Bombay HC sets aside Income Tax Reassessment Order in Citing Violation of mandatory unamended provisions under Section 144B [Read Order]

In a ruling, the Bombay High Court sets aside Income Tax Reassessment Order in violation of mandatory unamended provisions under Section 144B, read with the first proviso to Section 147 of the Income Tax Act, 1961 rendering such assessment, ex facie without jurisdiction and a nullity in law. The petitioner, Madhuri Sameer Gokhale is primarily aggrieved by the order dated 29 March 2022 passed by the Assessing Officer, National Faceless Assessment Centre, New Delhi (“NFAC”) under Section 147 read with Section 144 and 144B of the Income Tax Act, 1961 (IT Act) and the consequential demand notice dated 30 March 2022 issued under section 156 of the IT Act(“Impugned Demand notice” ). The substantive prayers read declare that the Impugned Order and Demand Notice dated 29 March 2022 are illegal, arbitrary, in breach of natural justice, and liable to be quashed and/or set aside. Read More: Supplies Amid Imports and IGST over Inter-State Trade & Supplies have similar Tax Rate: CESTAT The basic issue for consideration revolves around the legality and validity of impugned assessment order dated 29 March 2022 read with the impugned demand notice which according to the petitioner is in violation of mandatory unamended provisions under Section 144B, read with the first proviso to Section 147 of the IT Act rendering such assessment, ex facie without jurisdiction and a nullity in law. The petitioner is an individual. The assessment year in question is A.Y. 2014-2015. Respondent no.1 is the National Faceless Assessment Centre through the assessing officer which has passed the impugned assessment order dated 29 March 2022. Respondent no.2 is the jurisdictional assessing officer who issued the notice under section 148 of the IT Act to the petitioner for A.Y. 2014-15. Respondent no.3 is the Principle Commissioner having administrative supervision over petitioner’s assessment and is also the sanctioning authority for issuance of the notice under Section 148 of the IT Act. Want a deeper insight into the Income Tax Bill, 2025? Click here Respondent no. 2 issued a notice under Section 148 of the IT Act dated 23 March 2021 to the petitioner for AY 2014-15, recording that there were reasons to believe that the income of the petitioner chargeable to tax for AY 2014-15, had escaped assessment which justified reopening under Section 147 of the IT Act. The petitioner filed her return of income dated 29 April 2021, in response to the notice issued under Section 148 of the IT Act, which was duly acknowledged by the respondent no.2. The notice stated that the petitioner had not filed her return of income for the AY 2014-15, but had entered into financial transactions amounting to Rs. 11,61,22,771/-, the source of which was not explained. On such basis, the assessment of the petitioner was sought to be reopened. The return of income of the petitioner for the said assessment year was not filed. However, the petitioner had paid advance tax as reflected in the Form 26AS filed by the petitioner for the AY 2014-15. Respondent no. 1, NFAC, issued notices to the petitioner under Section 142(1) of the IT Act for the AY 2014-15 dated 28 December 2021 and 8 January 2022, respectively. Respondent no. 1 through such notices sought details from the petitioner in respect of the amount of Rs. 11,61,22,771/- (11.61 Crores approx.) which according to the respondents had escaped assessment for AY 2014-15. The petitioner through her chartered account addressed a letter dated 14 January 2022 to the respondent no. 1 requesting for an adjournment of 15 days to file her reply to the above notices, in the light of the difficulties faced by her during the Covid pandemic period, coupled with the fact that the partner of her chartered accountant firm was recuperating after a serious surgery. Read More: Failure to file Annual Returns for the FY 2020-21: MCA imposes Penalty of Rs. 5.6 Lakhs on Company and Directors A show cause notice-cum-draft assessment order issued to the petitioner under Section 144 of the IT Act. It was stated therein that there had been non-compliance by the petitioner with the earlier notices issued by the respondent no. 2 dated 28 December 2021 and 8 January 2022. Respondent no. 1 by such show cause notice-cum-draft assessment order proposed to make a best judgment assessment under Section 144 of the IT Act bringing to tax the entire amount of Rs.11,61,22,771/-, which according to the respondent had escaped assessment for the A.Y. 2014-15. Respondent no.1 granted time till 19 March 2022 (23.59 hours) to the petitioner, to file her reply to the said show cause notice-cum-draft assessment order. Affective Ways Of Tax Planning for HUF, Partnership Firm and Will CLICK HERE According to the petitioner, the entire amounts were in the nature of receipts from such Trust and HUF on which tax had already been paid by the Trust and HUF for the earlier years. Such letter/reply dated 24 March 2022 of the petitioner was supported by detailed documentation and with details to show that such amounts had already been brought to tax in the hands of the Trust and HUF. Bank summary was also enclosed to the said letter by the petitioner to support the receipt of the funds, with an explanation that such funds had been invested by the petitioner in different mutual funds and bonds, giving detailed break-up of such investments. The petitioner in the said letter also stated that the capital gains and/or other income derived from the said investments of the petitioner were offered to tax, from time to time. The bench observed that it would have been quite different if there were reasons available on record of the PCIT that the case on delay in filing returns as urged by the petitioners was false, and/or totally unacceptable. It needs no elaboration that in matters of maintaining accounts and filing of returns, the assessees are most likely to depend on the professional services of their Chartered Accountants. Clear all Your Doubts on RCM, TCS, GTA, OIDAR, SEZ, ISD Etc... Click Here Once a Chartered Accountant is engaged and there is a genuine dependence on his services, such as in the present case, whose personal difficulties had caused a delay in filing of the petitioners returns, was certainly a cause beyond the control of the petitioners/assessees. In these circumstances, the assessee, being at no fault, should have been the primary consideration of the PCIT. It also cannot be overlooked that any professional, for reasons which are not within the confines of human control, by sheer necessity of the situation can be kept away from the professional work and despite his best efforts, it may not be possible for him to attend the same A division bench of Justice G. S. Kulkarni & Justice Advait M. has ruled that the petitioner has become entitled to the reliefs as prayed for. Accordingly, the petition deserves to be allowed. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Bombay HC sets aside Income Tax Reassessment Order in Citing Violation of mandatory unamended provisions under Section 144B [Read Order]

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Bombay HC sets aside Income Tax Reassessment Order in Citing Violation of mandatory unamended provisions under Section 144B [Read Order]

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