POPULAR VEHICLES AND SERVICES LIMITED V. THE ADDITIONAL/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX,INCOME TAX OFFICER

WP(C)/14181/2021

AI Insights

The case involves Popular Vehicles and Services Limited challenging an assessment order issued under the Income Tax Act, 1961, for the assessment year 2018-19. The petitioner argued that the assessment was conducted without following the mandatory procedural requirements of the Faceless Assessment Scheme, specifically the issuance of a showcause notice before modifying the return. The respondents, including various commissioners of income tax, defended the assessment process, citing multiple communications and notices issued to the petitioner. However, the court found that the required showcause notice was not issued, leading to the setting aside of the assessment order and a directive for a fresh assessment following proper procedures.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 769121 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 06-12-2021
• Assessment Year: misc
• Other Referred Cases: WPC NO 11389 OF 2021, WP NO 5552/2021
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RAVINDRANATHA P K; JOSE JOSEPH
• Assessee Lawyers: ABRAHAM JOSEPH; ISAAC ABRAHAM; ALEXANDER MARKOS; SHARAD KODANTHARA
• Keywords: Assessment Order; E-assessment Scheme; Faceless Assessment Scheme; Income Tax; Showcause notice
• Section: 142(1); 143(2); 144B; 143(3A)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 6TH DAY OF DECEMBER 2021 / 15TH AGRAHAYANA, 1943 WP(C) NO. 14181 OF 2021 PETITIONER: POPULAR VEHICLES AND SERVICES LIMITED KUTTUKARAN CENTRE, MAMANGALAM, ERNAKULAM-682 025, REPRESENTED BY ITS DIRECTOR, FRANCIS K PAUL. BY ADVS. V.ABRAHAM MARKOS JOSEPH MARKOSE (SR.) ABRAHAM JOSEPH MARKOS ISAAC THOMAS P.G.CHANDAPILLAI ABRAHAM ALEXANDER JOSEPH MARKOS SHARAD JOSEPH KODANTHARA RESPONDENTS: 1 THE ADDITIONAL/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX,INCOME TAX OFFICER NATIONAL E- ASSESSMENT CENTRE, NEW DELHI-110 001. 2 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, NATIONAL E- ASSESSMENT CENTRE, NEW DELHI-110 001. 3 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIR 2 91), KOCHI-682 018. 4 THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOCHI-682 018. BY ADVS. P.K.RAVINDRANATHA MENON (SR.) JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06.12.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 14181 OF 2021 2 BECHU KURIAN THOMAS, J ................................................ W.P.(C) NO.14181 OF 2021 …........................................ Dated this the 6th day of December, 2021 JUDGMENT Petitioner is challenging Ext.P7 order of assessment issued under the Income Tax Act 1961, (for short the Act) for the assessment year 2018-19. 2. By Ext.P8 notification dated 12/09/2019 issued in exercise of the powers under Section 143(3A), of the Act, the Ministry of Finance had created a system of electronic assessment known as the E-assessment Scheme 2019. The aforesaid Scheme was subsequently renamed and modified, by notification dated 13/08/2020 as the “Faceless Assessment Scheme”, which has now transformed into Section 144B of the Act with effect from 1/04/2021. Since the impugned assessment order is dated 31.03.2021, the assessment was purportedly carried under the Faceless WP(C) NO. 14181 OF 2021 3 Assessment Scheme, (hereinafter referred to as the Scheme). 3. As per the procedure for assessment provided under Clause 5 of the Scheme, after an intimation is given that the assessment will be completed as per the Scheme, a requisition is required to be issued for obtaining information. Thereafter, a draft assessment order ought to be prepared by the assessing unit which will be send it to the National e-assessment Centre, who shall, if it intends to modify the return filed by the assessee, issue a showcause notice, calling upon the assessee to explain why the assessment should not be completed as per the draft assessment order. 4. The specific procedure to be followed once a draft assessment order is prepared, proposing to modify the return of the assessee is dealt with in clause 5(xvi) (a) & (b) of the Scheme. For the purpose of easier comprehension the said provision is extracted as below:- WP(C) NO. 14181 OF 2021 4 “5.Procedure for assessment (1) The assessment under this scheme shall be made as per the following procedure, namely: xxxxxx (xv) the assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any; (xvi) the National e-assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to, xxxxxxxx (a) finalise the assessment as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or (b) provide an opportunity to the assessee, in case a modification is proposed, by serving a notice calling upon him to showcause as to why the assessment should not be completed as per the draft assessment order; or” 5. Under the Scheme, once a show cause notice is issued under clause 5(xvi)(b), then, as per clause (xxii), the National e-assessment Centre will have to finalize the draft assessment through two modes. The WP(C) NO. 14181 OF 2021 5 first mode is to finalize the proposed assessment if it does not cause prejudice to the assessee. However, if even after response from the assessee, a modification, to the prejudice of the assessee is proposed then, one more opportunity ought to be granted by serving another notice to the assessee and based upon that response finalize the draft assessment order. The aforesaid procedure is dealt with in clause 5(xxii) and (xxv) which are extracted below:- “(xxii) the assessee may, in a case where show-cause notice under sub clause(b) of clause (xvi) has been served upon him, furnish his response to the National e- assessment centre on or before the date and time specified in the notice or within the extended time, if any; (xxv) the National e-assessment Centre shall, upon receiving the revised draft assessment order, (a) in case no modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, finalise the assessment as per the procedure laid down in sub-clause (a) of clause (xvi); or (b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, provide an opportunity to the assessee, by serving a notice as per the WP(C) NO. 14181 OF 2021 6 procedure laid down in sub-clause (b) of clause(xvi);” 6. The grievance of the petitioner against the impugned order of assessment, in the instant case, is that the Assessing Officer proposed to modify the return filed by the petitioner without issuing the mandatory showcause notice contemplated under Clause 5(xvi)(b) of the Scheme and hence, according to the petitioner, the assessment order itself is bad in law. 7. A statement has been filed on behalf of respondents, pointing out that the assessee had e-filed its original return for 2018-19 on 31/10/2018 and on finding inconsistencies in the return, a communication was sent on 23/03/2019. Thereafter the return was processed and after selecting the case for scrutiny, assessment was carried out under the scheme. Respondents further stated that a notice dated 22/09/2019 was issued under Section 143(2) and thereafter a notice under Section 142(1) dated WP(C) NO. 14181 OF 2021 7 19/11/2020 was issued apart from letters dated 19/02/2021 and 15/03/2021. Respondents pleaded that in response, assessee furnished information on 03/10/2019, 18/01/2021, 12/03/2021 and 21/3/2021 and thereafter the assessment proceedings were completed on 31/03/2021 adding an amount of Rs.12,09,42,393/- to the total income. 8. I have considered the rival contentions, raised by the learned Senior Counsel Sri.Joseph Markos duly instructed by Sri.Alexander Joseph Markos as well as the learned Standing Counsel Sri.Jose Joseph on behalf of respondents. 9. On a perusal of the order of assessment, it is revealed that the assessing Officer had, after calling for the objections of the assessee, decided to modify the return submitted by the assessee. By virtue of modification contemplated by the National e- assessment Centre the provisions of Clause 5(xvi)(b) of the Scheme gets automatically attracted thereby WP(C) NO. 14181 OF 2021 8 entitling the assessee to be served with a notice calling upon him to showcause, as to why the assessment should not be completed as per the draft assessment order. 10. On a perusal of the assessment order, I find that, the assesee was never served with a draft assessment order or the showcause notice while proposing to modify the return submitted by the petitioner. There is a clear violation of the procedure involved in arriving at the assessment order. The respondents failed to serve the showcause notices or the draft assessment order upon the assessee. 11. When the decision making process is contrary to law or is vitiated, jurisdiction under Article 226 of the Constitution of India can be invoked. Accordingly, I find that there is violation of the procedure while issuing the assessment order Ext.P7. Therefore Ext.P7 is set aside and the 1st respondent- Assessing Officer is directed to reconsider the case of the petitioner by WP(C) NO. 14181 OF 2021 9 issuing the draft assessment order and the necessary showcause notice as contemplated under the Faceless Assessment Scheme in Ext.P8 and after eliciting the objections/explanations of the assessee within a reasonable time, pass fresh orders thereon, in accordance with law, in a time bound manner. This writ petition is allowed as above. Sd/- BECHU KURIAN THOMAS JUDGE AJM WP(C) NO. 14181 OF 2021 10 APPENDIX OF WP(C) 14181/2021 PETITIONER’S EXHIBITS : Exhibit P1 TRUE COPY OF THE ORDER DATED 28.6.2021 PASSED BY THIS HONOURABLE COURT IN WPC NO 11389 OF 2021. Exhibit P2 TRUE COPY OF THE JUDGMENT DATED 27.5.2021 PASSED BY THE DELHI HIGH COURT IN WP NO 5552/2021. Exhibit P3 TRUE COPY OF THE REVISED RETURN ACKNOWLEDGEMENT FOR AY 2018-19 DATED 25.3.2019. Exhibit P4 TRUE COPY OF THE NOTICE DATED 19.11.2020 ISSUED UNDER SECTION 142(1) OF THE INCOME TAX ACT 1961 BY THE 1ST RESPONDENT. Exhibit P5 TRUE COPY OF THE NOTICE DATED 15.3.2021 ISSUED BY THE 1ST RESPONDENT. Exhibit P6 TRUE COPY OF THE REPLY DATED 19.3.2021 TO EXHIBIT P5 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. Exhibit P7 TRUE COPY OF THE ASSESSMENT ORDER DATED 31.3.2021 ISSUED BY THE 1ST RESPONDENT. Exhibit P8 TRUE COPY OF THE NOTIFICATION NO 3264(E) DATED 12.9.20219 INTRODUCING E-ASSESSMENT SCHEME 2019 OF THE CENTRAL GOVERNMENT. Exhibit P9 TRUE COPY OF THE NOTIFICATION NO SO 2745(E) DATED 13.8.2020 ISSUED BY THE CENTRAL GOVERNMENT. Exhibit P10 TRUE COPY OF THE GRIEVANCE PETITION DATED 1.4.2021 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT NATIONAL E ASSESSMENT CENTRE. WP(C) NO. 14181 OF 2021 11 Exhibit P11 TRUE COPY OF THE ORDER DATED 3.5.2021 PASSED BY THE 1ST RESPONDENT NATIONAL E ASSESSMENT CENTRE. Exhibit P12 TRUE COPY OF THE JUDGMENT REPORTED IN 1994 KLJ TAX CASES 24. RESPONDENT’S EXHIBITS : NIL AJM //TRUE COPY// PA TO JUDGE "