Earlier we had discussed about various Writ petition being filed against the assessment order passed under Faceless assessment system and now Hon’ble Delhi High Court has passed order in few of such writ petition against the Income tax department wherein procedure of faceless assessment and principle of natural justice has not been followed.
The above judgement has been passed in case of YCD INDUSTRIES (petitioner) versus NATIONAL FACELESS ASSESSMENT CENTRE, DELHI (Respondant). The decision was announced on 27.05.2021.
Facts of the case:
The petitioner had filed his return qua the Assessment Year (AY) 2018-2019 on 30.10.2018. Via this return, the petitioner had declared a loss of Rs.58,43,378/-.
Petitioner was issued a notice u/s 143(2) on 22.09.2019 and later on it’s case was transferred to faceless system.
Later various notices were issued to the petitioner and thereafter, the respondent/revenue directed the petitioner, via notice dated 08.02.2021, to explain its position, with regard to the unsecured loan and the increase in share capital and share application money, qua the assessment year in issue.
Petitioner filed it’s reply within due time. However, after considering the reply, respondent made an addition to the income of assessee and income was added u/s 115BBEE of the Act and a tax demand was raised.
Petitioner’s (Assessee’s) contention:
1. Contrary to the mandate of Section 144B of the Income Tax Act, 1961 (in short, ‘the Act’), and the Faceless Assessment Scheme, 2019 (in short, ‘the Scheme’), no show cause notice-cum-draft assessment order was served on the petitioner, before the passing of the impugned assessment order dated 20.04.2021, as also the impugned notices issued under Section 156 and Section 274 read with Section 270A of the Act, of even date.
2. There has been a breach of the principle of natural justice.
Respondent’s (Revenue’s) contention:
1. Before issuance of the impugned assessment order, several opportunities were given to the petitioner, and therefore, the case set up on behalf of the petitioner that there has been a breach of principles of natural justice, is not tenable.
The statute [i.e., Section 144B(1)(xiv), (xv), (xvi)(b) and (xxii)] provides for issuance of a show cause notice-cum-draft assessment order, and an opportunity to the petitioner/assessee to respond to the same where income of the assessee is varied by the respondent/revenue.
As a matter of fact, had the show cause notice cum draft assessment been served on the petitioner, its authorised representative could have requested for a personal hearing in the matter.
The respondent/ revenue, to our minds, could not have side-stepped such safeguards put in place by the legislature.
The justification proffered by Mr. Bhatia that notices were issued prior to the passing of the impugned assessment order, does not impress us.
Accordingly, the impugned assessment order and the notice issued under Section 156 and Section 270A read with Section 274 of the Act are set aside.
Thus, according to above order the addition made in assessment has been removed and the case has been again set aside to Assessing officer to decide by issuing show cause notice. Thus, it is not a complete deletion of addition made but a fresh opportunity has been provided to Assessee to submit his reply against show cause notice.
Similar order has been passed by Hon’ble Delhi high court on the same day in case of MS LOKESH CONSTRUCTIONS P LTD versus THE ASSISTANT COMMISSIONER OF INCOME TAX.
Thus, based on the above judgement it can be said that the principle of natural justice which was upheld earlier also before faceless assessment that proper opportunity needs to be given to the assessee and no assessment can be completed without issuing show cause notice in a case where there is a variance from the income declared by assessee, is being upheld even in faceless assessment.
To download order in case of YCD industries CLICK HERE.
To download order in case of MS Lokesh Constructions P Ltd CLICK HERE