Court rules that draft assessment orders are not mandatory for ordinary assessees under Income Tax Act, dismissing writ petitions challenging assessment procedures.
In a significant judgment, the Kerala High Court dismissed the writ petitions filed by M/s. Noel Villas and Apartments, challenging the faceless assessment process under the Income Tax Act for the assessment year 2020-21. The petitioner had contested the assessment order and subsequent penalty notices issued by the Income Tax Department, arguing that the assessment was conducted beyond the permissible time limit and without furnishing a draft assessment order.
The judgment, delivered by Justice Ziyad Rahman A.A., clarified the procedural requirements under the Income Tax Act, 1961, particularly the distinction between "eligible assessee" and ordinary assessees. According to the court, the statutory provisions under Section 144B and 144C necessitate the issuance of a draft assessment order only to "eligible assessees," as defined under Section 144C(15)(b). The petitioner, being an ordinary assessee, was not entitled to receive a draft assessment order.
The court further addressed the contention regarding the completion of the assessment beyond the time limit specified under Section 153. It noted that the Finance Act, 2022, extended the time limit for completing assessments for the year 2020-2021, thereby validating the assessment order passed on September 28, 2022.
The court also examined the principles of natural justice, emphasizing that the petitioner was served with a show cause notice detailing the proposed variations. The petitioner failed to request a personal hearing, a provision available under the faceless assessment scheme. Consequently, the court found no violation of natural justice in the assessment process.
In its judgment, the Kerala High Court underscored the availability of statutory remedies, advising the petitioner to pursue an appeal rather than a writ petition to address any factual disputes regarding the assessment's merits or demerits.
The court's decision reaffirms the procedural distinctions within the faceless assessment scheme and delineates the rights of ordinary assessees vis-à-vis eligible assessees under the Income Tax Act.
Bottom line:-
Income Tax Act - Faceless Assessment - Requirement of serving draft assessment order only applies to "eligible assessees" as defined under Section 144C(15)(b) - Ordinary assessees are not entitled to receive draft assessment orders under Section 144B of the Act.
Statutory provision(s): Income Tax Act, 1961 Sections 144B, 144C, 153, 270A, 274
