Madras High Court Quashes Assessment Proceedings Initiated In Violation Of Procedure Prescribed As Per Sec 144B

While holding that the draft assessment order suffers from non-application of mind, the Madras High Court sets aside the proceedings initiated in violation of procedure prescribed as per Section 144B(1)(vii) read with (xiv) and (xvi)(b) of the Income tax Act, 1961.

A Single Judge Bench of Justice Mohammed Shaffiq observed that “a duty is cast on the assessing authority in terms of Section 144B(1)(xiv) of the Act to take into account all relevant material and thereafter frame the draft assessment order. The respondent has erred in not complying with the above mandatory requirement inasmuch as the draft assessment order has been made without even examining / taking into account the objections / response of the petitioner made vide letter dated 22.09.2021. Thus, the draft assessment order suffers from non-application of mind to matters that are relevant and on record, thus stands vitiated”. (Para 5)

As per the brief facts of the case, the assessee company, engaged in manufacture/ production and sale of animal feed, aquatic feed, aquatic health care products, filed its return declaring “Nil” income after set-off of brought forward losses. Thereafter, the ITO issued a show cause notice proposing to make additions, while invoking penalty u/s 270A. Even though the assessee filed its reply to the show cause notice along with supporting evidence, the assessment order u/s 143(3) r/w/s 144B was passed making additions to the income along with demand notice.

Considering the paradigm shift as to the method and manner/ procedure adopted in making the assessment i.e. transition from face-to-face assessment to electronic assessment and now to a complete faceless assessment which was launched in 2020 with the objective of promoting an efficient and effective tax administration, minimizing physical interface & increasing accountability; the Bench found that the intimation by National Faceless Assessment Centre contemplated u/s.144B(1)(iii) has not been furnished.

The Bench opined that intimation u/s.144B(1)(iii) informs an assessee that the assessment would be made in terms of Sec.144B which is important if one bears in mind that Faceless Assessments u/s.144B comes with its own set of obligations and rights in making the assessment.

Finding that the order was passed without considering objections/reply filed by assessee, the Bench emphasized that such assessment order traverses beyond draft assessment order, thereby causing serious and grave prejudice to assessee.

The Bench also observed that the draft assessment order suffers from non-application of mind to matters that are relevant and on record, and therefore, sets aside impugned proceedings while leaving it open to Revenue to frame the assessment in accordance with law, after following the procedure contemplated u/s.144B.

Counsel for Petitioner/ Taxpayer: Senior Advocate Chythanya KK

Counsel for Respondent/ Department: B. Ramanakumar

Case Title: CPF (INDIA) Private Limited Verses Addl. CIT

Citation: 2024 LiveLaw (Mad) 62

Case Number: W.P No. 24032 of 2021

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