Additional Joint Deputy Assistant Commissioner of Income Tax Officer & Ors. Vs Multiplier Brand Solutions Pvt. Ltd. (Supreme Court of India)
The Supreme Court considered an appeal filed by the Revenue against the Bombay High Court’s judgment which had set aside an assessment order passed under the faceless assessment regime on the ground of non-compliance with the mandatory procedure prescribed under Section 144B of the Income-tax Act, 1961.
The dispute arose because the assessment order dated 13 May 2021 was passed without issuing a show-cause notice along with a draft assessment order, despite the proposed assessment involving a variation prejudicial to the assessee.
Before the Bombay High Court, the assessee challenged the assessment order on the ground that the mandatory requirement under Section 144B(1)(xvi)(b) had not been followed.
In its affidavit, the Revenue admitted that no draft assessment order had been issued. It explained that the Assessment Unit had finalized the assessment because the Risk Unit had not indicated that a show-cause notice or draft assessment order should be issued. The Revenue further contended that issuance of a draft assessment order was not mandatory and depended upon the Risk Unit’s recommendation.
The Bombay High Court rejected this contention. It observed that it had consistently held that the provisions of Section 144B are mandatory. Under Section 144B(1)(xvi)(b), where a variation prejudicial to the assessee is proposed, issuance of a draft assessment order is compulsory.
Since it was undisputed that no draft assessment order had been issued, the High Court held that there was non-compliance with the mandatory procedure prescribed under Section 144B. Referring to Section 144B(9), it held that failure to comply with the prescribed procedure rendered the assessment order non est.
Accordingly, the High Court quashed and set aside:
