In W.P. No.9420 of 2022 -MADR HC- Madras High Court sets aside income tax assessment order, citing violation of procedure under Section 144B of the Income Tax Act
Justice C. Saravanan [05-09-2023]

Read Order: Devendran Coal International Private Limited v. The Income Tax Officer and Ors

Chahat Varma

New Delhi, September 22, 2023: The Madras High Court has ruled in favour of Devendran Coal International Private Limited (petitioner), by setting aside an assessment order passed by the Income Tax Officer. The court's decision was based on the finding that the Assessing Unit did not follow the procedure outlined in Section 144B of the Income Tax Act, as they failed to pass a draft assessment order.

In summary, the petitioner was aggrieved with the assessment order dated 30.03.2022. The initial assessment had been completed on 20.12.2019 under Section 143(3) of the Income Tax Act. However, during the COVID-19 pandemic lockdown period, the tax department attempted to reopen the petitioner’s assessment by sending a notice under Section 148 of the Income Tax Act. The petitioner's contention was that they had not received the notice, while the Department argued that the notice had been posted on a web portal, shifting the responsibility to the petitioner to respond to it.

The bench of Justice C. Saravanan observed that the impugned order had been passed to prevent the assessment from becoming time-barred under Section 153 of the Income Tax Act.

The bench ruled that in this case, the Assessing Unit did not pass a draft assessment order, as required by Section 144B of the Income Tax Act. Therefore, there was a significant violation of the prescribed procedure under Section 144B.

Consequently, the court decided to set aside the impugned order passed by the Income Tax officer and sent the case back to the Department for the issuance of a fresh order, taking into account the merits and following the proper procedure. The bench instructed that the quashed order should be treated as a draft assessment order/show cause notice, to which the petitioner should have the opportunity to respond.