Microcard India Technology Consulting Service Private Limited V. Union of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes and Additional/Joint/Deputy/Assistant Commissioner of Income Tax

WP/1736/2023

AI Insights

The case involves M/s Microcard India Technology Consulting Service Private Limited, which challenged the assessment order and demand notice issued by the Income Tax Department. The petitioner argued that the assessment order was passed without providing a 'Draft Assessment Order' and an opportunity to file objections, as required under Section 144C of the Income Tax Act, 1961. The respondents contended that the show cause notice served to the petitioner was sufficient. The court found merit in the petitioner's argument, emphasizing the legal requirement of a 'Draft Assessment Order' and the opportunity for the assessee to respond before finalizing the assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 817845 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 16-02-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI; MADANAN PILLAI
• Assessee Lawyers: ANISH ACHARYA
• Keywords: Assessment Order; Demand notice; Draft Assessment Order; Income Tax
• Section: 143(3); 142(1); 144C; 144B

Judgement Text

" - 1 - WP No. 1736 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF FEBRUARY, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 1736 OF 2023 (T-RES) BETWEEN: M/S MICROCARD INDIA TECHNOLOGY CONSULTING SERVICE PRIVATE LIMITED A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT 2013 1ST FLOOR GOPALA KRISHNA COMPLEX RESIDENCY ROAD RICHMOND TOWN S O, BANGALORE - 560025 KARNATAKA INDIA REP BY ITS AUTHORISED SIGNATORY MR PURUSHOTH AKASH DIRECTOR AGED ABOUT 25 YEARS. …PETITIONER (BY SRI. ANISH ACHARYA.,ADVOCATE) AND: 1. UNION OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NORTH BLOCK NEW DELHI - 110001 REP BY ITS SECRETARY. 2. ADDITIONAL/ JOINT / DEPUTY / ASSISTANT COMMISSIONER OF Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA - 2 - WP No. 1736 of 2023 INCOME TAX INCOME TAX OFFICER NATIONAL E ASSESSMENT CENTRE DELHI - 110001. …RESPONDENTS (BY SRI.E.I. SANMATHI., ADVOCATE FOR R2; SRI. MADANAN S. PILLAI, CGC FOR R1) THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING ASSESSMENT ORDER PASSED BY THE RESPONDENT DATED 26/12/2022 BEARING DIN NO. ITBA/AST/S/143(3)/2022-23/1048225937(1) UNDER SECTION 143(3) READ WITH SECTION 144B OF THE INCOME TAX ACT, 1961, AT ANNEXURE-F; QUASHING DEMAND NOTICE DATED 26/12/2022, BEARING NO. ITBA/AST/S/156/2022-23/1048226053(1) AT ANNEXURE-G. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has called in question the Assessment Order dated 26.12.2022 [Annexure-F] under Section 143[3] of the Income Tax Act, 1961 [for short, ‘IT Act’] read with Section 144B of the IT Act and the subsequent Demand Notice dated 26.12.2022 [Annexure-G]. - 3 - WP No. 1736 of 2023 2. Sri. Anish Acharya, the learned counsel for the petitioner, who was heard on the previous occasion, reiterates the petitioner’s grievance that the impugned Order dated 26.12.2022 could not have been issued without the petitioner being served with a copy of the ‘Draft Assessment Order’ as contemplated under Section 144C of the IT Act with further opportunity to file objections. In response, Sri. E I Sanmathi, the learned counsel for the second respondent, relying upon the provisions of Section 144C1 of the IT Act, submits that it cannot be gainsaid that though Annexure- C3 dated 14.12.2022 reads as “show cause notice as to why the proposed variation should not be made”, it must necessarily be 1144C. Reference to dispute resolution panel.—(1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. - 4 - WP No. 1736 of 2023 construed as a ‘Draft Assessment Order’ because the details of the variation proposed have been indicated. 3. In rejoinder, Sri. Anish Acharya submits that if the notices of the proposed variation are dated 14.12.2022, the petitioner’s response is dated 19.12.2022 and the impugned order dated 26.12.2022 is in consideration of this response. If the response subsequent to these notice as aforesaid is considered, such notices cannot be construed as ‘Draft Assessment Order’ as envisaged under Section 144C of the IT Act. 4. On a careful consideration of these submissions, this Court must opine that there is considerable force in the submissions of Sri. Anish Acharya. The requirement in law indisputably is that there must be a ‘Draft Assessment Order’ and an opportunity to file objections to such ‘Draft Assessment Order’ before assessment orders are made under Section 143[3] of the IT Act. Merely - 5 - WP No. 1736 of 2023 because the proposed variations are detailed in the Show Cause Notice issued under the provisions of Section 142[1] of the IT Act, the assessment order made under Section 143[3] of the IT Act without furnishing a copy of the Draft Assessment Order’ cannot be sustained. This Court must therefore interfere with the impugned order and restore the proceedings to the stage where there will have to be a ‘Draft Assessment Order’ as contemplated under Section 144C of the IT Act with further opportunity as provided for under the IT Act before there is an assessment order made. Hence the following: ORDER [a] The petition is allowed, and the impugned order dated 26.12.2022 [Annexure-F] and the consequent Demand Notice dated 26.12.2022 [Annexure-G] are quashed. [b] The proceedings are restored to the second respondent to the stage - 6 - WP No. 1736 of 2023 where there will have to be a ‘Draft Assessment Order’ as contemplated under Section 144C of the IT Act with further opportunity to the petitioner as provided under the Statute. Sd/- JUDGE AN/-` "