Case Law Details
Rinku R. Rai Vs ITO (Bombay High Court)
Introduction: The recent judgment of the Bombay High Court in the case of Rinku R. Rai Vs ITO has significant implications for Income Tax assessments. The petitioner contested a Final Assessment Order dated March 25, 2022, alleging violations of Section 144B of the Income Tax Act. The primary contention was the absence of a draft Assessment Order, as mandated by Section 144B(1)(xvi). Additionally, the petitioner challenged the validity of the notice issued on March 31, 2021, asserting it lacked jurisdiction due to the absence of necessary satisfaction under Section 151.
Detailed Analysis: The petitioner’s counsel, Mr. Nishit Gandhi, argued that the notice for the Assessment Year 2015-16, issued on March 31, 2021, exceeded the four-year limit for re-opening assessments. Emphasizing a procedural flaw, he pointed out that the satisfaction of Additional Commissioner, Range 3(2), Mumbai, did not align with the requirements of Section 151, necessitating approval from concerned Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. .
Mr. Gandhi further contended that the final Assessment Order lacked jurisdiction, as it was issued without providing the petitioner with a draft Assessment Order under Section 144B(1)(xvi). This, he argued, was a mandatory requirement under the Faceless Assessment Scheme incorporated in the Act.
In response, Mr. Akhileshwar Sharma, representing the Revenue, admitted in the Affidavit-in-Reply that the approval for re-opening was obtained from the Additional Commissioner, Income Tax. However, he contested the petitioner’s claim, stating that the non-issuance of the draft Assessment Order was an uncontroverted fact.
The Court, after considering both arguments, ruled that the notice dated March 31, 2021, lacked jurisdiction and, therefore, quashed it. Additionally, acknowledging the breach of Section 144B(1)(xvi) due to the absence of a draft Assessment Order, the Court quashed the final Assessment Order dated March 25, 2022.
Conclusion: The judgment in Rinku R. Rai Vs ITO sets a precedent, emphasizing the importance of adhering to procedural requirements in Income Tax assessments. The Bombay High Court’s decision to quash both the notice and the final Assessment Order highlights the significance of jurisdictional compliance and adherence to the Faceless Assessment Scheme’s mandatory provisions. This case serves as a reminder to tax authorities to ensure strict adherence to procedural norms to avoid legal setbacks in the future.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1 By this petition, petitioner is aggrieved by the Final Assessment Order dated 25th March 2022 passed by the respondent on the ground that the said Assessment Order has been passed in violation of the provisions of Section 144B of the Income Tax Act (the “Act”) in as much as the said Order has been passed without passing or issuing the draft Assessment Order as envisaged in Section 144B(1)(xvi). Petitioner also seeks to challenge the legality and validity of the notice dated 31st March 2021 under Section 148 of the Act issued by the respondent to the petitioner on the ground that the said notice is without jurisdiction, in as much as the necessary satisfaction under Section 151 of the Act has not been obtained.
2 Mr. Nishit Gandhi, learned counsel for the petitioner, would submit that the relevant Assessment Year is 2015-16 and the notice under Section 148 is dated 31st March 2021, thereby clearly indicating that the re-opening sought to be done is beyond a period of four years. He submits that the satisfaction of Additional Commissioner, Range 3(2), Mumbai has been obtained whereas under Section 151, the sanction for re-opening an assessment beyond the period of four years should have been of the concerned Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. He submits that on this ground alone the notice and the proceedings thereunder ought to be set aside.
3 Learned counsel also submits that the final Assessment Order dated 25th March 2022 passed by the Assessing Officer, pursuant to the proceedings initiated by the Assessing Officer, is also without jurisdiction, in as much as, the same has been passed without serving upon the petitioner a draft Assessment Order as envisaged under Section 144B(1)(xvi) of the Act. He submits that the issuance of draft Assessment Order is mandatory in terms of the Faceless Assessment Scheme as incorporated in Section 144B of the Act. That the non-issuance of the draft Assessment Order is a jurisdictional defect, and therefore, the said order deserves to be set aside.
4 Mr. Akhileshwar Sharma, learned counsel for the respondent / Revenue, refers to the Affidavit-in-Reply dated 24th June 2022 filed by the Revenue. He fairly states that in paragraph 14 of the said reply, it has been admitted that the approval for the re-opening was obtained from the Additional Commissioner, Income Tax and submits to the orders of this Court. With respect to petitioner’s grievance on the non-issuance of the draft Assessment Order, he draws the attention of this Court to paragraph 12 of the reply and submits that the same is an uncontroverted fact on record.
5 Having heard learned counsel for the parties, we are of the view that the notice dated 31st March 2021 is clearly without jurisdiction and deserves to be quashed. The same is, hereby, quashed and set aside.
6 Though it would therefore not be necessary for us to discuss the other issue, however, admittedly, there has been a breach of the provision of Section 144B(1)(xvi) as no draft Assessment Order was issued to the petitioner. On this ground as well, the petition deserves to be allowed. The final Assessment Order dated 25th March 2022 is also quashed and set aside.
7 The petition is allowed in the above terms. No costs.
Author Bio
Really a good case for knowledge of CAs and Lawyers.
When the law imply issuance of draft assessment order how can a verbatim ssy not mandatory?
Case study gives more knowledge. Thanks for publishing it.