National Faceless Assessment: Court Orders Compliance with Show Cause Notice Rule

The court directed the Principal Chief Commissioner of the National Faceless Assessment Centre to address the recurring issue of final assessment orders being passed without the mandatory issuance of a Show Cause Notice and draft assessment order as required under Section 144B(1)(xvi)(b) of the Income Tax Act, 1961. The Commissioner assured the court of implementing a system of alerts and checks to prevent such violations, in line with Section 144B(9) of the Act, which deems assessment orders not made in accordance with prescribed procedures as non est. Further proceedings were scheduled for 24th December, 2021.

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Issues: Challenge to final assessment order under Income Tax Act, 1961 for Assessment Year 2018-19 without issuance of Show Cause Notice and draft assessment order as mandated under Section 144B(1)(xvi)(b) of the Act.

Analysis:
The petitioner, an advocate, filed a writ petition challenging the final assessment order dated 8th September, 2021, issued under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for the Assessment Year 2018-19. The counsel for the petitioner contended that the impugned assessment order was passed without the mandatory issuance of a Show Cause Notice and a draft assessment order as required under Section 144B(1)(xvi)(b) of the Act, thereby violating the provisions of Section 144B. The respondent assessed the petitioner's income at Rs. 25,85,92,670/- and raised a demand of Rs. 49,67,050/- without following the prescribed procedure.

The court noted that despite previous judgments setting aside similar assessment orders, the respondents continued to pass such orders, indicating a recurring issue. Consequently, the Principal Chief Commissioner of National Faceless Assessment Centre was directed to appear before the court to address the matter. Ms. Reena Sinha Puri, the Principal Chief Commissioner, assured the court that the National Faceless Assessment Centre would implement a system of alerts and checks to prevent the passing of final assessment orders without issuing a Show Cause Notice, draft assessment order, and considering the assessee's reply or request for a hearing.

Considering the provisions of Section 144B(9) of the Act, which renders assessment orders not made in accordance with the prescribed procedure as non est, the court directed the Principal Chief Commissioner to assess whether any final assessment order passed in violation of natural justice principles, without issuing necessary notices, and without considering the assessee's response should be withdrawn. Ms. Reena Sinha Puri committed to discussing the suggestions with the Central Board of Direct Taxes (CBDT) and her officers, and to file an affidavit within three weeks. The matter was listed for further hearing on 24th December, 2021.

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