The Mumbai Income Tax Appellate Tribunal (ITAT) has recently held that the assessment order passed without complying with the procedure of section 144B of Income Tax Act 1961 is invalid.
Section 144B Income Tax Act 1961 states about faceless assessment, which was carried out by the National Faceless assessment center. Assessment under section 143(3) or 144 or 144(2) shall be made in faceless manner.
Assessee Carrier Technologies India Limited is part of the UTC group and is engaged in the business of import and resale of various fire protection and security systems (trading activity) and assisting its group companies in sale of these systems in India in manufacturing, erection, installment and maintenance of fire protection and security system as per various government and semi government turnkey projects and rendering research and development services to its group companies in relation to fire protection and security business.
The assessee company has three different divisions namely trading and commission business from Gurgaon (GGN Segment), manufacturing businesses from Mumbai (MUM segment) and Research and development services business from Hyderabad (HYD Segment).
After the scrutiny assessment the assessing officer determined the total income and made transfer price adjustment thereafter passed the assessment order against the order assessee filed an appeal before the ITAT.
M P Lohia counsel for the assessee submits that Assessing officer has failed to issue show cause notice-cumdraft order which is mandated in section 144B of the Act Therefore the non-compliance of the procedure will make the assessment order null and void
Yogesh Kamat counsel for the revenue submits that “The draft assessment order issued under section 144C of Income Tax Act 1961 by assessing officer was not the final assessment order and that non issue of show cause cum draft order does not make the assessment non est in the eyes of law”
After considering the contentions of the both sides the division bench of the ITAT comprising Prashant Maharishi, (Accountant Member) and Kavitha Rajagopal, (Judicial Member) allowed the appeal filed by the assessee and the bench observed that, “The mandatory procedure prescribed under section 144B of the Income Tax Act 1961 if not followed the same would make the assessment order and the draft assessment order as non est”.
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