Wp(C)/11389/2021 Of Corpus Christi Educational Society v. The Additional/Joint/Deputy Assistant Commissioner Of Income Tax Officer

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS MONDAY, THE 6 DAY OF DECEMBER 2021 / 15TH AGRAHAYANA, 1943 WP(C) NO. 11389 OF 2021 PETITIONER: CORPUS CHRISTI EDUCATIONAL SOCIETYKALATHIPADI, VADAVATHOOR P.O., KOTTAYAM-686010, REPRESENTED BY ITS ADDITIONAL SECRETARY MS.MARY ROY. BY ADVS.SRI.JOSEPH MARKOSE (SR.)SRI.V.ABRAHAM MARKOSSRI.ABRAHAM JOSEPH MARKOSSRI.ISAAC THOMASSRI.ALEXANDER JOSEPH MARKOSSRI.SHARAD JOSEPH KODANTHARA RESPONDENTS: 1THE ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX OFFICER, NEW DELHI-110001. NATIONAL E-ASSESSMENT CENTRE, 2THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, NATIONAL E-ASSESSMENT CENTRE, NEW DELHI-110001. NATIONAL E-ASSESSMENT CENTRE, 3INCOME TAX OFFICER, EXEMPTION WARD, KOTTAYAM-686001. 4THE PRINCIPAL COMMISSIONER OF INCOME TAX,THIRUVANANTHAPURAM-695001.THIRUVANANTHAPURAM-695001. 5PRINCIPAL COMMISSIONER OF INCOME TAX, PUBLIC LIBRARY BUILDING, W.P.(C) No.11389/21 -:2:- KOTTAYAM-686001. BY ADVS. P.K.RAVINDRANATHA MENON (SR.)ADV.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARDON 06.12.2021, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: W.P.(C) No.11389/21 BECHU KURIAN THOMAS, J. ----------------------------------------- W.P.(C) No.11389 of 2021 ---------------------------------------- Dated this the 6[th] day of December, 2021 JUDGMENT Petitioner impugns the order of assessment issued under section143(3) of the Income Tax Act, 1961 (for short, 'the Act'). Consequentialpenalty notice issued under section 274 of the Act is also assailed in thiswrit petition. 2. The limited challenge raised in this writ petition, for invoking thejurisdiction under Article 226, is the alleged violation of the principles ofnatural justice. According to the petitioner, the order of assessment hasbeen issued without serving the show-cause notice and the draftassessment order, as contemplated under section 144B(1)(xvi)(b) of theAct. 3. The e-Assessment Scheme was brought in by notification of2019. The said scheme was subsequently renamed as 'FacelessAssessment Scheme'. With effect from 01.04.2021, the notification foundits way into the statute book in the form of section 144B. The scheme ofFaceless Assessment under the aforesaid section is that after reckoningthe relevant material available on record, obtained pursuant to notices -:4:- issued under the provisions, a draft assessment order is prepared, eitheraccepting the income as per the return submitted by the assessee or bymaking a variation to the income so returned, and a copy of the draftassessment order is forwarded to the National Faceless AssessmentCentre (for short, 'the Centre'). Thereafter the Centre will examine thedraft assessment and finalise the same, in case no variation, prejudicial tothe interests of the assessee is proposed. However, if any variation,prejudicial to the interests of the assessee is proposed, then notice shallbe served upon the assessee calling upon him to show-cause as to why avariation should not be made. 4. The above scheme of statutory provision is incorporated with apurpose and is a facet of the principle of natural justice incorporated intothe statute. 5. Learned counsel for the petitioner contends that, whenrespondents issued Ext.P11 order of assessment, they acted, contrary tosection 144B, since, when a variation to the return of income submitted bythe petitioner was carried out, the same was made without issuing thedraft assessment order or show-cause notice. 6. A perusal of the documents produced by the petitioner includingthe return filed for the assessment year 2018-19 shows the petitioner hadsubmitted a return with “Nil” income and claimed exemption pursuant to W.P.(C) No.11389/21 -:5:- 4. The above scheme of statutory provision is incorporated with apurpose and is a facet of the principle of natural justice incorporated intothe statute. 5. Learned counsel for the petitioner contends that, whenrespondents issued Ext.P11 order of assessment, they acted, contrary tosection 144B, since, when a variation to the return of income submitted bythe petitioner was carried out, the same was made without issuing thedraft assessment order or show-cause notice. 6. A perusal of the documents produced by the petitioner includingthe return filed for the assessment year 2018-19 shows the petitioner hadsubmitted a return with “Nil” income and claimed exemption pursuant to W.P.(C) No.11389/21 -:5:- Ext.P2 order under section 10 of the Act. However, subsequently noticesunder section 142 of the Act were issued, for which the petitioner had fileda detailed reply, and it was thereafter that, the order under Section 143(3)was issued by the 1[st] respondent on 08.04.2021. A reading of theassessment order shows that, the assessing officer had varied the returnfiled by the petitioner and demanded an income tax of Rs.2,73,46,529/-,after noticing the failure of the assessee in filing an audit report physically.This disentitled the assessee from claiming exemption under section10(23C) of the Act. It is clear that there is a variation from the return filedby the petitioner. 7. The provisions of section 144B, as mentioned earlier, requiresthe draft assessment order and the show-cause notice to be furnished tothe assessee, eliciting his explanation. The impugned order ofassessment has varied the alleged return filed by the petitioner. Since themandate of the statue has been clearly infringed upon the assessmentorder falls foul of the principles of natural justice and hence is liable to beset aside. The decisions of the Delhi High Court in DJ Surfactants v.National E-Assessment Centre, Income Tax Department, New Delhiand Others [2021 (437) ITR 519 (Delhi)] and that in RMSI PrivateLimited v.National E-Assessment Centre, Delhi [(2021 (436) ITR 612(Delhi)] in this context are relevant. W.P.(C) No.11389/21 -:6:- 8. Accordingly, Ext.P11 order of assessment is set aside.Consequently, Ext.P14 penalty order shall also stand set aside. Havingregard to the circumstances of the case, the competent among therespondents shall serve the draft assessment order along with a show-cause notice to the petitioner, as expeditiously as possible, in a timebound manner and complete the proceedings in accordance with law,without further delay. The writ petition is allowed as above. Sd/- vps BECHU KURIAN THOMAS JUDGE W.P.(C) No.11389/21 APPENDIX OF WP(C) 11389/2021 PETITIONER'S/S' EXHIBITS EXHIBIT P1 TRUE COPY OF THE CERTIFICATE OFREGISTRATION DATED 15.6.1976 ISSUED BYREGISTRATION DATED 15.6.1976 ISSUED BY THE REGISTRAR OF SOCIETIES EXHIBIT P2 TRUE COPY OF THE ORDER DATED 13.2.2007ISSUED BY THE 4TH RESPONDENT ISSUED BY THE 4TH RESPONDENT EXHIBIT P3 TRUE COPY OF RETURN ACKNOWLEDGEMENT FOAY 2018-19 AY 2018-19 EXHIBIT P4 TRUE COPY OF THE INTIMATION DATED10.5.2019 ISSUED TO THE PETITIONER 10.5.2019 ISSUED TO THE PETITIONER EXHIBIT P5 TRUE COPY OF THE NOTICE DATED 23.9.2019ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P6 TRUE COPY OF THE NOTICE DATED 15.10.2020ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P7 TRUE COPY OF THE NOTICE DATED 18.12.2020ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P8 TRUE COPY OF THE PETITIONERS RESPONSEDATED 1.1.2021DATED 1.1.2021 EXHIBIT P9 TRUE COPY OF THE NOTICE DATED 4.2.2021ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P10 TRUE COPY OF THE PETITIONERS RESPONSEDATED 20.2.2021DATED 20.2.2021 EXHIBIT P11 TRUE COPY OF THE ASSESSMENT ORDER DATED8.4.20218.4.2021 EXHIBIT P12 TRUE COPY OF THE CIRCULAR DATED3.11.2020 ISSUED BY THE CBDT 3.11.2020 ISSUED BY THE CBDT EXHIBIT P5 TRUE COPY OF THE NOTICE DATED 23.9.2019ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P6 TRUE COPY OF THE NOTICE DATED 15.10.2020ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P7 TRUE COPY OF THE NOTICE DATED 18.12.2020ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P8 TRUE COPY OF THE PETITIONERS RESPONSEDATED 1.1.2021DATED 1.1.2021 EXHIBIT P9 TRUE COPY OF THE NOTICE DATED 4.2.2021ISSUED TO THE PETITIONER ISSUED TO THE PETITIONER EXHIBIT P10 TRUE COPY OF THE PETITIONERS RESPONSEDATED 20.2.2021DATED 20.2.2021 EXHIBIT P11 TRUE COPY OF THE ASSESSMENT ORDER DATED8.4.20218.4.2021 EXHIBIT P12 TRUE COPY OF THE CIRCULAR DATED3.11.2020 ISSUED BY THE CBDT 3.11.2020 ISSUED BY THE CBDT EXHIBIT P13TRUE COPY OF THE INTERIM ORDER DATED16.4.2021 IN WPC NO 4774 OF 2021 PASSEDBY THE DELHI HIGH COURT 16.4.2021 IN WPC NO 4774 OF 2021 PASSEDBY THE DELHI HIGH COURT EXHIBIT P14TRUE COPY OF THE NOTICE DATED 8.4.2021ISSUED BY THE 1ST RESPONDENT ISSUED BY THE 1ST RESPONDENT