The Delhi High Court has quashed the assessment order passed without issuing a show cause notice or a draft assessment order which has been mandated under Section 144B(1)(xvi)(b) of the Income Tax Act.
The division bench of Justice Manmohan and Justice Navin Chawla has directed the department to issue a show-cause notice within four weeks.
The petitioner/assessee stated that the assessment order had been passed without issuing a show cause notice and a draft assessment order, which were mandated under Section 144B(1)(xvi)(b). The respondent's action was violative of Section 144B.
The assessee contended that the respondent straightaway issued the final assessment order without issuing any draft assessment order or show cause notice and assessed the petitioner's income at Rs. 25,85,92,670. The department issued the notice of demand.
The court ordered the Principal Commissioner, National Faceless Assessment Center, to appear before the court by way of an online video link.
The Principal Chief Commissioner, NaFAC, had appeared in the post-lunch session by way of an online video link. The Principal Chief Commissioner assured the Court that the National Faceless Assessment Centre would introduce a system of alerts and checks to ensure that no final assessment order was passed without prior issuance of a show cause notice as well as a draft assessment order and without considering the reply filed by the assessee and a request, if any, by the assessee for an opportunity of hearing.
The Court ordered the Principal Chief Commissioner to investigate whether the National Faceless Assessment Center would reverse a final assessment order that had been passed without giving a show-cause notice or in violation of natural justice principles.
The court said that the department is at liberty to issue a draft assessment order or show cause notice to the petitioner and the proceedings shall continue in accordance with law.
Case Title: RMSI Private Limited Versus NaFAC
Citation: 2022 LiveLaw (Del) 1102
Counsel For Petitioner: Advocate Piyush Kaushik
Counsel For Respondent: Sr.Standing Counsel Puneet Rai