K J FOUNDATION vs. ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX

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WP/1369/2022HC KarnatakaKAHC01002734202202 February 2022Bench: S SUNIL DUTT YADAV4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the petitioner had filed 'Nil' returns and the assessment order resulted in a variation, leading to a demand. In such circumstances, the procedure contemplated under Section 144B(xiv) of the Income Tax Act, which requires the issuance of a draft assessment order and adherence to the prescribed procedure, should have been followed. The Court noted that the learned counsel for the Department could not refute the petitioner's claim that this procedure was not followed. Consequently, the assessment order dated 30.03.2021, along with the computation sheet, demand notice, and penalty notice, were set aside. The matter was remitted back to the 1st respondent (Assessing Officer) to redo the assessment proceedings in compliance with the procedure under Section 144B(xiv) of the Income Tax Act. The writ petition was disposed of with these directions.

What were the facts?

The petitioner, K.J. Foundation, filed 'Nil' returns for Assessment Year 2018-19. The Assessing Officer (1st respondent) rejected the exemption claimed and passed an assessment order dated 30.03.2021 under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act. This order, along with a computation sheet, demand notice, and penalty notice, is under challenge. The petitioner contends that the procedure prescribed under Section 144B of the Act, specifically Clause (xiv) regarding draft assessment orders in case of variation, was not followed.

What were the issues?

1. Whether the assessment order dated 30.03.2021, passed for AY 2018-19, is liable to be quashed for non-compliance with the procedure prescribed under Section 144B(xiv) of the Income Tax Act, 1961, when the petitioner filed 'Nil' returns and a demand was raised based on variation. Assessee's Contention: The petitioner argues that since 'Nil' returns were filed and the Assessing Officer rejected exemption, leading to a variation and demand, the procedure under Section 144B(xiv) of the Income Tax Act, which mandates the passing of a draft assessment order and subsequent procedure, ought to have been followed. The learned counsel for the petitioner highlighted that this procedure was not adhered to. Revenue's Contention: The learned counsel for the Department was unable to controvert the petitioner's contention regarding the non-compliance with the prescribed procedure.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 143(3A),Section 143(3B),Section 144B,Section 144B(xiv)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 2ND DAY OF FEBRUARY, 2022 BEFORE THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV WRIT PETITION No.1369/2022 (T-IT) BETWEEN: K.J. FOUNDATION 58/1, THUBARAHALLI BEHIND SRIRAM SAMRUTHI APARTMENTS, WHITEFIELD ROAD, BANGALORE - 400 067. PAN: AABTK1178N REPRESENTED BY ITS TRUSTEE MR. DARAYUS KEKI PALIA.

… PETITIONER (BY SRI BALACHANDRAN B.S., ADVOCATE) AND: 1. ADDITIONAL/JOINT/DEPUTY/ASSISTANT

COMMISSIONER OF INCOME TAX/

INCOME-TAX OFFICER

NATIONAL E-ASSESSMENT CENTRE,

E RAMP, JAWAHARLAL NEHRU STADIUM

NEW DELHI - 110 003. 2. ASSISTANT COMMISSIONER OF INCOME TAX

EXEMPTION CIRCLE-1, BANGALORE,

UNITY BUILDING ANNEXE, MISSION ROAD,

BENGALURU - 560 027. 3. PRINCIPAL CHIEF COMMISSIONER OF

INCOME TAX, EXEMPTION

UNITY BUILDING ANNEXE,

MISSION ROAD,

BENGALURU - 560 027.

2 4. THE CENTRAL BOARD OF DIRECT TAXES

THROUGH THE CHAIRPERSON

DEPARTMENT OF REVENUE

GOVERNMENT OF INDIA

NORTH BLOCK,

NEW DELHI - 110 001. 5. UNION OF INDIA

THROUGH ITS FINANCE SECRETARY

DEPARTMENT OF REVENUE

MINISTRY OF FINANCE, 3RD FLOOR,

JEEVAN DEEP BUILDING,

SANSAD MARG,

NEW DELHI - 100 001. … RESPONDENTS (BY SRI K.V.ARAVIND, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED ASSESSMENT ORDER DATED 30.03.2021 PASSED BY THE R-1 FOR THE AY-2018-19 UNDER SECTION 143(3) R.W.S.143(3A) AND 143(3B) OF THE ACT ALONG WITH THE COMPUTATION SHEET DEMAND NOTICE AND PENALTY NOTICE VIDE ANNEXURE-G TO F3 AND ETC. THIS WRIT PETITION COMING ON FOR ORDERS THIS DAY, THE COURT, MADE THE FOLLOWING: ORDER Petitioner has filed the present writ petition seeking issuance of appropriate writ to set aside the assessment order dated 30.03.2021 passed by the 1st respondent for the assessment year 2018-19 under Section 143(3) read with Sections 143(3A) and 143(B) of the Income Tax Act

3 and has also sought for setting aside of the computation sheet, demand notice and penalty notice at Annexures - G1, G2 and G3 respectively. 2. Petitioner has contended that he has filed 'Nil' returns and the procedure prescribed under Section 144(B) of the Income Tax Act ought to have been followed and Section 144(B) Clause (xiv) contemplates passing of a draft assessment order and procedure to be followed thereon in the event of any variation. It is further submitted that in light of the 'Nil' returns filed by the petitioner and the Assessing Officer having rejected exemption and passed an assessment order, ought to have followed the procedure under Section 144B(xiv) of the Income Tax Act and ought to have been forwarded the draft assessment order and followed the procedure thereon. 3. Insofar as the said procedure not having been followed, learned counsel for the Department is unable to controvert the said contention.

4 4. Noticing that the petitioner had filed 'Nil' Returns and also noticing the order passed whereby demand has been raised on the basis of variation, it could be said that if there was variation, procedure of draft assessment order as contemplated under Section 144B(xiv) of the Income Tax Act ought to have been made and procedure prescribed ought to have been followed for completing the assessment proceedings. 5. In light of the above, assessment order at Annexure-G is set aside. So also the computation sheet, demand notice and penalty notice at Annexures - G1, G2 and G3 respectively are set aside. The matter is remitted back to respondent No.1 with a direction to redo the assessment proceedings in light of the procedure under Section 144B(xiv) of the Income Tax Act.

The writ petition is disposed off. Sd/- JUDGE VP

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