The Bombay high court has held that the assessment order under faceless assessment scheme passed without show cause notice is void.
The bench of Justice G. S. Kulkarni and Justice Advait M. Sethna has observed that the assessment order is passed without issuance of a show cause notice and an opportunity of a hearing being granted to the petitioner. Section 144B inherits the application of the principles of natural justice. For such reasons, the order would be manifestly illegal and a nullity in the eyes of law.
The petitioner/assessee has challenged the assessment order primarily on the ground that the Faceless Assessing Officer has passed the assessment order in violation of the principles of natural justice and in a manner contrary to the provisions of the Income Tax Act, 1961 for the reason that the petitioner was not issued a show cause notice-cum-draft assessment order, as per requirement of the provisions of Section 144B of the Income Tax Act, as retrospectively brought into effect from 01 April 2021 by the Finance Act, 2022.
The case of the petitioner is premised on the provisions of Section 144B and more particularly clauses (xiv), (xix), (xx) and (xxii) of sub-section (1) requiring such procedure to be followed which, according to the petitioner, is completely overlooked and/or not applied in passing the order.
The petitioner contended that no show cause notice was issued, which was a necessary requirement to be adhered by AO in passing the impugned order, which was to be prejudicial to the petitioner.
The petitioner submitted that there is no manner of doubt that an arbitrary procedure has been followed, in complete ignorance of the statutory mandate and more particularly in gross non-application of mind, as the assessment order records issuance of a show cause notice, when there is no material to that effect that any show cause notice was issued to the petitioner.
The department contended that there is no material on the basis of which the petitioner’s contention on the show cause notice cum draft assessment order being not supplied to the petitioner, could be contested by the department. He is not in a position to dispute that the assessment order was passed in the absence of mandatory compliance/ requirement which is required to be complied by AO.
The court held that order would deserve to be quashed and set aside, so that further appropriate procedure as recognized by law under the relevant provisions of the Income tax Act can now be followed and an appropriate assessment order in accordance with law passed.
The court directed the AO to take recourse to the procedure as mandated by law, to issue a show cause notice-cum-draft assessment order, to be served on the petitioner, and by following the due procedure under the provisions of the Income Tax Act, pass an assessment order.
Case Details
Case Title: Teerth Developers and Teerth Realties JV Versus The Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer
Case No.: Writ Petition No. 3591 Of 2022
Date: 18/11/2024
Counsel For Petitioner: Mihir Naniwadekar
Counsel For Respondent: Suresh Kumar
