Non-compliance with Section 144B of the Income Tax Act leads to setting aside of ITAT's order in Accost Media LLP case
In a significant development, the Bombay High Court has set aside the order of the Income Tax Appellate Tribunal (ITAT) concerning the case of Accost Media LLP, citing non-compliance with the procedural mandates of Section 144B of the Income Tax Act, 1961. The case, revolving around the assessment year 2021-2022, involved disputes over disallowed expenditures and the genuineness of transactions reported by the appellant, Accost Media LLP, a business engaged in painting and advertising.
The appellant challenged the ITAT's dismissal of its appeal against an order by the Commissioner of Income Tax (Appeals) [CIT(A)], which upheld disallowance of 12.5% of alleged bogus expenditures. The High Court bench, comprising Justices G.S. Kulkarni and Aarti Sathe, found merit in the appellant's contention that the jurisdictional issue under Section 144B was not addressed by the ITAT, which goes to the root of the matter.
Section 144B mandates a faceless assessment process that includes a specific standard operating procedure for issuing show-cause notices. The appellant argued that these procedures were not followed, rendering the assessment order erroneous. The High Court concurred, emphasizing that the jurisdictional issue was indeed raised by the appellant in its miscellaneous application before the ITAT, although it was not addressed in the tribunal’s decision.
The court noted that the appellant had presented substantial documentary evidence to establish the genuineness and creditworthiness of its transactions, which the ITAT failed to consider adequately. Furthermore, the bench dismissed the Revenue's argument that the jurisdictional issue could not be raised at this stage, noting that it was indeed part of the appellant's submissions before the ITAT.
In light of these findings, the High Court has remanded the case back to the ITAT for a fresh evaluation, instructing the tribunal to adjudicate on the jurisdictional issue of non-compliance with Section 144B and to re-evaluate the evidence concerning the genuineness and creditworthiness of the transactions in question.
This decision underscores the importance of adherence to procedural mandates in tax assessments and reinforces the appellant’s right to a fair assessment process. The High Court’s directive to the ITAT to consider all grounds raised by the appellant marks a pivotal step in ensuring that jurisdictional issues are duly addressed and rectified in the appellate proceedings.
Bottom line:-
Income Tax - Jurisdictional issue under Section 144B of the Income Tax Act, 1961, going to the root of the matter, needs to be adjudicated by the ITAT. Failure to comply with the mandatory provisions of Section 144B renders the assessment order erroneous and unsustainable.
Statutory provision(s): Sections 144B, 69C, 115BBE, 271AAC(1) of the Income Tax Act, 1961
Accost Media LLP v. Deputy Commissioner of Income Tax, (Bombay)(DB) : Law Finder Doc id # 2931880
