Shreeji Investment & Advisory Services Vs National Faceless Assessment Centre (Bombay High Court)
Appeal Number : Writ Petition (L) No. 13235 of 2021
Date of Judgement/Order : 25/10/2021
Related Assessment Year :
Courts : Bombay High Court
Can show cause notice be called the draft assessment order. as required under sub clause (xvi) of sub Section (1) of Section 144B?
Answer given by Bombay High Court on 25/10/2021 in the case of Shreeji Investment & Advisory Services Vs National Faceless Assessment Centre : the show cause notice cannot, by any stretch of imagination, be called the draft assessment order. Issuance of show cause notice is the preliminary step which is required to be undertaken. The purpose of show cause notice is to enable a party to effectively deal with the case made out by respondent (Om Shri Jigar Association Vs. Union of India). In paragraph 3 of the notice it is stated “please explain the tax impact if it should be 8,41,03,800/- instead of 6,54,05,508/-”. Then it is stated in paragraph 4 “in this regard please produce the ITR/P&L / and balance sheet of the partners”. In paragraph 5 it is stated “please explain the method of accounting adopted by you” and in paragraph 6 it is stated “please produce copy DEMAT account with a chart showing the entry date of purchase of share on which short term capital losses occurred and chart showing sale date of these shares supported with the bank details”. In our view, this is nothing but a notice seeking further details, information, documents and cannot be called the draft assessment order. Therefore, on this ground also the assessment order is quash, cancel and set aside.
FULL TEXT OF THE JUDGMENT/ORDER of BOMBAY HIGH COURT
1 Petitioner is impugning the assessment order dated 24th May 2021 passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 (the said Act), for the A.Y.-2018-2019 on the grounds that; a) no draft assessment order was issued as required under sub clause (xvi) of sub Section (1) of Section 144B; b) addition under Section 68 of the Act has been made without even giving an opportunity by issuing a show cause notice and ; (c) no personal hearing was granted despite petitioner requesting for the same.
2 Petitioner was issued notices under Section 142(1) of the Act dated 19th November 2020, 20th January 2021, 11th February 2021 and 11th March 2021 and show cause notice dated 18th February 2021 was also issued through e-portal. Replies were submitted by petitioner who also sought a personal hearing. On the issue of personal hearing, admittedly no hearing has been granted because in the impugned order, respondent state “during the assessment proceedings assessee sought VC/personal hearing on 24th February 2021 which was fixed on 22nd April 2021, but due to technical problems VC could not be held.” Therefore, on this ground alone the impugned order requires to be set aside.
3 Moreover, as regards draft assessment order, the impugned order does not state that any draft assessment order was given but in the affidavit in reply filed by one Sreekala S. Nair affirmed on 21st September 2021, it is stated that the show cause notice dated 18th February 2021 had a heading “show cause notice as to why assessment should not be completed as per draft assessment order and “the notice further states that if no reply is received, the assessment will be completed as per the draft assessment order”. In our view, this is one of the most preposterous stand take in as much as in the notice dated 18th February 2021 cannot, by any stretch of imagination, be called the draft assessment order. In paragraph 3 of the notice it is stated “please explain the tax impact if it should be 8,41,03,800/- instead of 6,54,05,508/-”. Then it is stated in paragraph 4 “in this regard please produce the ITR/P&L / and balance sheet of the partners”. In paragraph 5 it is stated “please explain the method of accounting adopted by you” and in paragraph 6 it is stated “please produce copy DEMAT account with a chart showing the entry date of purchase of share on which short term capital losses occurred and chart showing sale date of these shares supported with the bank details”. In our view, this is nothing but a notice seeking further details, information, documents and cannot be called the draft assessment order. Therefore, on this ground also the assessment order has to be set aside.
4 The final nail in the coffin is addition of Rs.3,24,98,451/- and Rs.3,79,58,450/-, both under Section 68 of the Act. In the petition, in one of the grounds there is a specific allegation that there is not even a whisper of these additions either in the alleged draft assessment order or in any of the notices issued in the course of assessment proceedings and no opportunity whatsoever was given to petitioner to file its objections against these additions. In the affidavit in reply of respondent, there is no denial of this fact. In the affidavit in reply, the affiant has gone on the merits of the two additions but does not deny the fact that neither the alleged draft assessment order or any of the notices have not even referred to this proposed additions under Section 68 of the Act. Issuance of show cause notice is the preliminary step which is required to be undertaken. The purpose of show cause notice is to enable a party to effectively deal with the case made out by respondent (Om Shri Jigar Association Vs. Union of India)1 Therefore, on this ground also the impugned order is required to be set aside.
5 In our view, having heard Mr. Syal and Mr. Pinto and having considered the petition and the affidavit in reply, the prayer as prayed for in prayer clauses (a) and (c) of the petition has to be granted and is hereby granted. The same read as under:
“(a) that this Hon’ble Court be pleased to issue a Writ of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records of the case leading to the passing of the impugned order dated 24th May 2021 under Section 143(3) r.w.s. 144B of the Act for the assessment year 2018-19 and after going through the same and examining the question of legality thereof quash, cancel and set aside such impugned order .
(c) that this Hon’ble Court be pleased to issue a Writ of Prohibition or any other writ, order or direction under Article 226 of the Constitution of India ordering and directing respondent no.1 not to take any action in furtherance to the impugned order.”
7 Petition disposed with no order as to costs.