Gurgaon Realtech Limited Vs National Faceless Assessment Centre Delhi (Delhi High Court)
Summary: The Delhi High Court, in Gurgaon Realtech Limited Vs National Faceless Assessment Centre Delhi, W.P.(C) 5849/2021, decided on 4 June 2021 for Assessment Year 2018-19, held that an assessment order passed on 15 April 2021 under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961, could not be sustained because the statutory framework governing such assessments had ceased to apply from 1 April 2021. The Division Bench comprising Justice Rajiv Shakdher and Justice Talwant Singh held that, in view of Section 143(3D) and the CBDT notification dated 31 March 2021, assessments made on or after 1 April 2021 were required to follow the procedure prescribed under Section 144B. Consequently, the Court set aside the assessment order, the consequential demand notice under Section 156 and the notice initiating penalty proceedings under Section 274 read with Section 270A.
The petitioner challenged the assessment order dated 15 April 2021 principally on the ground that the respondent lacked jurisdiction to pass an order under Sections 143(3A) and 143(3B) after 31 March 2021. The petitioner relied upon Section 143(3D), which expressly excluded the application of Sections 143(3A) and 143(3B) to assessments made on or after 1 April 2021. It also referred to the CBDT notification dated 31 March 2021, issued in exercise of powers under Section 144B(2), to contend that the applicable assessment procedure was the one prescribed under Section 144B. Accordingly, the petitioner argued that the impugned assessment order was without jurisdiction and non-est in law.
An additional question arose regarding maintainability of the writ petition because the petitioner had already filed an appeal before the Commissioner of Income Tax (Appeals) on 29 May 2021 to protect its position before expiry of the limitation period on 31 May 2021. The Revenue argued that the petitioner should pursue the statutory appellate remedy rather than invoke writ jurisdiction. The petitioner, relying on the Supreme Court judgment in Kiran Singh Vs Chaman Paswan, submitted that an order passed without jurisdiction was a nullity and that the existence of an alternative remedy could not validate such an order.
The High Court accepted the petitioner’s submissions. It held that filing an appeal merely to prevent limitation from expiring did not bar examination of a jurisdictional challenge in writ proceedings. On the substantive issue, the Court observed that Section 143(3D) expressly provided that Sections 143(3A) and 143(3B) would not apply to assessments made under Section 143(3) or Section 144 on or after 1 April 2021. The Court also noted that the CBDT notification dated 31 March 2021 supported the requirement that assessments after that date must conform to Section 144B.
The Court accordingly set aside the assessment order dated 15 April 2021 and the consequential demand and penalty notices. However, it did not prohibit the Revenue from continuing assessment proceedings. Instead, it granted liberty to proceed under Section 144B, with the requirement that the petitioner be given an opportunity to respond to any show cause notice-cum-draft assessment order and, where a variation in income was proposed, an opportunity of personal hearing. The writ petition was disposed of and the pending applications were closed.
List of Cases Discussed:
1. Kiran Singh Vs Chaman Paswan, (1955) 1 SCR 117 (Supreme Court): Relied upon by the petitioner for the principle that an order passed without jurisdiction is a nullity and that a fundamental jurisdictional defect cannot be cured by consent of parties. The Delhi High Court accepted that the petitioner’s filing of a statutory appeal did not prevent it from pursuing the jurisdictional challenge through a writ petition.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
[Court hearing convened via video-conferencing on account of COVID-19]
CM No. 18316/2021
1. Allowed, subject to just exceptions.
CM No. 18317/2021
2. The prayer made in the captioned application is to grant exemption from filing sworn/notarised and/or affirmed affidavits along with the present petition. The captioned application is disposed of with a direction to the petitioner to place on record the duly sworn/notarised and/or affirmed affidavits, within three days from the resumption of the normal and usual work pattern by this court.
W.P.(C) 5849/2021 & CM No.18315/2021 [Application filed on behalf of the petitioner seeking stay on the operation of the impugned assessment order and consequential actions]
3. Issue notice. Mr. Ajit Sharma accepts service on behalf of the respondent/revenue.
4. Mr. Sharma says that since an issue concerning the jurisdiction of the Assessing Officer has been raised, he does not wish to file a formal reply and will argue the matter based on the record presently available with the Court.
5. Thus, with the consent of the parties, the writ petition is taken up for hearing and final disposal.
6. Via the instant petition, challenge has been laid to the assessment order dated 15.04.2021 passed by the respondent/revenue under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961 (in short the “Act”).
6.1. Besides this, challenge has also been laid to the notice of demand issued under Section 156 of the Act as well as notice for initiating penalty proceedings issued under Section 274 read with Section 270A of the Act. These notices are also dated 15.04.2021.
7. To be noted, the impugned assessment order concerns the assessment year (‘AY’) 2018-2019.
8. The principal ground on which the impugned assessment order has been challenged is that the said order could not have been passed under Sections 143(3A) & 143(3B) of the Act after 01.04.2021.
8.1 In support of this plea, Mr. Ajay Vohra, learned senior counsel, who appears on behalf of the petitioner, has relied upon the provisions of Sections 143(3D) and Section 144B of the Act, as also the Central Board of Direct Taxes (in short ‘CBDT’) notification dated 31.03.2021. (See Annexure ‘F’, which is appended on page 55 of the paper book). Pertinently, the said notification has been issued by the CBDT in exercise of its power under Section 144(B)(2) of the Act.
8.2. Mr. Vohra, thus, submits that the impugned assessment order, being without jurisdiction, is non-est in the eyes of law.
8.3. Mr. Vohra fairly informs us that an appeal against the impugned assessment order was filed by the petitioner with the Commissioner of Income Tax (Appeals) [in short ‘CIT(A)’] on 29.05.2021, albeit, having regard to the fact that at that juncture, the period of limitation was expiring on 31.05.2021. It is, however, contended by Mr. Vohra that since the Assessing Officer lacked the jurisdiction to pass the impugned assessment order, the writ petition is maintainable, despite an appeal having been filed by the petitioner. [See Kiran Singh vs. Chaman Paswan1, (1955) 1 SCR 117]
8.4. On the other hand, Mr. Sharma contends that since the petitioner has already taken recourse to the alternate remedy by preferring an appeal with CIT(A) against the impugned assessment order, the issues raised in the writ petition by the petitioner should be agitated before the said forum.
9. We have considered the submissions made by the learned counsel for the parties.
9.1. To our minds, if the challenge to the assessment order is made on the ground that it was passed without jurisdiction, then, notwithstanding the fact that an appeal was filed, albeit, only to ensure that the limitation is not crossed, is not an impediment in proceeding ahead with the matter. In this particular case, the reason that we are proceeding ahead with the matter, is that, we are persuaded by the arguments advanced by Mr. Vohra that the impugned assessment order dated 15.04.2021 could not have been passed under Section 143(3A) and 143(3B) after March 31, 2021, having regard to the provisions of Section 143(3D) of the Act. For the sake of convenience, the said provisions are extracted below:
“Section 143. Assessment
xxx xxx xxx
(3A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of making assessment of total income or loss of the assessee under sub-section (3) so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the Assessing Officer and the assessee in the course of proceedings to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a team-based assessment with dynamic jurisdiction.
(3B) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (3A), by notification in the Official Gazette, direct that any of the provisions of this Act relating to assessment of total income or loss shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of March, 2021,
xxx xxx xxx
(3D) Nothing contained in sub-section (3A) and sub-section (3B) shall apply to the assessment made under sub-section (3) or under section 144, as the case may be, on or after the 1st day of April, 2021.]”
9.2. Besides this, Mr. Vohra is also right in his contention that the CBDT notification dated 31.03.2021, to which, we have made a reference hereinabove, also says, in effect, the same thing, i.e., that after 01.04.2021, the assessment order could have only have been passed in consonance with the provisions of Section 144B of the Act.
10. In view of the foregoing reasons, we are inclined to set aside the impugned assessment order dated 15.04.2021 as also the notice of demand issued under Section 156 of the Act and the notice for initiating penalty proceedings issued under Section 274 read with Section 270A of the Act.
10.1. That being said, the respondent/revenue will have liberty to proceed with the assessment process, albeit, under the provisions of Section 144B of the Act. Needless to add, if a show cause notice-cum-draft assessment order is served on the petitioner, an opportunity would be given to the petitioner to file its response/objections to the same. Furthermore, if there is a variation proposed in the income of the petitioner, an opportunity of personal hearing will also be accorded. In sum, the procedure prescribed under Section 144B of the Act will be followed by the respondent/revenue.
11. The writ petition is disposed of in the aforesaid terms. Pending applications also stands closed. The case papers shall stand consigned to the record.
Note:
1 “6. … It is a fundamental principle well established that a decree passed by a court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties. … “
