adjournment as prayed for by the assessee. Time was granted by the department. The assessee brought to the notice of the department that it had already submitted its response to the notice dated 17.04.2021.
The assessee received the assessment order dated July 30, 2021. The assessee also received a notice of penalty under Section 274 read with Section 270A of the Income Tax Act.
Aggrieved by the assessment order, the assessee filed the writ petition.
The assessee submitted that the assessment order was passed without taking into consideration the reply filed by the assessee and also without affording any opportunity for video conferencing. The order passed under Section 143 (3) read with Section 144B of the Income Tax Act was passed in violation of the principles of natural justice.
The court, while remitting the matter to the Assessing Officer for fresh proceedings, observed that no show cause notice came to be issued along with the draft assessment order and, in such circumstances, the final order of assessment was without jurisdiction.
“The impugned assessment order dated 30.07.2021 for the A.Y. 2018-19 is hereby quashed and set aside. The matter is remitted to the Assessing Officer. The Assessing Officer shall issue a show cause notice with the draft assessment order so that the writ petitioner can respond to the same by an appropriate reply,” the court said.
Case Title: Symphony Limited Vs ACIT
Citation: Special Civil Application No. 13012 of 2021
Dated: 28.03.2022
Counsel For Petitioner: Advocate B. S. Soparkar
Counsel For Respondent: Advocate M.R. Bhatt
Earlier, In OMKAR NATH VERSUS NATIONAL FACELESS ASSESSMENT CENTRE DELHI (EARLIER NATIONAL E-ASSESSMENT CENTRE DELHI) & ANR. Delhi HC Quashed 144B Order where opportunity of being heard was not granted.
Validity of Faceless assessment u/s 144B – whether or not the principles of natural justice have been followed as required under Section 144B? – HELD THAT:- AO passed the impugned assessment order, as indicated above, on 07.06.2021, without granting an opportunity to the petitioner of a personal hearing in the matter.
This being the position, clearly, the provisions of Section 144B(7)(vii) of the Act would apply in this case. See RITNAND BALVED EDUCATION FOUNDATION (UMBRELLA ORGANIZATION OF AMITY GROUP OF INSTITUTIONS) VERSUS NATIONAL FACELESS ASSESSMENT CENTRE & ORS. [2021 (6) TMI 17 – DELHI HIGH COURT]
Thus the prayer made in the writ petition is allowed.The impugned assessment order dated 07.06.2021, as well as consequential notices i.e., the notice of demand issued under Section 156 of the Act, and the notice issued for initiation of penalty proceedings under Section 270A of the Act, of even date, are set aside.
No.- W.P.(C) 6158/2021 and CM APPL. 19532/2021
Dated.- March 10, 2022
