Income Tax Act, 1961 – Sections 143(3), 144B, 68 and 143(1)(a) – The assessee, a private limited company engaged in cab services, filed its return of income for Assessment Year 2018-19, which was initially processed under Section 143(1)(a) with certain prima facie adjustments. The case was subsequently selected for scrutiny under Section 143(3), and the Assessing Officer (AO) assessed the total income at Rs. 62,64,421. The assessee challenged the assessment order, arguing that under the e-Assessment Scheme, 2019, the AO was required to issue a draft assessment order or show-cause notice before finalizing the assessment, which was not done. Additionally, the assessee disputed multiple additions, including disallowances of depreciation, late deposit of Employee Provident Fund (EPF) and Employees' State Insurance (ESI) contributions, interest on delayed TDS and GST payments, and discrepancies between turnover reported in financial statements and Form 26AS. The CIT(A) upheld the AO’s order, leading to an appeal before the Income Tax Appellate Tribunal (ITAT) - Whether the assessment order passed without serving a draft assessment order or show-cause notice under the e-Assessment Scheme, 2019, was valid, and whether the additions made by the AO were justified – HELD - The assessment order was invalid as it violated the mandatory provisions of Section 144B, which requires a show-cause notice or draft assessment order to be issued before modifying the returned income. The Tribunal relied on the Delhi High Court’s ruling in Anju Jalaj Batra v. National e-Assessment Centre, which held that failure to serve a draft assessment order or show-cause notice vitiates the entire assessment. The Tribunal also noted that the Revenue failed to produce any evidence showing compliance with the procedural requirements of the e-Assessment Scheme. As a result, the assessment proceedings were deemed to be non-est and were quashed. Consequently, other grounds related to additions under Sections 68 and 143(1)(a) were not adjudicated, as the assessment itself was declared void - Appeal allowed. The assessment order was set aside for being in violation of Section 144B, rendering the entire proceedings invalid
2025-VIL-210-ITAT-DEL
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH: ‘G’: NEW DELHI)
ITA No. 1756/Del/2023
Assessment Year: 2018-19
Date of Hearing: 29.11.2024
Date of Pronouncement: 31.01.2025
SUNSHINE CAB SERVICES PVT LTD
Vs
ITO
Assessee by: Sh. Alok Kumar Gupta, CA
Revenue by: Ms. Harpreet Kaur, Sr.DR
BEFORE
SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER
SHRI SUDHIR PAREEK, JUDICIAL MEMBER
ORDER
PER SUDHIR PAREEK, JM
This appeal has been preferred by the assessee against the order passed by National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘CIT(A)’) dated 24.04.2023 pertaining to Assessment Year 2018019, on the following grounds of appeal:
“1. The assessment though carried under E-Assessment Scheme 2019, no draft assessment order/show cause notice was served on the appellant as it was required under the scheme and otherwisely also before framing the assessment making it invalid and illegal
2. The Ld CIT(A) erred in confirming the deduction of depreciation allowed by the Id Assessing Officer as per Income Tax Act 1961 at Rs 2707671 though such depreciation claimed by the appellant in its return of income at Rs 2755671 was correct. Rs. - 12360
3. The Ld CIT(A) erred in law and on facts of the case in confirming the addition of Rs 457120 made by the Ld Assessing Officer on account of late deposit of Employee Contribution to PF & ESI as stipulated in the respective laws ignoring the fact that in most of the cases it was paid in time. Rs. -117708
4. The Ld CIT(A) erred in confirming the disallowance of Rs 45782 made by the Ld Assessing Officer for paying interest on late deposit of TDS. Rs -11789
5. The Id CIT(A) erred in confirming the disallowance of Rs 16289 made by the Ld Assessing Officer for paying interest on late deposit of Service Tax and GST. Rs. - 4195
6. The Ld CIT(A) erred in confirming the addition of Rs 2205110 made by the Ld Assessing Officer being difference of turnover reported in the profit and loss account and the same appearing in Form No 26AS and further erred in ignoring the reconciliation between these two being on record. Rs 143102
7. The Ld CIT(A) erred in confirming the sum of Rs 185245 being added by the Ld Assessing Officer u/s 68 of the Income Tax Act 1961 on account of difference in opening and closing balances of the bank account as per the books and the bank statements and further erred in ignoring the bank reconciliation statement being on record.. Rs.- 143102
8. The appellant craves leave to add, amend, delete and modify any grounds of appeal before/during the hearing of the appeal and all the above grounds are without prejudice to each other.”
2. Brief facts of the case are that the assessee M/s sunshine cab service Pvt. Ltd. is a private company filed its return of income for AY 2018-19 on 22.10.2018. On 28.05.2019 return treated defective, however on 21.09.2019 defect was remove and return has been duly processed. Before processing assessee was informed / show caused vide communication dated 01.11.2019 for prima facie some adjustment within the meaning of section 143(1)(a) of the IT Act, 1961. Then after, return processed on 08.12.2019, resulting refund of Rs. 32,75,483/- has been issued to the assessee. Further, the aforesaid ITR selected for scrutiny within the meaning of section 143(3) of the IT Act, 1961 with the issue of scrutiny “The assessee has disclosed substantial reduction in profit because of application of Income Computation & amp; Discloser standards as per schedule ICDS of ITR”. The Ld. AO, assessed at total income of Rs. 62,64,421/- u/s 143(3) of the Act and deemed total income u/s 115JB of the Act of Rs. 61,49,715/-.
3. Aggrieved by this, the assessee in appeal before the CIT(A), and the CIT(A) dismissed the appeal of the assessee and, hence, by aggrieved the same, this appeal is before the Tribunal.
4. Heard rival submissions and carefully scanned the material on record. Regarding ground no. 1, assailing the impugned order passed by the Ld. CIT(A), the Ld. AR submitted that according to e—assessment scheme 2019, it is established by law that before passing the assessment order the Ld. AO has to serve a Show Cause Notice / Draft Assessment Order on the assessee if any modification in the returned income is proposed or required. During the argument the Ld. AR referred the copy of scheme. The relevant part referred as under:
2(iii) “Assessment” means assessment of total income or loss of the assessee under sub-section (3) of section 143 of the Act.
2(xiii) e-assessment “means the assessment proceedings conducted electronically in e-proceeding facility through assessee’s registered account in designated portal.
5(viii) the assessment unit shall, after taking into account all the relevant material available on the record, make in writing, a draft assessment order either accepting the returned income of the assessee or modifying the returned income of the assessee, as the case may be, and send a copy of such order to the National e-assessment Centre:
5(x) the National e-assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to-
(b) provide an opportunity to the assessee, in case a modification is proposed, by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the draft assessment order; or (c) assign the draft assessment order to a review unit in any one Regional e-assessment Centre, through an automated allocation system, for conducting review of such order.
5(xi) the review unit shall conduct review of the draft assessment order, referred to it by the National e-assessment Centre whereupon it may decide toITA
(a) concur with the draft assessment order and intimate the National e-assessment Centre about such concurrence; or (b) suggest such modification, as it may deem fit, to the draft assessment order and send its suggestions to the National eassessment Centre:
5(xii) the National e-assessment Centre shall, upon receiving concurrence of the review unit, follow the procedure laid down in subparagraph (a) or sub-paragraph (b) of paragraph (x), as the case may be
the National e-assessment Centre shall, upon receiving suggestions for modifications from the review units, communicate the same to the Assessment unit;”
the assessment unit shall, after considering the modifications suggested by the Review unit, send the final draft assessment order to the National e-assessment Centre:
The National e-assessment Centre shall, upon receiving final draft assessment order, follow the procedure laid down in subparagraph (a) or sub-paragraph (b) of paragraph (x), as the case may be:”
6. In this regard, it is also submitted that the Ld. AO specifically mentioned in the order passed by him that notice u/s 143(2) of the Income Tax Act, 1961, was issued to assessee via online mode on 22.09.2019 which was served upon the assessee though his reported email on same date and in compliance of the notice, the assessee filed submissions through e-filing window on 09.10.2019 and thereafter vide intimation dated 15.10.2020, the assessee was informed that its case shall now be completed under faceless assessment scheme, 2019 which was also duly served upon assessee and in the course of proceedings, further, notice u/s 142(1) have been issued to the assessee on 21.12.2020 and which was also duly served and assessee filed part compliance on 05.01.2021. In this context, the Ld. AR referred about mentioned three notices, which is specifically mentioned in the order of the Ld. AO that bare perusal of these notices, it is quite manifested that in these notices there is no mention to issuance and service of show cause notice / draft assessment order, which is required by law. He also referred to the portal for scrutiny assessment proceedings in which also establishes that only in three notices were issued before made addition in question and no other notices were issued by the Ld. AO. There is no any whisper from the Revenue, in order to controvert above submission. It is also submitted by the Ld. AR that by lacking in proper serving of draft assessment order / show cause notice entire assessment proceedings vitiated and violate of principle of natural justice and liable to be quashed. In this regard, the Ld. AR referred the judgment passed by the Hon’ble Delhi High Court in the case of Anju Jalaj Batra vs. National E-Assessment Centre Additional Joint Deputy Assistant Commissioner of Income Tax Officer W.P.(C) 6233/2021 & C.M. Nos. 19732-19733/2021, in which Hon’ble Delhi High Court clearly held that the respondent / Revenue issued impugned assessment order without issuing a mandatory draft assessment order or show cause notice to the petitioner in accordance with the relevant provision of law liable to be set aside. The relevant operative para 6, 7 and 8 are reproduced as under:
“6.. This argument of the respondent/revenue is contrary to the statutory scheme, as provided in Section 144B of the Act. The relevant portions of Section 144B xvi (a) and (b) as well as Section 144B(9) of the Act are reproduced hereinbelow:-
"144B. (1) Notwithstanding anything to the contrary contained in any other provisions of this Act, the assessment under sub-section (3) of section 143 or under section 144, in the cases referred to in sub-section
(2). shall be made in a faceless manner as per the following procedure. Namely........
(xvi) the National Faceless Assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to
(a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or
(b) provide an opportunity to the assessee, in case any variation prejudicial to the interest of assessee is proposed, by serving a notice calling upon him to show cause as to why the proposed variation should not be made: or
Xxx xxx xxx
(9) Notwithstanding anything contained in any other provision of this Act, assessment made under sub-section (3) of section 143 or under section 144 in the cases referred to in sub- section (2) [other than the cases transferred under sub-section (8)], on or after the 1st day of April, 2021, shall be non est if such assessment is not made in accordance with the procedure laid down under this section."
(emphasis supplied)
7. In our opinion, learned counsel for the petitioner is correct in submitting that Section 144B of the Act has been violated and the assessment proceeding has been completed in the present case in violation of the principles of natural justice.
8. Consequently, the impugned assessment order dated 22nd April, 2021 issued under Section 144 read with Section 144B of the Act for the assessment year 2018-2019 as well as demand notice issued under Section 156 of the Act and notice for initiating penalty proceedings issued under Section 270A and 271AAC(I) of the Act are set aside..”
7. In the case in hand, there is no any evidence which shows that in compliance with the relevant provision of law, the Ld. Assessing Officer before passing impugned assessment order, show cause notice / draft assessment order was served upon assessee and respectfully following the above judicial precedent, in absence of proper services of show cause notice / draft assessment order, the Ld. AO was not justified to pass assessment order and if he did so then it is against the principle of natural justice and liable to be quashed and set aside, also, it is brought to our notice that assessee has filed additional evidence before CIT(A), refer page 186 to 208 of PB-II which was not considered by Ld. CIT(A). We find material substance in the submissions advance on behalf of the assessee / appellant and on the basis of foregoing discussion and submissions, we allow ground no. 1 of the assessee.
8. Other grounds are not required to adjudicate, in the light of the adjudication of Ground no. 1, as above and appeal of the assessee / appellant deserves to be allowed.
9. In the result, appeal by the assessee is allowed for statistical purposes, as indicated above.
Order pronounced in the Open Court on 31.01.2025.
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