The Karnataka High Court held that the scrutiny notices issued by the Addl Commissioner of Income Tax ( CIT ) instead of the Assessing Officer ( AO )under central charge are valid.
Adarsh Developers, the petitioner has impugned the first respondent’s Assessment Order under Section 143[3] of the Income Tax Act, 1961. In addition, the petitioner has impugned the consequential Computation and Demand as also Show Cause Notice issued under Section 270A of the IT Act for the assessment year 2020-21.
The petitioner, a partnership firm engaged in the business of real estate development, has filed Returns of Income [ROI] under Section 139[1] of the Income Tax Act for the Assessment Year 2020-21. The Additional Commissioner of Income Tax, NaFAC-1[1][2], Delhi has issued a Notice dated 29.06.2021 to the petitioner under Section 143[2] of the IT Act.
The first respondent has passed the impugned Assessment Order dated 20.09.2022 with certain additions and disallowances. The petitioner has filed its appeal against the first respondent’s Assessment Order dated 20.09.2022 with the Commissioner of Income Tax [Appeals]-11 Bengaluru.
The petitioner has also filed separate applications for rectification under Section 154 of the IT Act with the first respondent on 18.10.2022 and 06.12.2022. The aforesaid appeal and the rectification applications are pending consideration.
The Principal Commissioner of Income Tax [Central], has granted a stay of recovery in terms of the Assessment Order subject to the petitioner depositing the disputed amount in ten instalments of Rs.1,96,28,424/-. In the light of the submission that the first of the instalments in Rs.1,96,28,424/- is paid under protest, and because of the question that is canvassed, has recorded that the respondents are expected not to be precipitated.
The question was whether the Additional Commissioner of Income Tax NaFAC-1(1)(2) could have assumed jurisdiction in respect of the petitioner’s case which belongs to the central charge for issuance of notice under Section 143(2) of the Income Tax Act, 1961; and if the aforesaid officer could not have so assumed jurisdiction, whether the proceedings must fail for want of due notice under Section 143(2) of the Income Tax Act, 1961.
The petitioner argued that the Additional Commissioner of Income Tax, NaFAC-1(1)(2), Delhi [the second respondent] could not have assumed jurisdiction to issue notice dated 29.06.2021 of the IT Act because the jurisdiction of the first respondent has not been decentralized insofar as the petitioner.
A single bench of Justice B M Shyam Prasad observed that the essential features of the Faceless Assessment Scheme, 2019 are retained with certain modifications under the National Faceless Assessment Scheme in Section 144B of the IT Act, and undeniably, the Parliament’s intention in incorporating the Faceless Assessment into the IT Act with inclusion of Section 144B is to continue the Faceless Assessment subject to some changes as felt necessary from the experience.
It was observed that “the petitioner has availed its statutory remedy against this assessment order in not just filing an appeal under Section 246A of the IT Act but also in filing an application for rectification under Section 154 of the IT Act. These proceedings are pending consideration, and during the pendency of these proceedings, the petitioner has also filed an application for stay before the Principal Commissioner of Income Tax which was disposed of on 20.12.2022 “requesting the petitioner to pay an amount equal to ten per cent of the disputed demand after disposal of the rectification application filed by the petitioner in ten equal monthly instalments starting from January 2023”.
The Court rejected the petition and held that the petitioner, in terms of the orders of the Principal Commissioner of Income Tax, Central, Bengaluru, shall be at liberty to pay instalments due from February 2024.
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