Case Note & Summary
The petitioner, Teerth Developers and Teerth Realties JV (AOP), an association of persons, filed a writ petition under Article 226 of the Constitution of India challenging an assessment order dated 12 June 2021 passed by the Income Tax Officer, National Faceless Assessment Centre, Delhi, for the assessment year 2018-19. The petitioner had filed its return of income on 29 October 2018. The case was selected for scrutiny, and notices were issued between December 2020 and February 2021. The petitioner furnished information and sought adjournments due to the Covid-19 pandemic. The petitioner contended that the Assessing Officer was required to follow the procedure under Section 144B of the Income Tax Act, 1961, including issuing a show cause notice-cum-draft assessment order before passing any prejudicial order. However, on 12 June 2021, the assessment order was passed without such notice, though the order internally recorded that a show cause notice was issued. The petitioner made an RTI application, and the CPIO responded on 20 September 2021 stating that no show cause notice was available in electronic records. The petitioner also filed an appeal before the CIT (Appeals), which was pending, and recovery proceedings were initiated. The petitioner sought quashing of the assessment order and demand notice. The respondents filed a reply affidavit claiming that a show cause notice dated 19 April 2021 was issued, but no proof of dispatch or service was provided. The court heard arguments from both sides. The petitioner's counsel argued that the failure to issue a show cause notice violated Section 144B and principles of natural justice, relying on Tin Box Co. v. Commissioner of Income-tax. The Revenue's counsel fairly conceded that there was no material to contest the petitioner's claim. The court held that the assessment order was passed in violation of the mandatory procedure under Section 144B and principles of natural justice, as no show cause notice-cum-draft assessment order was issued. The court quashed the assessment order and the consequential demand notice, setting aside the order and remanding the matter for fresh assessment in accordance with law.
Headnote
A) Income Tax - Assessment Procedure - Section 144B - Show Cause Notice - Mandatory Requirement - The court considered whether the assessment order passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 was valid when no show cause notice-cum-draft assessment order was issued to the assessee. The court held that the failure to issue such notice violated the mandatory procedure under Section 144B and principles of natural justice, rendering the assessment order invalid. (Paras 2-12)
B) Income Tax - Natural Justice - Violation - Section 144B - The court examined the contention that the assessment order recorded issuance of a show cause notice when no such notice was actually issued, as confirmed by the RTI response. The court held that this amounted to a gross violation of natural justice and the statutory mandate, warranting quashing of the order. (Paras 4-12)
C) Income Tax - Assessment Order - Quashing - Section 144B - The court addressed the argument that the assessment order was passed without considering the petitioner's detailed replies. The court held that the order was cryptic and summary, and the failure to issue a show cause notice-cum-draft assessment order was fatal, leading to the order being set aside. (Paras 4-12)
Issue of Consideration
Whether the assessment order passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 is liable to be quashed for non-compliance with the mandatory requirement of issuing a show cause notice-cum-draft assessment order as per clauses (xiv), (xix), (xx) and (xxii) of sub-section (1) of Section 144B.
Final Decision
The court allowed the petition, quashed the assessment order dated 12 June 2021 and the consequential demand notice, and set aside the order. The matter was remanded to the Assessing Officer for fresh assessment in accordance with law, after following the procedure under Section 144B and principles of natural justice.
Law Points
- Principles of natural justice
- mandatory procedure under Section 144B
- show cause notice-cum-draft assessment order
- violation of statutory mandate
- quashing of assessment order
Case Details
2024 LawText (BOM) (11) 183
Writ Petition No. 3591 of 2022
G. S. Kulkarni, Advait M. Sethna
Mr. Mihir Naniwadekar with Mr. Rohan Deshpande i/b. Ms. Farzeen Khambatta for Petitioner; Mr. Suresh Kumar for Respondents
Teerth Developers and Teerth Realties JV (AOP) through Mr. Vijay Tukaram Raundal
The Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, National Faceless Assessment Centre, Delhi; The Deputy Commissioner of Income Tax, Circle 2 Pune; The Union of India
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging an assessment order under the Income Tax Act, 1961.
Remedy Sought
Quashing of assessment order dated 12 June 2021 and consequential demand notice, and direction to refrain from recovery proceedings.
Filing Reason
Assessment order passed without issuing mandatory show cause notice-cum-draft assessment order under Section 144B of the Income Tax Act, 1961, violating principles of natural justice.
Previous Decisions
The petitioner had filed an appeal before the CIT (Appeals), which was pending. The petitioner also filed an RTI application which revealed no show cause notice was issued.
Issues
Whether the assessment order under Section 143(3) read with Section 144B is valid when no show cause notice-cum-draft assessment order was issued.
Whether the failure to issue show cause notice violates principles of natural justice and the mandatory procedure under Section 144B.
Submissions/Arguments
Petitioner: The assessment order was passed without issuing a show cause notice-cum-draft assessment order as required under Section 144B(1) clauses (xiv), (xix), (xx) and (xxii), violating natural justice. The order internally recorded issuance of such notice, but no notice was actually issued, as confirmed by RTI response.
Respondent: The reply affidavit claimed a show cause notice dated 19 April 2021 was issued, but no proof of dispatch or service was provided. The Revenue's counsel fairly conceded that there was no material to contest the petitioner's claim.
Ratio Decidendi
The mandatory procedure under Section 144B of the Income Tax Act, 1961 requires the Assessing Officer to issue a show cause notice-cum-draft assessment order before passing an assessment order prejudicial to the assessee. Failure to do so violates principles of natural justice and renders the assessment order invalid. The court must quash such an order and remand for fresh assessment.
Judgment Excerpts
The petitioner assails the assessment order primarily on the ground that the Faceless Assessing Officer/ respondent no.1 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...
The petitioner’s RTI application was disposed of by the CPIO (Circle 2) by an order dated 20 September 2021, recording that based on the electronic records available with the department, no show cause notice was available as also a proof of dispatch of the same could not be provided.
Mr. Suresh Kumar, learned counsel for the Revenue... would fairly state 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.
Procedural History
The petitioner filed its return of income on 29 October 2018 for A.Y. 2018-19. Scrutiny notices were issued between December 2020 and February 2021. The petitioner furnished information and sought adjournments. On 12 June 2021, the assessment order was passed without issuing a show cause notice-cum-draft assessment order. The petitioner filed an RTI application on an unspecified date, and the CPIO responded on 20 September 2021 stating no show cause notice was available. The petitioner filed an appeal before the CIT (Appeals) on an unspecified date, which was pending. Recovery proceedings were initiated on 22 December 2021. The petitioner filed a stay application on 7 January 2022. The present writ petition was filed on an unspecified date in 2022. The court heard the matter and delivered judgment on 18 November 2024.
Acts & Sections
- Income Tax Act, 1961: Section 143(3), Section 144B, Section 68
- Right to Information Act, 2005:
- Constitution of India: Article 226
