Faceless Assessment Scheme : Bombay High Court Warns Assessing Officers Of Costs If Orders Are Passed Without Hearing Assessees
The Bombay High Court has made clear that it won't entertain the orders of Income Tax Department under National Faceless Assessment Scheme, if the assessing officer has failed to comply with the limits proscribed by Section 144 r/w 144B of the Income Tax Act. The bench of Justices K.R. Shriram and Amit Borkar set aside the assessment order dated 8th June, 2021 on the ground that...
The Bombay High Court has made clear that it won't entertain the orders of Income Tax Department under National Faceless Assessment Scheme, if the assessing officer has failed to comply with the limits proscribed by Section 144 r/w 144B of the Income Tax Act. The bench of Justices K.R. Shriram and Amit Borkar set aside the assessment order dated 8th June, 2021 on the ground that it's non-est under subsection 9 of Section 144B for denying the personal hearing sought by the assessee.
The High Court has also given a strict directive to National Faceless Assessment Centre to give a warning that if the assessing officers (AOs) continue passing such orders without applying their mind, and without paying heed to the assesses, then the court will be forced to impose substantial costs on the AOs concerned.
The High Court was hearing a petition filed by Mantra Industries Limited, challenging the Assessing Officer's Order along with notice of demand and show cause notice for initiating penalty proceedings against the company. It was the grievance of the petitioner that the AO had erred and it was threefold:
- Not considering the petitioner's request for adjournment for the assessment year 2018-19
- Denying the petitioner an avenue for personal hearing.
- Not taking into account the objections filed before the stipulated date as a response to the draft assessment order and show cause notice dated 22nd April, 2021.
Mantra Industries submitted that the final assessment order in June was a blatant violation of the principles of natural justice. They had informed the Department via National Faceless Assessment Centre of the constraints imposed upon them by Covid-19, including restrictions on travel, the impossibility for staff to attend and the Mumbai offices remaining closed due to the rise in Covid Cases. Even though the show-cause notice that came with the draft order mentioned a request can be made for personal hearing, the reply requesting such personal hearing and objections to modification was disregarded as evident from the final assessment order.
Advocate Devendra H. Jain for the petitioner further pointed out that they had requested 20 days in order to complete and convey the quantitative details sought for in the initial show-cause notice. They filed the same, meeting the compliance requirements for giving quantitative details on 27th April, 2021. Mantra Industries tried to establish that the assessment order was an exact replica of the draft order except a modification reproduced below:
"Regarding this show cause notice issued to the assessee on 22.04.2021 but assessee has not given any justification for non-furnishing of quantitative details in form 3CD."
The High Court took note of this observation in the assessment order that 'no response has been filed at all to the notice' and said, "there cannot be anything far from the truth".
A submission was made by Advocate Akhileshwar Sharma on behalf of the Respondents that the quantitative details was not in line with the prescribed format in Form 3CD. The court compared the statements containing quantitative details filed by the petitioner and the quantitative details to be filed in Form 3CD under Item 35b. The court in its order noted as below:
"We have compared the details provided by petitioner and Form 35(b) annexed to the affidavit in rejoinder. We do not find any difference except that in the response dated 27th April 2021 the product manufactured, viz., Wet Grinders, is mentioned. We have to also note that this is not the case in the assessment order which has proceeded on the basis that no response at all has been filed to the notice dated 22nd April 2021."
The court perused through the documents at its disposal and enquired as to why the reply affidavit of the respondent made a statement that "the noting records show that the submission dated 23rd April 2021 and 27th April 2021 both taken on record and considered". Regarding this inconsistency, the court noted:
"…But the assessment order does not reflect this. We wonder how does the affiant know something which the assessment order does not reflect…"
While setting aside the impugned order, the court added that "if such orders are continued to be passed, this Court will be constrained to impose substantial costs on the concerned Assessing Officer to be recovered from his/her salary and also direct the department to place such judicial orders in the career records of such Assessing Officers."
Case Title: Mantra Industries Limited v. National Faceless Assessment Centre (NFAC or NeAC) & Ors.
Case No: WP/1625/2021
Click Here To Read/ Download Order