Order not in conformity of Faceless Assessment Scheme 2019 if not est? – ITAT remands the case in view of amendment to section 144B
In a recent judgment, the ITAT Indore has remanded the case to the file of Assessing Officer (AO) the challenge to validity of assessment order passed without issuance of Draft Assessment Order in view of omission of sub-section (9) of section 144B of the Income Tax Act, 1961 (the Act).
ABCAUS Case Law Citation:
ABCAUS 4123 (2024) (06) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in dismissing the ground challenge the validity of the Assessmsent order being in violation of Faceless Assessment Scheme 2019.
The appellant assessee had raised an objection against the validity of the assessment order on the ground that the Assessing Officer (AO) had not issued a draft order mandatory as per the e-Assessment Scheme, 2019.
It was submitted that the assessment order was passed by the AO after the case of the assessee was selected for complete scrutiny in e-Assessment Scheme 2019. However, the AO had not issued the draft assessment order as well as the show cause notice to the assessee before finalizing the assessment.
Thus, it was submitted that the impugned order passed by the AO was invalid and liable to be quashed, when it was not in the conformity of the e-Assessment Scheme, 2019. The assessee submitted that the CBDT vide notification dated 1st November, 2019, had notified the procedure for completion of Faceless Assessment and as per sub clause (xiv) and (xvi) of the Clause 2 of the said Notification, the AO is required to issue a draft assessment order and an opportunity is required to be given to the assessee in case any variation prejudicial to the interests of the assessee is proposed in the draft assessment order by serving a notice calling upon him to show cause as to why the proposed variation should not be made.
Thus, the assessee submitted that when the AO had made a variation to the returned income of the assessee and the disallowance made was prejudicial to the interests of the assessee, then the AO ought to have issued a draft assessment order alongwith show cause notice to the assessee as to why the proposed addition should not be made in its case, therefore, making the addition directly without any show cause notice to the assessee and without giving any opportunity to explain its case, the order passed by the AO would become bad in law and liable to be quashed.
The assessee relied upon the decision of Hon’ble Bombay High Court where in terms of the CBDT Circular dated 13.08.2020 which provided that any assessment order which is not in conformity with faceless Assessment Scheme 2019 shall be treated as non-est and shall be deemed to have never been passed, the Hon’ble High Court had quashed the Assessment Order.
However, the Revenue contended that when the AO had made no variation in the returned income but assessed the income as it was assessed by the CPC while processing the return u/s 143(1), then there was no requirement of issuing any show cause notice to the assessee. Referring to e-Assessment Scheme 2019 it was submitted that only in case the AO had proposed any addition or variation, which is prejudicial to the interests of the assessee, a show cause notice is required to be given to the assessee before passing final assessment order.
The Tribunal noted that since the assessee had raised a very serious objection, it ought to have been decided by the CIT(A), instead of dismissing it observing that ground was of general nature and not pressed. The CIT(A) ought to have decided this issue by considering the fact regarding issuance of draft assessment and procedure as per e-Assessment Scheme, 2019.
The Tribunal further noted that the assessee was seeking quashing of the assessment order being invalid on the strength of judgement of Hon’ble Mumbai High Court whereby the High Court had allowed the writ petition and had quashed the Assessment Order. However, the said decision of Hon’ble Bombay High Court had been set-aside by the Hon’ble Supreme Court.
The Tribunal observed that before the Hon’ble Supreme Court, the case of the Revenue was that sub-section (9) of section 144B of the Act, which was earlier brought into statute with effect from 1-4-2021. However, the very pari materia provision had been omitted subsequently w.e.f. 1-4-2021. It was contended that omission of section 144B (9) of the Act would have a direct bearing on the merits of the impugned judgment and order passed by the High Court.
The Tribunal further observed that the Hon’ble Supreme Court in view of omitting of Section 144B (9) of the Act, which was pari materia to para 3 of the CBDT Circular dated 13-8-2020, set aside the judgment and order passed by the High Court and remanded the matter to the High Court to consider the effect of omission of Section 144B(9) of the Act on para 3 of the CBDT Circular dated 13-8-2020.
Accordingly, following the judgement of Hon’ble Supreme Court, the Tribunal remanded the issue to AO to pass a fresh assessment order.
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