Delhi High Court Sets Aside Assessment Order On Non-Compliance Of Section 144B(1)(XVI)(B) Of Income Tax Act
The Court observed that the mandate of the statute had to be complied with, even if it is assumed that the principles of natural justice had been complied with
The Delhi High Court has set aside the assessment order on non-compliance of Section 144B(1)(xvi)(b) of the Income Tax Act, 1961 by observing that the mandate of the statute had to be complied with, even if it is assumed that the principles of natural justice had been complied with.
The Division Bench of the High Court of Delhi, comprising Justices Manmohan and Navin Chawla, dealt with the matter titled Pooja Singla Builders And Engineers Private Limited v National Faceless Assessment Centre & Ors.
The Petitioner – Assessee through a petition had challenged the assessment order which drew an adverse inference against the Petitioner by creating a tax demand of ₹3,11,37,680 along with the penalty imposed u/S 274 read with Section 271AAC(1) of the Income Tax Act, 1961 for the Assessment Year 2018-2019.
It was contended by the Petitioner – Assessee that the assessment order passed by the Respondent – Authorities was jurisdictionally flawed and bad in law since it was violative of the mandatory and binding natural justice requirements stipulated in faceless assessment scheme and relevant instructions of Central Board of Direct Taxes. The Petitioner – Assessee further submitted that no mandatory valid show cause notice, as well as draft assessment order, had been issued to the Petitioner before passing the assessment order.
On the other hand, the Respondent – Authorities submitted that they had complied with the principles of natural justice as adequate notice had been given to the Petitioner, who had also responded to the same by way of an elaborate reply.
In order to deal with this issue at hand, the Court went through the relevant portions of Section 144B(1)(xvi)(b) as well as Section 144B(9) of the Income Tax Act, 1961. The Court after going through these provisions observed that Section 144B(1)(xvi)(b) of the Act mandatorily provides for issuance of a prior show cause notice and draft assessment order before issuing the final assessment order.
The Court connected this provision with the present case and noted that no prior show cause notice as well as draft assessment order had been issued, which resulted in a violation of the mandatory procedure prescribed in law. It further made the following observations with regards to the compliance of provisions:
"It is settled law that when power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and other methods of performance are forbidden. Consequently, even if it is assumed that the principles of natural justice have been complied with in the present case, then also the mandate of the statute would have to be complied with."
After considering the circumstances, the Court set aside the assessment order, notices and penalty issued against the Petitioner – Assessee and remanded the matter back for fresh consideration.