2022 (11) TMI 1026 - HC - Income Tax

Court sets aside assessment order for 2018-19 under Income Tax Act due to procedural lapses.

The Court set aside the final assessment order for the Assessment Year 2018-19 issued under the Income Tax Act, 1961, as it was passed without following ... Validity of Faceless Assessment - non issuance of show cause notice / a draft assessment order - HELD THAT:- Since in the present case, the impugned order has been passing without issuing a show cause notice / a draft assessment order which has been mandated under Section 144B(1)(xvi)(b) of the Act, the impugned assessment order dated 8th September, 2021 issued under Section 143(3) read with Section 144B of the Act is set aside and the Respondent is directed to issue a show cause notice within four weeks. The Respondent is at liberty to issue a draft assessment order / show cause notice to the petitioner and thereafter, the proceedings shall continue in accordance with law. Present writ petition along with pending application is disposed of. Issues:Challenging final assessment order under Income Tax Act, 1961 for AY 2018-19 without show cause notice and draft assessment order as mandated under Section 144B(1)(xvi)(b) of the Act.Analysis:The petitioner challenged 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 petitioner contended that the assessment order was passed without issuing a show cause notice and a draft assessment order, which was required under Section 144B(1)(xvi)(b) of the Act. The petitioner argued that this action was in violation of Section 144B of the Act.The petitioner emphasized that the Respondent had directly issued the final assessment order without following the necessary procedural requirements of issuing a draft assessment order and a show cause notice. The Respondent assessed the petitioner's income at Rs. 25,85,92,670 and raised a demand of Rs. 49,67,050 through a notice of demand dated 8th September, 2021.Despite previous judgments setting aside similar assessment orders, the Respondents continued to pass such orders. Consequently, the Court directed the Principal Commissioner, National Faceless Assessment Centre to appear before the Court through online video link.The Principal Chief Commissioner, NaFAC assured the Court that a system of alerts and checks would be introduced to ensure compliance with the principles of natural justice. The Court directed the Principal Chief Commissioner to examine the possibility of withdrawing final assessment orders passed in violation of procedural requirements.The Principal Chief Commissioner of Income Tax, NaFAC, later filed an affidavit stating the introduction of alerts and checks in the Income Tax Business Application to prevent the passing of final assessment orders without necessary procedures. The affidavit also clarified that the Income Tax Act did not provide for the withdrawal of assessment orders once passed, but it offered remedial and appellate channels for rectification of errors.After subsequent directions and affidavits, the Court set aside the impugned assessment order dated 8th September, 2021, and directed the Respondent to issue a show cause notice within four weeks. The Respondent was given the liberty to issue a draft assessment order or show cause notice, and the proceedings were to continue in accordance with the law.The Court disposed of the writ petition and pending application, clarifying that it had not commented on the merit of the controversy, leaving the rights and contentions of all parties open for further proceedings.