Assessment order under Section 143(3) with 144B upheld despite natural justice challenge over Section 144A application

The Madras HC dismissed a writ petition challenging an assessment order under Section 143(3) read with Section 144B of the Income Tax Act. The petitioner argued the order violated natural justice principles as it was passed without considering their application under Section 144A. The HC held that Section 144B provides adequate safeguards through its faceless assessment procedure involving automated allocation systems and multiple review units. The court ruled that Section 144A becomes redundant when assessment is conducted under Section 144B, as the jurisdictional Joint Commissioner cannot issue directions to the Assessment Unit in faceless assessments. The petition was dismissed with liberty to file statutory appeal within 30 days.

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ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the assessment order dated 28.09.2021, passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, violated the principles of natural justice due to non-consideration of the petitioner's application under Section 144A.
• Whether Section 144A of the Income Tax Act, 1961, is applicable in light of the amendments introduced by Section 144B regarding faceless assessments.
• Whether the petitioner had an alternative remedy available under Section 246A of the Income Tax Act, 1961, which precludes the need for interference under Article 226 of the Constitution of India.
• Whether the computation of income and the rejection of benefits under Section 11(2) were justified.

ISSUE-WISE DETAILED ANALYSIS

1. Applicability of Section 144A in light of Section 144B:

Relevant legal framework and precedents: Section 144A allows the Joint Commissioner to issue directions for assessment guidance, while Section 144B establishes a faceless assessment procedure.

Court's interpretation and reasoning: The Court found that Section 144B, introduced on 01.04.2021, is a comprehensive code for faceless assessments. It supersedes the need for directions under Section 144A, rendering it redundant in cases where Section 144B is applicable. The Court emphasized that the faceless assessment process is designed to operate independently of traditional jurisdictional oversight, including that of the Joint Commissioner.

Application of law to facts: The Court noted that the petitioner filed an application under Section 144A shortly before the assessment order was issued, which was not entertained due to the prevailing faceless assessment framework.

Treatment of competing arguments: The Court rejected the petitioner's argument that the assessment should have awaited a direction under Section 144A, as the faceless assessment procedure under Section 144B does not accommodate such interplay.

Conclusions: The Court concluded that the assessment under Section 144B was valid and that Section 144A was not applicable in this context.

2. Violation of natural justice principles:

Relevant legal framework: The principles of natural justice require fair hearing and consideration of relevant applications and submissions.

Court's interpretation and reasoning: The Court determined that the faceless assessment procedure under Section 144B includes adequate safeguards and opportunities for the assessee to present their case, thus complying with natural justice principles.

Application of law to facts: The Court observed that the petitioner had opportunities to respond to notices and present their case electronically, in line with the faceless assessment framework.

Treatment of competing arguments: The petitioner's claim of non-application of mind and lack of consideration was countered by the Court's finding that the faceless assessment process inherently provides for procedural fairness.

Conclusions: The Court found no violation of natural justice principles in the assessment process.

3. Alternative remedy under Section 246A:

Relevant legal framework: Section 246A provides for an appeal mechanism against assessment orders.

Court's interpretation and reasoning: The Court highlighted the availability of an alternative remedy through statutory appeal, which is a more appropriate forum for addressing grievances related to assessment orders.

Application of law to facts: The Court noted that the petitioner could pursue an appeal under Section 246A to contest the assessment order and related computations.

Treatment of competing arguments: The Court dismissed the need for interference under Article 226, given the availability of a statutory appeal process.

Conclusions: The Court emphasized the importance of exhausting alternative remedies before seeking judicial intervention.

4. Computation of income and rejection of benefits under Section 11(2):

Relevant legal framework: Section 11(2) pertains to the accumulation of income by charitable trusts.

Court's interpretation and reasoning: The Court did not delve deeply into the merits of the computation, as it directed the petitioner to pursue the matter through the appellate process.

Application of law to facts: The Court acknowledged the petitioner's contention regarding computation errors but deferred substantive examination to the appellate authorities.

Treatment of competing arguments: The Court recognized the petitioner's arguments on computation but maintained that these should be addressed through the statutory appeal mechanism.

Conclusions: The Court refrained from making a determination on the computation merits, directing the petitioner to the appellate process for resolution.

SIGNIFICANT HOLDINGS

The Court held that:

• Section 144B is a comprehensive code for faceless assessments, rendering Section 144A redundant in such contexts.
• The faceless assessment procedure complies with natural justice principles, providing adequate safeguards and opportunities for the assessee.
• The petitioner has an alternative remedy available under Section 246A, which should be pursued before seeking judicial intervention.
• The merits of the income computation and rejection of benefits under Section 11(2) are to be addressed through the appellate process.

Final determinations on each issue were made in favor of upholding the assessment order, with directions for the petitioner to pursue statutory appeals for any grievances.

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