Bombay High Court
Kbc Advanced Technologies Pvt Ltd vs Assistant Comissioner Of Income Tax ... on 27 January, 2025
Author: M.S.Sonak
Bench: M.S.Sonak
2025:BHC-OS:1267-DB KBC Advanced Technologies Pvt Ltd v Assistant
4-oswp-3130-2022-J-F.docx
Amol
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3130 OF 2022
1. KBC Advanced Tech,
C - 304, Delphi CHS,
Hiranandani Gardens,
Powai, Mumbai - 400076 ...Petitioner
VERSUS
1. Assistant Commissioner of Income-tax
Circle 15(1)(2), Mumbai,
Room No. 483A, 4th Floor,
Aayakar Bhavan, M. K. Road,
Mumbai - 400020
2. Additional/Joint/Deputy/Assistant
Commissioner of Income-tax/Income-tax
Officer,
National Faceless Assessment
Delhi
AMOL
PREMNATH
JADHAV 3. Union of India,
Digitally signed by
AMOL PREMNATH Through the Joint-Secretary
JADHAV
Date: 2025.01.28
16:20:04 +0530
& Legal Adviser, Branch Secretariat
Department of Legal Affairs,
Ministry of Law and Justice,
2nd Floor, Aayakar Bhavan, M.K. Marg,
New Marine Lines, Mumbai - 400020 ...Respondents
__________________________________________________________
A PPEARANCES -
Mr Manish Kanth, i/b, Mr Atul K Jasani, for the Petitioner.
Mr Suresh Kumar, for the Respondent.
__________________________________________________________
CORAM : M.S.Sonak &
Jitendra Jain, JJ.
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DATED : 27 January 2025
ORAL JUDGMENT (Per MS Sonak J):-
1. Heard learned Counsel for the parties.
2. Rule. The Rule is made returnable immediately at the
request of and with the consent of the learned Counsel for the
parties.
3. This Petition concerns assessment year 2017-18.
4. The Petitioner seeks relief in terms of prayer clauses (a)
and (b), which read as follows: -
"a. issue a Writ of Certiorari or writ in the nature of
Certiorari or any other appropriate writ, order or direction
under Article 226 of the Constitution of India calling for
the records of the Petitioner case and after examining the
legality and validity thereof quash and set aside the
Impugned Penalty Order dated 16th March 2022, the
Impugned Penalty Notice dated 30th March 2021, the
Impugned Assessment Order dated 30 th March 2021, the
Impugned Demand Notice dated 30 th March 2021 and, the
Impugned Recovery Notice dated 30th December 2021
passed by the Respondent;
b. issue a Writ of Mandamus or a writ in the nature of
Mandamus or any other appropriate writ, order or
direction under Article 226 of the Constitution of India
ordering and directing the Respondent by themselves,
their subordinate, servants and agents to forthwith (I)
withdraw and/or cancel the Impugned Penalty Order
dated 16th March 2022, the Impugned Penalty Notice
dated 30th March 2021, the Impugned Demand Notice
dated 30th March 2021 and, the Impugned Recovery
Notice dated 30th December 2021 passed by the
Respondent respectively;"
5. Mr Manish Kanth, learned Counsel for the Petitioner,
submits that the order dated 30 March 2021 (Exhibit B, pages
50 to 57 of the paper book) is only a draft assessment order
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and not a final assessment order. He submits that based on
such a draft assessment order, the impugned demand notice
dated 30 March 2021, the impugned penalty order dated 16
March 2022, and the consequential recovery notice dated 30
December 2021 could never have been issued.
6. Mr Kanth, in the alternative, submitted that if the order
dated 30 March 2021 (Exhibit B) is to be regarded as a final
assessment order (which, according to him, it is not), then it
must be set aside because it was never preceded by any draft
assessment order, which is the requirement under the law.
7. On the above grounds, Mr Kanth submitted that the
Rule in this Petition must be made absolute.
8. Mr Suresh Kumar learned Counsel for the Respondent
invited our attention to the affidavit in reply filed by Mr
Eknath Ganpat Abhang, Deputy Commissioner of Income Tax,
Circle-15(1)(2), Mumbai. He focussed on the statements in
paragraph 4(iii) and paragraph 5.7(iii) of this affidavit. He
submitted that the order dated 30 March 2021 (Exhibit B)
was a final assessment order. He submitted that the impugned
demand, penalty and recovery notices were based on this final
assessment order. Accordingly, he submitted that no reliefs be
granted to the Petitioner.
9. The rival contentions now fall for our determination.
10. At the outset, we refer to the order dated 30 March
2021 at Exhibit B pages 50 to 58 of the paper book. Though
this order is styled as an 'assessment order, ' the record shows
that any draft assessment order never preceded this order.
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That apart, we refer to Clause 8 of this order, which reads as
follows: -
"8. As per the provisions of section 144C(2) of the
Income Tax Act, 1961, assessee may either accept the
variations mentioned in this order or file its objections
before DRP and before the undersigned within 30 days from
the receipt of this order. If no objection is received within
the time, assessment shall be completed on the basis of this
draft order."
11. The circumstance that the order dated 30 March 2021
was never preceded by a draft assessment order coupled with
the above-quoted Clause 8 clarifies that the order dated 30
March 2021 was only a draft assessment order. Clause 8
explicitly refers to the provisions of Section 144C(2) of the
Income Tax, 1961 and calls upon the assessee to either accept
the variations mentioned in the order or to file objections
before DRP and before the issuing authority within 30 days of
receiving this order. Clause 8 concludes by stating that if no
objection is received within time, assessment shall be
completed "on the basis of this draft order".
12. Besides, in paragraphs 3, 4.5 and 5.3.3 of the order
dated 30 March 2021, there is a reference to 'proposed
additions'. This is another circumstance showing that the
order dated 30 March 2021 is nothing but a draft assessment
order and not some finalized assessment order.
13. Mr Suresh Kumar's submission, based upon the
statements in paragraphs 4(iii) and 5.7(iii) can be best
answered by transcribing the statements.
"4(iii) During the course of scrutiny assessment
proceedings, the A.O. observed that the petitioner-assessee
entered into specified international transaction and
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therefore, made reference to the Transfer Pricing Officer for
computing arm's length price. Also, necessary details were
called for and examined by the then A.O. Accordingly, after
receipt of order u/s.92CA(3) of the Act dt. 25.01.2021
passed by the T.P.O., the A.O. prepared Draft Assessment
Order on 22.03.2023. The same was approved by the Range
Head on 23.03.2023. Subsequently, the draft assessment
order was sent to Review Unit on 24.03.2023. The Review
Unit has approved the draft assessment order on 27.03.2021.
The draft assessment order was pending for signature at the
Faceless Unit for service through NaFAC. As the Review Unit
has approved the Draft Assessment Order on 27.03.2021, the
FAO has putup the Final Assessment order for approval on
30.03.2021. The Range Head has approved the same on
30.03.2021. Accordingly, the NaFAC issued Final Assessment
Order on 30.03.2021 u/s.143(3) r.w.s. 143(3A) & 143(3B) of
the Act determining income of Rs.3,44,67,019/-. Hereto
annexed and marked as Exhibit-R-1 is the copy of Order
Sheet Notings reflecting the chronological order of events.
5.7(iii) In the case of the Petitioner the mandatory procedure
as discussed in above was not followed by the Faceless
Assessing Officer (FAO) and instead of passing the Draft
assessment order, the FAO has passed Final Assessment Order
i.e. order u/s.143(3) r.w.s 143(3A) & 143(3B) of the Act
therefore, the consequential Demand Notice, Penalty order
and Recovery letter are issued. In this regard, it is to state
that the FAO has prepared the Draft Assessment Order, which
was pending for signature before the NaFAC. Subsequently,
the FAO has passed Final Assessment Order."
14. The above statements virtually admit that mandatory
procedures were not followed but seek to apportion the blame
on the faceless assessing officer. In any event, based on the
above statements relied upon by Mr Suresh Kumar, we cannot
hold that the order dated 30 March 2021 is the final
assessment order and not a draft assessment order.
15. Based on a draft assessment order, the Respondents
were not justified in issuing the impugned demand notice
dated 30 March 2021, penalty order dated 16 March 2022,
and recovery notices dated 30 December 2021. Accordingly,
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all these are liable to be set aside and are hereby quashed and
set aside.
16. Since we have held that the order dated 30 March 2021
was only a draft assessment order, it cannot be set aside.
However, based on this draft assessment order, the
Respondents could not have made any tax, or penalty
demands or sought recovery of tax or penalty.
17. The Rule is accordingly made absolute in the above
terms without any costs order.
18. All concerned to act on an authenticated copy of this
order.
(Jitendra Jain, J) (M. S. Sonak, J)
