JCIT Vs Sujatha Revikumar (Kerala High Court)
Kerala High Court rules serving draft assessment order not mandatory for ‘ordinary assessees’ under former Section 144B faceless tax law; Kerala High Court Clarifies Faceless Assessment Procedure; Serving Draft Order Not Mandatory for All Assessees Under Former Law
Kochi: The Kerala High Court has clarified that the Income Tax Department was not required to serve a copy of the draft assessment order along with the Show Cause Notice (SCN) to an ‘ordinary assessee’ during the faceless assessment proceedings under the provisions of Section 144B of the Income Tax Act, 1961, as they stood at the relevant time. This ruling by a Division Bench overturned a Single Judge’s decision that had mandated the service of the draft order for all assessees as a requirement of natural justice, citing previous judgments.
The case involves a taxpayer engaged in the money lending business whose assessment for the year 2021-2022 was selected for faceless assessment. The assessment proceedings were initiated after the Income Tax Department took notice of a substantial loss amounting to over Rs. 7.68 crore written off by the taxpayer, allegedly due to fraud involving false entries related to gold loans. The faceless assessment process culminated in a final assessment order which reduced the claimed loss for income tax purposes. Separate penalty proceedings were also initiated against the taxpayer for alleged under-reporting of income.
