Wp(C)/14181/2021 Of Popular Vehicles And Services Limited v. The Additional/Deputy/Assistant Commissioner Of Income Tax,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. 14181 OF 2021 PETITIONER: POPULAR VEHICLES AND SERVICES LIMITEDKUTTUKARAN CENTRE, MAMANGALAM, ERNAKULAM-682 025, REPRESENTED BY ITS DIRECTOR, FRANCIS K PAUL. BY ADVS.V.ABRAHAM MARKOSJOSEPH MARKOSE (SR.)ABRAHAM JOSEPH MARKOSISAAC THOMASP.G.CHANDAPILLAI ABRAHAMALEXANDER JOSEPH MARKOSSHARAD JOSEPH KODANTHARA RESPONDENTS: 1THE ADDITIONAL/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX,INCOME TAX OFFICERNATIONAL E- ASSESSMENT CENTRE, NEW DELHI-110 001. 2THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, NATIONAL E- ASSESSMENT CENTRE, NEW DELHI-110 001. 3THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIR 2 91), KOCHI-682 018. 4THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOCHI-682 018. BY ADVS.P.K.RAVINDRANATHA MENON (SR.)JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON06.12.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: BECHU KURIAN THOMAS, J ................................................ W.P.(C) NO.14181 OF 2021 …........................................ Dated this the 6[th] day of December, 2021 JUDGMENT Petitioner is challenging Ext.P7 order ofassessment issued under the Income Tax Act 1961, (forshort the Act) for the assessment year 2018-19. 2. By Ext.P8 notification dated 12/09/2019 issued in exercise of the powers under Section 143(3A), ofthe Act, the Ministry of Finance had created a system ofelectronic assessment known as the E-assessmentScheme 2019. The aforesaid Scheme wassubsequently renamed and modified, by notificationdated 13/08/2020 as the “Faceless AssessmentScheme”, which has now transformed into Section144B of the Act with effect from 1/04/2021. Since theimpugned assessment order is dated 31.03.2021, theassessment was purportedly carried under the Faceless Assessment Scheme, (hereinafter referred to as theScheme). 3. As per the procedure for assessment provided under Clause 5 of the Scheme, after an intimation isgiven that the assessment will be completed as per theScheme, a requisition is required to be issued forobtaining information. Thereafter, a draft assessmentorder ought to be prepared by the assessing unit whichwill be send it to the National e-assessment Centre,who shall, if it intends to modify the return filed by theassessee, issue a showcause notice, calling upon theassessee to explain why the assessment should not becompleted as per the draft assessment order. 4. The specific procedure to be followed once a draft assessment order is prepared, proposing tomodify the return of the assessee is dealt with in clause5(xvi) (a) & (b) of the Scheme. For the purpose ofeasier comprehension the said provision is extracted asbelow:- “5.Procedure for assessment (1) Theassessment under this scheme shall be madeas per the following procedure, namely: xxxxxx (xv) the assessment unit shall, whilemaking draft assessment order, providedetails of the penalty proceedings to beinitiated therein, if any; (xvi) the National e-assessment Centreshall examine the draft assessment orderin accordance with the risk managementstrategy specified by the Board, includingby way of an automated examination tool,whereupon it may decide to, xxxxxxxx (a) finalise the assessment as per thedraft assessment order and serve a copy ofsuch order and notice for initiatingpenalty proceedings, if any, to theassessee, along with the demand notice,specifying the sum payable by, or refundof any amount due to, the assessee on thebasis of such assessment; or (b) provide an opportunity to theassessee, in case a modification isproposed, by serving a notice calling uponhim to showcause as to why the assessmentshould not be completed as per the draftassessment order; or” (xvi) the National e-assessment Centreshall examine the draft assessment orderin accordance with the risk managementstrategy specified by the Board, includingby way of an automated examination tool,whereupon it may decide to, xxxxxxxx (a) finalise the assessment as per thedraft assessment order and serve a copy ofsuch order and notice for initiatingpenalty proceedings, if any, to theassessee, along with the demand notice,specifying the sum payable by, or refundof any amount due to, the assessee on thebasis of such assessment; or (b) provide an opportunity to theassessee, in case a modification isproposed, by serving a notice calling uponhim to showcause as to why the assessmentshould not be completed as per the draftassessment order; or” 5. Under the Scheme, once a show cause notice is issued under clause 5(xvi)(b), then, as per clause(xxii), the National e-assessment Centre will have tofinalize the draft assessment through two modes. The WP(C) NO. 14181 OF 2021 first mode is to finalize the proposed assessment if itdoes not cause prejudice to the assessee. However, ifeven after response from the assessee, a modification,to the prejudice of the assessee is proposed then, onemore opportunity ought to be granted by servinganother notice to the assessee and based upon thatresponse finalize the draft assessment order. Theaforesaid procedure is dealt with in clause 5(xxii) and (xxv) which are extracted below:- “(xxii) the assessee may, in a case whereshow-cause notice under sub clause(b) ofclause (xvi) has been served upon him,furnish his response to the National e-assessment centre on or before the dateand time specified in the notice or withinthe extended time, if any; (xxv) the National e-assessment Centreshall, upon receiving the revised draftassessment order, (a) in case no modification prejudicial to the interest of the assessee is proposedwith reference to the draft assessmentorder, finalise the assessment as per theprocedure laid down in sub-clause (a) ofclause (xvi); or (b) in case a modification prejudicial tothe interest of the assessee is proposedwith reference to the draft assessmentorder, provide an opportunity to theassessee, by serving a notice as per the procedure laid down in sub-clause (b) ofclause(xvi);” 6. The grievance of the petitioner against theimpugned order of assessment, in the instant case, isthat the Assessing Officer proposed to modify thereturn filed by the petitioner without issuing themandatory showcause notice contemplated underClause 5(xvi)(b) of the Scheme and hence, according tothe petitioner, the assessment order itself is bad inlaw. 7. A statement has been filed on behalf ofrespondents, pointing out that the assessee had e-filedits original return for 2018-19 on 31/10/2018 and onfinding inconsistencies in the return, a communicationwas sent on 23/03/2019. Thereafter the return wasprocessed and after selecting the case for scrutiny,assessment was carried out under the scheme.Respondents further stated that a notice dated22/09/2019 was issued under Section 143(2) andthereafter a notice under Section 142(1) dated WP(C) NO. 14181 OF 2021 7 19/11/2020 was issued apart from letters dated19/02/2021 and 15/03/2021. Respondents pleadedthat in response, assessee furnished information on03/10/2019, 18/01/2021, 12/03/2021 and 21/3/2021and thereafter the assessment proceedings werecompleted on 31/03/2021 adding an amount ofRs.12,09,42,393/- to the total income. 8. I have considered the rival contentions, raised by the learned Senior Counsel Sri.Joseph Markos dulyinstructed by Sri.Alexander Joseph Markos as well asthe learned Standing Counsel Sri.Jose Joseph on behalfof respondents. 9. On a perusal of the order of assessment, it is WP(C) NO. 14181 OF 2021 7 19/11/2020 was issued apart from letters dated19/02/2021 and 15/03/2021. Respondents pleadedthat in response, assessee furnished information on03/10/2019, 18/01/2021, 12/03/2021 and 21/3/2021and thereafter the assessment proceedings werecompleted on 31/03/2021 adding an amount ofRs.12,09,42,393/- to the total income. 8. I have considered the rival contentions, raised by the learned Senior Counsel Sri.Joseph Markos dulyinstructed by Sri.Alexander Joseph Markos as well asthe learned Standing Counsel Sri.Jose Joseph on behalfof respondents. 9. On a perusal of the order of assessment, it is revealed that the assessing Officer had, after calling forthe objections of the assessee, decided to modify thereturn submitted by the assessee. By virtue ofmodification contemplated by the National e-assessment Centre the provisions of Clause 5(xvi)(b) ofthe Scheme gets automatically attracted thereby WP(C) NO. 14181 OF 2021 entitling the assessee to be served with a notice callingupon him to showcause, as to why the assessmentshould not be completed as per the draft assessmentorder. 10. On a perusal of the assessment order, I findthat, the assesee was never served with a draftassessment order or the showcause notice whileproposing to modify the return submitted by thepetitioner. There is a clear violation of the procedureinvolved in arriving at the assessment order. Therespondents failed to serve the showcause notices orthe draft assessment order upon the assessee. 11. When the decision making process is contrary to law or is vitiated, jurisdiction under Article 226 of theConstitution of India can be invoked. Accordingly, Ifind that there is violation of the procedure whileissuing the assessment order Ext.P7. Therefore Ext.P7is set aside and the 1[st] respondent- Assessing Officer isdirected to reconsider the case of the petitioner by WP(C) NO. 14181 OF 2021 issuing the draft assessment order and the necessaryshowcause notice as contemplated under the FacelessAssessment Scheme in Ext.P8 and after eliciting theobjections/explanations of the assessee within areasonable time, pass fresh orders thereon, inaccordance with law, in a time bound manner. This writ petition is allowed as above. AJM Sd/-BECHU KURIAN THOMASJUDGE APPENDIX OF WP(C) 14181/2021 PETITIONER’S EXHIBITS: Exhibit P1Exhibit P2 TRUE COPY OF THE ORDER DATED 28.6.2021 PASSED BY THIS HONOURABLE COURT IN WPC NO 11389 OF 2021. TRUE COPY OF THE JUDGMENT DATED 27.5.2021 PASSED BY THE DELHI HIGH COURT IN WP NO 5552/2021. Exhibit P3 TRUE COPY OF THE REVISED RETURN ACKNOWLEDGEMENT FOR AY 2018-19 DATED 25.3.2019. Exhibit P4Exhibit P5Exhibit P6 TRUE COPY OF THE NOTICE DATED 19.11.2020 ISSUED UNDER SECTION 142(1) OF THE INCOME TAX ACT 1961 BY THE 1ST RESPONDENT. TRUE COPY OF THE NOTICE DATED 15.3.2021 ISSUED BY THE 1ST RESPONDENT. TRUE COPY OF THE REPLY DATED 19.3.2021 TO EXHIBIT P5 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT. Exhibit P7 TRUE COPY OF THE ASSESSMENT ORDER DATED 31.3.2021 ISSUED BY THE 1ST RESPONDENT. Exhibit P8 TRUE COPY OF THE NOTIFICATION NO 3264(E) DATED 12.9.20219 INTRODUCING E-ASSESSMENT SCHEME 2019 OF THE CENTRAL GOVERNMENT. Exhibit P9 TRUE COPY OF THE NOTIFICATION NO SO 2745(E) DATED 13.8.2020 ISSUED BY THECENTRAL GOVERNMENT. Exhibit P10 TRUE COPY OF THE GRIEVANCE PETITION DATED 1.4.2021 FILED BY THE PETITIONER BEFORE THE 1ST RESPONDENT NATIONAL E ASSESSMENT CENTRE. WP(C) NO. 14181 OF 202111 Exhibit P11TRUE COPY OF THE ORDER DATED 3.5.2021PASSED BY THE 1ST RESPONDENT NATIONALE ASSESSMENT CENTRE.Exhibit P12TRUE COPY OF THE JUDGMENT REPORTED IN1994 KLJ TAX CASES 24. RESPONDENT’S EXHIBITS: NIL AJM //TRUE COPY// PA TO JUDGE