Court quashes Assessment Order for non-compliance with tax law, upholds taxpayer rights

The court quashed the Impugned Assessment Order due to non-compliance with Section 144B(1) of the Income Tax Act, which safeguards the interests of taxpayers. The case was remitted back to the respondents for a fresh order within sixty days. The petitioner was granted the opportunity to be heard and given thirty days to file a reply. The writ petition was allowed with specific directions, and no costs were imposed.

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Issues Involved: Challenge to Impugned Assessment Order under Section 144C of the Income Tax Act, 1961 for the Assessment Year 2017-2018.

Summary:
The petitioner challenged the Impugned Assessment Order dated 27.05.2021, which added amounts to the income disclosed in the Returns under Section 139 of the Income Tax Act, 1961. The petitioner contended that non-transfer pricing issues required compliance with Section 144B(1)(xvi)(b), which was not done before passing the Impugned Order. The respondents admitted that no Show Cause Notice was sent along with the Draft Assessment Order to the petitioner. The petitioner argued based on the provisions of Section 144B as it stood prior to 01.04.2022. The court considered arguments from both sides.

The provisions of Section 144B prior to the substitution with new provisions from 01.04.2022 required the assessment unit to make a Draft Assessment Order and send it to the National Faceless Assessment Centre. The National Faceless Assessment Centre was to examine the Draft Assessment Order as per Risk Management Strategy. The procedures under Section 144B(1) were intended to safeguard the interests of Income Tax Assessees. The National Faceless Assessment Centre was required to serve a notice to the assessee in case of any variation prejudicial to their interest.

The court found that the Impugned Order overlooked the safeguards prescribed under the provisions of Section 144B(1). As a result, the court decided to quash the Impugned Order and remit the case back to the respondents to pass a fresh order within sixty days. The petitioner was directed to be heard in accordance with the prescribed procedure, and the respondents were instructed to enable the portal for the petitioner to file a reply within thirty days. The writ petition was allowed with the mentioned observations and directions, with no costs incurred. Connected miscellaneous petitions were closed.

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