MS LOKESH CONSTRUCTIONS P LTD vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

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W.P.(C)/5491/2021HC DelhiDLHC01018013202127 May 2021Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MR. JUSTICE TALWANT SINGH4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the impugned assessment order, the consequential notice of demand under Section 156, and the notice for initiation of penalty proceedings under Section 274 read with Section 270A are set aside. The Court reasoned that since there was a variation in the declared income (an addition of Rs.13,95,890/- was made to the revised declared income of Rs.73,59,500/-), the respondent/revenue was required to issue a show cause notice-cum-draft assessment order. This requirement is in consonance with the provisions of Section 144B of the Income Tax Act, 1961, and the Faceless Assessment Scheme, 2019, as per the judgment in YCD Industries vs. National Faceless Assessment Centre, Delhi (W.P. (C) No. 5552/2021). The Court granted liberty to the respondent/revenue to pass a fresh assessment order in accordance with the law, including granting a personal hearing to the petitioner's authorized representative via videoconferencing, with the date and time to be communicated in advance.

What were the facts?

The petitioner, M/s Lokesh Constructions P Ltd, filed a writ petition challenging an assessment order dated 07.04.2021, passed under Section 143(3) read with Section 143(3A) & 143(3B) of the Income Tax Act, 1961. The challenge also extended to the consequential notice of demand under Section 156 and notice for penalty proceedings under Section 274 read with Section 270A. The assessment year in question is 2018-2019. The petitioner's principal grievance was that the assessment order was passed without issuing a show cause notice-cum-draft assessment order. The petitioner initially declared income of Rs.87,55,390/-, which was revised to Rs.73,59,500/-. The impugned assessment order made an addition of Rs.13,95,890/- to the declared income.

What were the issues?

1. Whether the assessment order dated 07.04.2021, passed under Section 143(3) read with Section 143(3A) & 143(3B) of the Income Tax Act, 1961, is liable to be set aside for having been passed without issuing a show cause notice-cum-draft assessment order, in light of the variation in declared income and the provisions of Section 144B of the Act and the Faceless Assessment Scheme, 2019. Assessee's Contention: The primary contention of the petitioner is that the assessment order was passed without the mandatory issuance of a show cause notice-cum-draft assessment order, which is a procedural requirement when there is a variation in the declared income. Revenue's Contention: The revenue, through its counsel, accepted notice and stated that it did not wish to file a reply, agreeing to argue the matter based on the available record in view of the directions proposed by the Court. The revenue's counsel also drew the Court's attention to a previous judgment of the same Court in W.P. (C) 5552/2021, stating its ratio would apply to the present case.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 143(3A),Section 143(3B),Section 156,Section 274,Section 270A,Section 144B

AI-generated summary — verify with the full judgment below

W.P.(C)5491/2021 Page 1 of 4

$~20 * IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of decision: 27.05.2021

+ W.P.(C) 5491/2021

MS LOKESH CONSTRUCTIONS P LTD .....Petitioner

Through: Mr. Gagan Kumar with Mr. Ashish

Parashar, Advocates.

versus

THE ASSISTANT COMMISSIONER OF INCOME TAX

..... Respondent

Through: Ms. Vibhooti Malhotra, Sr. Standing

Counsel.

CORAM: HON'BLE MR. JUSTICE RAJIV SHAKDHER HON'BLE MR. JUSTICE TALWANT SINGH

[Court hearing convened via video-conferencing on account of COVID-19]

RAJIV SHAKDHER, J.: (ORAL)

CM APPL. 17023/2021 1. Allowed, subject to just exceptions. CM APPL. 17024/2021 2. The prayer made in the captioned application is to grant exemption from filing requisite court-fee and sworn/notarised/affirmed affidavit. The captioned application is disposed of with a direction to the petitioner to place on record the duly sworn/notarised/affirmed affidavit and to deposit the requisite court-fee, within three days of the resumption of the normal and usual work pattern by this court.

Digitally Signed By:VIPIN KUMAR RAI Signing Date:31.05.2021 01:14:07 Signature Not Verified

W.P.(C)5491/2021 Page 2 of 4

W.P.(C) 5491/2021 and CM APPL. 17022/2021 [Application filed on behalf of petitioner, under Section 151 of the Civil Procedure Code, 1908, seeking stay on the operation of order passed by respondent, dated 07.04.2021.] 3. Via this writ petition, challenge has been laid to the assessment order dated 07.04.2021, passed under Section 143(3) read with Section 143(3A) & 143(3B) of the Income Tax Act, 1961 (in short, ‘the Act’), as also the consequential notice of demand issued under Section 156 of the Act, and notice for initiation of penalty proceedings issued under Section 274 read with Section 270A of the Act. 4. To be noted, the impugned assessment order concerns Assessment Year (AY) 2018-2019. 5. The principal grievance of the petitioner is that, the impugned assessment order was passed without issuance of a show cause notice-cum draft-assessment order. 6. Issue notice. 7. Ms. Vibhooti Malhotra, accepts notice on behalf of the respondent/revenue. 7.1 Ms. Malhotra says that, in view of the directions that we propose to pass, she does not wish to file a reply and will argue the matter based on the record, presently, available with the Court. 7.2. Accordingly, with the consent of the counsel for the parties, the writ petition is taken up for hearing and final disposal. 8. At the outset, Ms. Malhotra, fairly, draws our attention to the judgement passed by this Court, today, in W.P. (C) 5552/2021 [listed on our board today as Item No. 28], the ratio of which, according to her, will apply, to this matter, as well. Digitally Signed By:VIPIN KUMAR RAI Signing Date:31.05.2021 01:14:07 Signature Not Verified

W.P.(C)5491/2021 Page 3 of 4

9.

As indicated above, the respondent/revenue passed the impugned assessment order, without issuance of a show cause notice-cum-draft assessment order. 10. It is required to be noted that initially, the petitioner had declared its income as Rs.87,55,390/-; which was revised to Rs.73,59,500/-. 11. Via the impugned assessment order dated 07.04.2021, an addition of Rs.13,95,890/-, has been made to the declared income of the petitioner. 12. To our minds, since there was a variation in the declared income, the respondent was required to issue a show cause notice-cum-draft assessment order, in consonance with the provisions of Section 144B of the Act and the Faceless Assessment Scheme, 2019. [See: Judgement dated 27.05.2021, passed in W.P. (C) No. 5552/2021, titled YCD Industries vs. National Faceless Assessment Centre, Delhi] 13. Accordingly, the impugned assessment order, and the consequential notices issued, i.e., notice of demand issued under Section 156 of the Act, and notice for initiation of penalty proceedings issued under Section 274 read with Section 270A of the Act, are set aside. 14. Liberty is, however, given to the respondent/revenue to pass a fresh assessment order, albeit, as per law. 15. The respondent/revenue will grant a personal hearing to the authorised representative of the petitioner. 16. For this purpose, the respondent/revenue will convene a hearing via the videoconferencing mechanism. 17. The respondent/revenue will also indicate the date and time of the hearing, well in advance, to the petitioner via its registered e-mail id.

Digitally Signed By:VIPIN KUMAR RAI Signing Date:31.05.2021 01:14:07 Signature Not Verified

W.P.(C)5491/2021 Page 4 of 4

18.

The writ petition is disposed of in the aforesaid terms. The pending application shall stand closed.

RAJIV SHAKDHER, J.

TALWANT SINGH, J. MAY 27, 2021 sh/tr

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Digitally Signed By:VIPIN KUMAR RAI Signing Date:31.05.2021 01:14:07 Signature Not Verified

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