In the relief to the Piramal Enterprises, the Bombay High Court ruled that the Faceless Assessment without adhering to Section 144B procedures is invalid.
The Petitioner, Piramal Enterprises carries on various businesses including pharmaceuticals comprising manufacturing pharmaceutical formulations as well as trading in pharmaceutical goods. It purchases raw material for manufacturing its formulations as well as purchases goods for trading.
According to the petitioner, in its profit and loss account, it breaks up expenditure in broad categories viz; cost of material consumed, purchase of stock in trade and change in inventory of finished goods, work in progress and stock in trade. Its details are disclosed in the schedule to the profit and loss account. In the balance-sheet, inventory (closing stock) comprises the items raw material, work in progress, finished goods, stock in trade and spares and is given in consolidated figures.
Mr. Sham Walve, learned Counsel appearing for the revenue defending the impugned order, reiterates the submissions in the reply and strenuously contends that there is substantial difference between the values of gross receipts from services shown in service tax return received from CBEC and values disclosed in income tax return which are significantly less in income tax return. While the assessee was asked to reconcile the difference between the two, it was expected that the assessee would reconcile figures with its own books of accounts, the assessee – company has failed to do the same. Assessee’s submission that services received will not form part of revenue, being an expense, had been accepted.
He submits that it is basic that opening stock should match with the closing stock of preceding year and closing stock is derived on the basis of opening stock, purchases and consumption of the stock, that should be matched with the inventories in the balance sheet. It is incorrect to say that due to inflexibility of the software, the petitioner has put incorrect figures. The additions are based on facts, submissions and documents available on record.
The division bench of Justice Abhay Ahuja and Justice Sunil P.Deshmukh declared that assessment for AY 2017-18 made u/s 143(3) vide order dated 22.4.2021 was non est u/s 144B(9) of the Income Tax Act, 1961 for not adhering the procedure laid down u/s 144B(1) and u/s 144B(7/(vii) of the Act and holding that principles of natural justice firmly runs through fabric of section 144B(1) of the Income Tax Act, 1961.
The court further added that Section 144B of the Income Tax Act, 1961captioned ‘Faceless Assessment’ commences vide it’s sub-section (1) with non obstante clause and compulsively requires assessment u/s 143(3) and 144 shall be by prescribed procedure contained under sub-section (1) of section 144B in the cases referred to in sub-section (2) thereof.
“In the circumstances, when an assessee approaches with response to show cause notice, the request made by an assessee, as referred to in clause (vii) of sub section 7 of section 144B, would have to be taken into account and it would not be proper, looking at the prescribed procedure with strong undercurrent to have hearing on a request after notice, to say that petitioner would have opportunity pursuant to section 144C in the present matter, would intercept operation of the scheme contained under section 144B,” the bench said.
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