Indu Goenka Vs Assessment Unit, Income Tax Department & Ors. (Calcutta High Court)
High Court held that Income Tax Faceless assessment order under section 143(3) rws 144B becomes invalid if Assessment is completed without following standard operating procedure (SOP).
Case Summary:
The appellant challenged the assessment order passed by the Income Tax Department under section 143(3) rws 144B of the Income Tax Act, 1961. The appellant contended that the assessment order was in total violation of the principles of natural justice and that it ignored the formalities outlined under the Standard Operating Procedure (SOP) for faceless assessment orders. The single bench of the Calcutta High Court dismissed the writ petition, stating that the Court cannot act as an appellate authority to examine the reasoning given by the assessing officer and there existed an alternative remedy of appeal. The appellant appealed this decision before the division bench.
The Division Bench of the Calcutta High Court considered an intra-court appeal where the Single Bench had refused to interfere against a challenge to the assessment order on grounds of alternative remedy, despite there being a glaring violation of SOP. However, the Division Bench quashed the assessment order on the grounds of being perverse and not following the SOP, which is designed to be followed by the Assessing Officer in a faceless environment. Any violation of the SOP is considered a violation of the principles of natural justice.
Important Observations of the High Court
1. At the first blush it may appear that the challenge is to the assessment order passed by the authority on the merits of the case. However, on a careful consideration of the entire facts and circumstances of the case, it is clear that the appellant has not questioned the merits of the assessment but the decision making process.
2. The Standard Operating Procedure (SOP) under the Faceless Assessment framed under Section 144B of the Act had been issued by the National Faceless Assessment Centre, Delhi and communicated to all the Principal Chief Commissioners, Income Tax under the cover of a letter dated 3rd August, 2022.
3. The procedure enumerates as to how the assessment has to be made and in paragraph N.1.3 it has been stated that the authority should ensure adherence to the principles of natural justice and reasonable opportunity to the assessee, timelines to be given for obtaining response to the show cause notice which have also been stipulated.
4. Further, the SOP also gives the format of final assessment order in AU-9 which sets out the various heads under which the assessment order has to be passed with due discussion.
5. On a cursory perusal of the assessment order dated 20th December, 2022, which is impugned in the writ petition, one gets an impression that it is in compliance with the SOP as it contains requisite sub-headings but however, on a closure reading of the assessment order it is found that the assessing officer has acted in a most perverse manner in passing the assessment order.
6. We say so because the first 21 pages of the assessment order is a verbatim extract of the show cause notice. In page nos.22 and 23 in two paragraphs the reply given by the assessee has been summarized.
7. From page nos.23 to 36 of the assessment order it is once again extract of the show cause and ultimately at page nos.37 and 38 the total income has been determined and the assessment is completed.
8. The impugned assessment order is a classical example as to how an assessment should not be made.
9. The assessing officer has reduced the procedure to an empty formality, which has to be deprecated.
10. This leaves us with no other option except to quash the assessment order. In the result, the appeal as well as the writ petition are allowed and the assessment order dated 20th December, 2022 is quashed.
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