Income Tax Appellate Tribunal - Mumbai
Sahyadri Erectors Private ... vs National E-Assessment Centre, Delhi, ... on 12 March, 2026
IN THE INCOME-TAX APPELLATE TRIBUNAL "G" BENCH, MUMBAI BEFORE SHRI JUSTICE (RETD.) C. V. BHADANG, PRESIDENT & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 4396/MUM/2023 (A.Y. 2018-19) Sahyadri Erectors Private v/s. Income Tax Officer, Ward Limited बनाम - 13(2)(1) 7 t h Floor, Resham Bhavan, Aaykar Bhavan, Mumbai -
Veer Nariman Road, 400 020, Maharashtra Churchgate, Mumbai-400063, Maharashtra
स्थायी ले खा सं ./जीआइआर सं ./ PAN/GIR No: AAKCS7995R Appellant/अपीलाथी .. Respondent/प्रतिवादी Appellant by : Shri Mayank Patwari,Advocate & Shri Rishav Patawari, CA Respondent by : Shri Arun Kanti Datta,(CIT DR) Date of Hearing 30.01.2026 Date of Pronouncement 12.03.2026 आदे श / O R D E R PER PRABHASH SHANKAR [A.M.] :-
The present appeal arising from the appellate order dated 11.10.2023 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as "CIT(A)"] pertaining to assessment order passed u/s. 143(3) r.w.s. 144B of the Income-tax Act, 1961 [hereinafter referred to as "Act"] dated 23.09.2021 for the Assessment Year [A.Y.] 2018-19.
Page |2 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai
2. The grounds of appeal are as under:
1. On the facts and in the circumstances of the appellant's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in not quashing the assessment order passed by the AO u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961.
2. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the AO's action of making addition of Rs 1,95,00,00,000/-
u/s 68 of the Income Tax Act, 1961.
3. Brief facts of the case are that the assessee filed the return of income for the relevant year declaring 'Nil' income. Subsequently, its case was selected for scrutiny and the AO assessed the total income at Rs. 195 cr.by making entire addition of equivalent amount u/s 68 of the Act in respect to loan taken from M/s Reliance Commercial Finance Limited (RCFL), an NBFC during the relevant year. The assessee was asked by the AO to prove the identity and creditworthiness of the loan giver and the genuineness of this transaction. In response, it furnished loan sanction letter issued by RCFL and bank statements indicating the receipt of loan. The AO noted that the loan was apparently not genuine. It was noticed by him that the assessee company was non-functional, not doing any business and with no profit and having all the features of a paper-based entity only or a shell company since its incorporation in 19.12.2006. The loan sanction letter of the RCFL stated that the loan was given as working capital loan and it was secured against the Current Page |3 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai Assets which however, were of only Rs. 205,88,26,860/-, out of which Rs 205,88,14,000/- was money advanced to and rest was bank/cash balance. Against such meagre Current Assets, the lender advanced such a huge sum of Rs. 195 cr. which was beyond any ordinary prudence and was shrouded in mystery. The case was examined in the light of the three ingredients for examining the bonafide of cash credit and it was found that the credit giver was a RBI registered NBFC, therefore the identity was not under question. Secondly, as the balance sheet of the said NBFC showed significant loan funds from various banks, it had some sort of creditworthiness even though as the source of this huge loan had not been explained by the NBFC, the creditworthiness had not been proved in entirety. However, the most important test i.e. the test of genuineness of the transaction had not been proved. He observed that in the instant case, from the facts narrated above, it was evident that the said loan given by the NBFC to the assessee was not a loan transaction but something else. The NBFC loaned over 5% of its owned funds to an obscure entity having no creditworthiness whatsoever to repay such huge amount.
3.1 The AO further observed that the onus was on the assessee to prove that the loan transaction was genuine and that the apparent was real. The NBFC to whom notice u/s 133(6) was served over email Page |4 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai and through the e-filing portal also did not respond even after fresh notice sent as per new address provided by the assessee. He placed reliance on the landmark judgements of the hon'ble Apex Court in Sumati Dayal Vs CIT (214 ITR 801)and Durga Prasad More Vs CIT and McDowell Vs CTO holding that in absence of third party confirmation and explanation in respect of the loan of Rs. 195 cr. taken by the assessee from RCFL remained unjustified and was added to the income of the assessee as unexplained income u/s 68 of the Act.
4. Aggrieved, the assessee preferred appeal before the first appellate authority. It was submitted before him at the outset that the impugned assessment order was invalid, bad in law, without jurisdiction and/ or in excess of jurisdiction and was liable to be quashed on the ground that it was passed in gross violation of the principles of natural justice and contrary to the provisions of section 144B(1)(xvi)(b) of the Act wherein the procedure of conducting a Faceless assessment is provided which explicitly provide that the assessment unit shall after taking into account all the relevant material available on record, shall issue a show cause notice stating the variations proposed to be made to the assessee's total income which are prejudicial to the interest of the assessee and call him upon to submit as to why such proposed variations should not be made and shall serve such show cause notice on the Page |5 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai assessee through the NFAC. Thus, it is a mandate for the AO to issue a show cause notice in writing explicitly specifying the proposed variations. However, the AO erred in not furnishing a reasonable opportunity of being heard to the assessee by the issuance of a show cause notice and passed an impugned assessment order dated 23.09.2021 by alleging the loans as non-genuine and treating it as unexplained cash credits. Relevant parts of the section 144B(1)(xvi)(b) are reproduced as below:
(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
(c)assign the draft assessment order to a review unit in any one Regional Faceless Assessment Centre, through an automated allocation system, for conducting review of such order;
4.1 Further, it was argued before the ld.CIT(A) the provisions of section 144B(1)(xvi)(a) of the Act mandate the assessment unit of the NFAC to issue a draft assessment order in accordance with the income or loss determination proposal/ proposed variations as per the show Page |6 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai cause notice. The AO disregarded the provisions of the Act and the explicit procedure laid down to conduct a Faceless assessment.
4.2 Thus, it was contended that the AO had passed the impugned assessment order in gross violation of principles of natural justice and fair play, without jurisdiction which was bad in law, illegal, unjust and untenable. Further, on account of the pandemic prevailing in the country during the relevant assessment year, the Central Board of Direct Taxes vide Notification No.74/2021/F.No.370142/35/2020-TPL dated 25.06.2021 extended the time for completing assessments to 30.09.2021. Therefore, despite the extension of time limit for passing assessment orders till 30.09.2021, the action of the AO of passing the impugned order without providing sufficient opportunity to the appellant was in gross violation of the principles of natural justice. The impugned order was stated to be therefore invalid, bad in law and ought to be set aside.
4.3 In support of the above contentions, the assessee placed reliance upon the following judicial pronouncements wherein non issuance of a show cause notice or a draft assessment order led to quashing the impugned assessment order and deleting the additions made:
Page |7 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai a. Hon'ble High Court of Gujarat in the matter of Margita Infra vs. National E- Assessment Centre Delhi. It is quite clear from the very provision that the assessee is required to be provided an opportunity once there is a possibility of any variation which may turn prejudicial to the interest of the assessee. What is expected of the NFAC is to serve a notice calling upon the assessee to showcause as to why the proposed variation be not made. This has to be done by furnishing Draft Assessment Order along with showcause notice. It is in other words, statutory obligation of the to serve upon the assessee the show cause notice along with the draft assessment order for the assessee to be availed the opportunity with regard to the variation proposed. It goes without saying that calling upon the assessee as provided under clause (v) or (vi) or
(viii) and availing opportunity there under or its failure to utilise such opportunity or its failure to response would not permit NFAC or any authority to finalize the assessment once there is a variation proposed, prejudicial to the interest of the assessee.
b. Hon'ble High Court of Delhi in the matter of RMSI (P.) Limited vs. National E- Assessment Centre Delhi. Since in the present case, the impugned order has been passing without issuing a show cause notice a draft assessment order which has been mandated under section 144B(1)(xvi)(b) of the Act, the impugned assessment order dated 8th September, 2021 issued under section 143(3) read with section 144B of the Act is set aside and the Respondent was directed to issue a show cause notice within four weeks. The Respondent is at liberty to issue a draft assessment order/show cause notice to the petitioner and thereafter, the proceedings shall continue in accordance with law. c. Hon'ble High Court of Gujarat in the matter of Gandhi Realty (India) P Limited vs. Assistant/ Joint/ Deputy/Commissioner of Income Tax/ Assessing Officer. We are in total disagreement with the revenue that on account of issuance of notice u/s. 143(2) dated 22-9-2019 and opportunities provided earlier to the assessee, acceding to his request would be a mitigating circumstance so far as non-service of the Draft Assessment Order is concerned. The opportunity of furnishing the documents and hearing which has been given time and again and requests acceded to by the authority to the assessee at that stage would not eventually culminate into furnishing of the final assessment order without service of prior notice along with draft assessment order, if any additions are made to the prejudice of the assessee. It is a statutory requirement, as discussed hereinabove, more particularly when any assessment order is to be made which is likely to be prejudicial to the interest of the assessee. NFAC if would have served upon the assessee the draft assessment order, its presence on web portal would invariably there. In virtual regime, noticing of or presence or absence of trail of action is not a herculian task. Thus, in absence of any proof, the version of the respondent simply Page |8 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai cannot be accepted. We could further notice from the documents which have been furnished by the petitioner that authenticated copy of notice/ order is not served to the petitioner when otherwise all other documents on the web portal of the income tax department are existing. We have sought assistance from the learned advocate of both the sides to point out to us due service of the draft assessment order, as has been claimed by the respondent, however, the said order dated 12-4-2021 has been duly served to the petitioner, showcause notice which was claimed to have been issued along with the draft assessment order were surely missing. This being a simple case of statutory noncompliance of the provision, the same would amount to breach of not only principles of natural justice, but also, of the action in complete disregard to the statutory provision. And therefore, the order of the respondent passed without following the mandate given by the statute undersection 144B of the Act deserves to be interfered with by quashing and setting aside the same. In view of the foregoing reasons, the assessee contended before the ld.CIT(A) to quash the impugned assessment order 20-4-2021 so also the notice of demand issued by the respondent authority and any other proceedings initiated pursuant to the said.
19. However, we direct that the respon19. However, we direct that the respondent/revenue will be at liberty to proceed with the assessment process under the provisions of section 144B of the Act, as permissible under the law obviously after issuance of the prior notice-cum draft assessment order and on availing an opportunity to the petitioner. The petitioner shall file response and the objection to the same. Opportunity of hearing if is sought for, the same shall be accorded including opportunity of personal hearing. Let the procedure under section 144B of the Act be followed by the revenue scrupulously.
d. Hon'ble High Court in the matter of Piramal Enterprises Ltd. vs. Additional/ Joint/Deputy/Assistant Commissioner of Income Tax/ Income Tax Officer- Learned senior counsel Mr. Pardiwala, during the course of hearing, had drawn attention to 'Standard Operating Procedure' ( SOP ) for Assessment Unit under Faceless Assessment Scheme, 2019' under Circular FNo.PR.CCIT/SOP/2020-21 dated 19-11-2020 providing for, under its clause , that reasonable time is to be given to an assessee to comply with principles of natural justice. He had also referred to Circular F. No. PR.CCIT/NCAC/SOP/2020-21 dated 23-11-2020 to contend that personal hearing is to be allowed when there is response to DAO.
63. Principles of natural justice firmly run through fabric of section 144B(1) of the Income-tax Act, 1961. Whenever DAO, FDAO is prejudicial to the interest of assessee or RDAO is prejudicial to the interest of assessee in comparison to Page |9 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai DAO or FDAO, upon a response to show cause notice, personal hearing for oral submissions or to present its case before income tax authority is strongly entwined in the provisions on a request from an assessee unless it is absurd, strategised and/or intended to protract assessment etc. It would also emerge from various decisions, referred to above, ordinarily, such a request would not be declined.
64. Section 144B of the Income-tax Act, 1961 captioned 'Faceless Assessment' commences vide its sub-section (1) with a non- obstante clause and compulsively requires assessment u/ss 143(3) and 144 shall be by prescribed procedure contained in sub-section (1) of section 144B in the cases referred to in sub-section (2) thereof.
65. Sub-section (9) of section 144B declares that assessment made under section 143(3) or under section 144(4) referable to sub-section (2) other than sub-section (8) on or after 1 st day of April, 2021 shall be non est if such assessment is not made in accordance with the procedure laid down under section 144B. There is a telling/pronounced rigour, to follow the procedure under section 144B, lest the assessment would be non est.
66. Going by the provisions under section 144B, when hearing has been envisioned and incorporated, it is imperative to observe principles of natural justice as stipulated.
Further, reliance was placed on the decision of Hon'ble High Court of Bombay in the matter of Abacus Real Estate P Limited vs. Deputy Commissioner of Income Tax(2022) 284 Taxman 654 (Bom.)and Trendsutra Client Services P.Ltd.(2021) 283 Taxman 558.
4.4 In so far as the merits of the case are concerned, the assessee argued before the ld.CIT(A) that during the course of the assessment proceedings on being asked, the company submitted i. Copy of loan sanction letter from Reliance Commercial Finance Limited. ii. Copy of loan confirmation letter iii. Copy of bank statements highlighting the loan transaction iv. Nature of security as per the loan sanction letter v.
P a g e | 10 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai Details pertaining to the charge created on the book debts of the assessee company. vi. A copy of duly audited financial statements alongwith the auditor's report. Upon the perusal of the documentary evidences and proofs it is evident that the appellant company has discharged its onus to establish the genuineness of the transaction, identity and creditworthiness of the lender. The appellant company had availed the loan on behalf of its group concern, M/s Oceanmint Buildcon P Limited. The loan was availed and remitted to its group concern in the ordinary course of business and as per the commercial expediency. In the instant case, the appellant company availed the loan to the tune of Rs 195 cr. from RCFL, through proper banking channels. In the given case, the identity of the lender is beyond the doubt and the source of the receipt of loan has been duly explained. The identity and creditworthiness of the lender has been duly established. The Assessing Officer had issued a notice u/s 133(6) of the Act, to RCFL. However, it did not furnish any reply to the AO. It is pertinent to note that no field inquiry/ verification was undertaken by the him at the registered office of RCFL to satisfy the creditworthiness and genuineness of the third party. Reliance is placed on the decision of the Hon'ble High Court of Bombay in the matter of Commissioner of Income Tax -15, vs. Haresh D Mehta(2018) 407 ITR 492 (Bom) wherein it was held that no addition P a g e | 11 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai can be made merely on the basis of non-compliance of notices or non- attendance by the third parties. Further, reliance is placed on the decision of the Hon'ble High Court of Gujarat in the matter of Deputy Commissioner of Income Tax vs. Rohini Builders [2002]256ITR360(GUJ) wherein, it was held that when the appellant had discharged its initial onus of proving the capacity of the lender by submitting the supporting documents and evidences, subsequently the Assessing Officer could not raise doubts pertaining to the source of the source and hold assessee liable to prove the genuineness of the transactions.
5. In respect of section 144B(1)(xvi)(b)of the Act, we find that the ld.CIT(A) observed that the assessee did not bring anything on record to show that procedure mentioned in the section was followed. The assessee also placed reliance on various judgments. According to him, in all these judgments the Hon. High Courts had laid down the ratio that no variation in income should be made without giving show cause to the assessee. The ld.CIT(A) however, did not discuss the contentions elaborately and merely observed that the AO had allowed sufficient opportunities to the assessee before making the impugned addition. According to him, the replies of assessee were considered by the AO before finalizing the assessment order. On the basis of assessee's reply P a g e | 12 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai fresh notice under section 133(6) of the Act was issued to RCFL for compliance which showed that the AO finalized the assessment order at the fag end of time barring period. In view of the above discussion this ground of appeal was dismissed by the ld.CIT(A).
6. Before us, the ld.AR has vehemently agitated the conclusion drawn by the ld.CIT(A) claiming that the ground of appeal in this regard was not at all dealt with by him in the light of the specific provisions of section 144B(xvi)(b) of the Act. The ld.CIT(A) did not elaborate how the decisions of various High Courts as relied upon by the assessee were distinguishable.It is submitted that the assessment order is void ab initio as the mandatory procedure u/s 144B of the Act was not followed by the AO. In terms of section 144B(1)(xvi)(b), where any variation is prejudicial to the interest of assessee, the NFAC must issue a draft assessment order along with a SCN. However, the AO has not issued any SCN or draft assessment order and no opportunity of Video Conference was granted before passing the final assessment order. Thus, the AO has not followed the due procedure which vitiated the assessment order, thus the same is liable to be quashed. Reliance is placed on the judgement of Hon'ble Bombay High Court in the case of Trendsutra Client Services (P.) Ltd. vs. ACIT bearing W.P. no. 1083 of 2021 dated 14.09.2021.
P a g e | 13 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai
7. It may be stated here that the Bench in the course of hearing directed ld.CIT(DR) to submit a factual report on the issue of show cause notice and draft assessment order and also comments w.r.t. decision of court including the jurisdictional High Court on the matters canvassed by the ld.AR. The ld.CIT(DR) has furnished a written report dated 27.01.2026 from the AO i.e. ITO 13(2)(1),Mumbai and has also submitted his own report dated 30.01.2026 admitting that the said report is non committal on the issue of show cause notice or draft assessment, thereby implying that they were not issued or confronted to the assessee by the AO, thus admitting such lapse on part of the assessing authority. He however, placed reliance on certain decisions of High Court in the cases of Hero Fincorp Ltd 146 Taxmann,com 511(Del) and Take Solutions Ltd 155 taxmann.com 204(Mad) on the issue of show cause and draft assessment order. He also relied on the jurisdictional High Court decision in the case of Dhiraj L. Shah(2025) 181 Taxmann.com 949(Bom) wherein the AO allowed time of 3 days only vide a show cause notice u/s 144B(1)(xvi).The hon'ble Court quashed the assessment order and directed the AO to pass fresh assessment order u/s 144B of the Act. The ld.CIT(DR) requested to remand the matter to the AO as the mistakes on part of the AO are merely procedural in nature.
P a g e | 14 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai
8. We have carefully considered the contentions of the assessee, perused the records and have also gone through the relevant provisions of the Act. We have also perused the citations relied upon qua facts on record. It appears that the ld.CIT(A) has brushed aside the grounds of appeal in this regard without analysing it from the facts on record. No factual report in this regard appears to have been called from the AO. Further, there is no discussion as to why the cases laws relied upon were not applicable to the facts of the case. The relevant provisions have not be examined to find out their applicability to the facts of the case. Relevant extracts of the order in the case of Trendsutra Client Services Pvt. Ltd vs Assistant Commissioner of Income Tax in WP 1083 of 2021 on 14 September, 2021 reproduced as below for the sake of brevity:
"12. Having considered the submissions, it is necessary to note that the faceless assessment scheme, 2019 which was modified by notification No.60/2020 dated 13th August, 2020, prescribed in paragraph 5, the procedure for making assessment. For the first time, the principle of natural justice has been embodied in the piece of legislation itself. It would be relevant to note that after 1st April, 2021, the assessments are to be completed as per provisions of Section 144B of the Act. The objectives of the faceless assessment scheme provides for imparting greater efficiency, transparency and accountability. However, one of the features of the scheme is stated to be passing of objective, fair and just orders. The above objectives are visible on the website of the department itself. The benefit of the scheme is slated to include "improvement in quality of assessment". The relevant provisions of section 144B are set out as under:-
144B : Faceless Assessment:
P a g e | 15 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai (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
(c) ....
(xxv) (a) in case the variations proposed in the revised draft assessment order are not prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order, and - (A) in case the revised draft assessment order is in respect of an eligible assessee and there is any variation prejudicial to the interest of the assessee proposed in draft assessment order or the final draft assessment order, forward the said revised draft assessment order to such assessee; (B) in any other case, finalise the assessment as per the revised 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.
(b) in case the variations proposed in the revised draft assessment order are prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order, provide an opportunity to the assessee, by serving a notice calling upon him to show-cause as to why the proposed variation should not be made; (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. To summarize, Section 144B provides for (a) issuance of a show cause notice to the assessee, providing draft assessment order if P a g e | 16 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai any modification or variation prejudicial to interest of the assessee is proposed; (b) granting reasonable time to the assessee to submit its reply; (c) extension of time to reply by the assessee;(d) consideration of reply filed by the assessee before passing the assessment order; and (e) granting of personal hearing if a request is made in this regard and such request is the one prescribed. It has been clearly held by this Court that the principles of natural justice cannot be violated and a show cause has to be issued before passing any order prejudicial to the assessee.
13. It is clear from reading of Section 144B that the assessee is required to be given an opportunity in case the variation proposed in the draft assessment order upon its examination by NaFAC is prejudicial to the interest of assessee by having served upon him a show cause notice calling upon him to show cause as to why the proposed variation should not be made. This would be equally applicable in case variation is proposed in a revised draft assessment order which is prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order. In that case too an opportunity shall be provided to the assessee by serving a show cause notice calling upon him to show cause as to why the proposed variation should not be made. It has been further provided in sub-section (9) of Section 144B that in the event that the final assessment order is not made in accordance with procedure laid down under Section 144B for faceless assessment, the assessment order shall be non est. Thus, Sub-section (a) of Section 144B makes it amply clear that the Section 144B is a mandatory provision and non- compliance thereof would make the assessment order non-est.
14. xxxxxxxxxxxxxxxxxxxx
15. xxxxxxxxxxxxxxxxxxxxx
16. We find from the impugned assessment order that there are variations from the return filed by Petitioner by containing additions / disallowances. The final assessment order is not made in accordance with the procedure laid down under Section 144B (xvi)(b) of the Act as inspite of the variation being prejudicial to the interest of assessee, no opportunity has been provided to the assessee by having him served with a show cause notice as well as draft assessment order calling upon him to show cause as to why the proposed variation should not be made. Thus, the impugned assessment order dated 18th April, 2021 is non est as the assessment is not made in accordance with P a g e | 17 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai procedure laid down under Section 144B of the Act. Hence, we pass following order:-
(a) The assessment order issued by Respondent No.2 dated 18th April, 2021along with consequential demand notice is quashed and set aside.
(b) The Respondents may take such denovo proceedings as required in accordance with law."
8.1 Similar decisions have been rendered by the hon'ble Gujarat High in the case of Margita Infra vs National E-Assessment- Centre Delhi in R/Special Civil Application no.15756 of 2021 on 9 January, 2023 and by hon'ble Orissa High Court in the case of Sribasta Kumar Versus Union of India and another in WP © No.29279 of 2021,the hon'ble Delhi High Court in Bharat Aluminium Company Ltd. vs Union Of India & Ors. in WP© 14528 of 2021 on 14 January, 2022.
8.2 It may be stated here that hon'ble Apex court while dismissing Departmental SLP in the case of ACIT v. Trendsutra Client Services P. Ltd. (2023)453 ITR 219 (SC) in SLP(C) No. 21158/2022 observed as below:
"10. Application for amendment of cause title is allowed.
11. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court of Judicature at Bombay in Writ Petition No. 1083/2021, by which the High Court has set aside the Assessment Order on the ground that the procedure as required under Section 144B, namely, to furnish the draft Assessment Order upon the assessee has not been complied with, the Revenue has preferred the present Special Leave Petition.
P a g e | 18 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai
12. Shri Balbir Singh, learned ASG, has submitted that, in that case, the High Court ought to have remanded the matter to the Assessing Officer for a fresh order.
13. However, it is required to be noted that, in para 16(b), the High Court itself has reserved the liberty in favour of the Revenue to take such de novo proceedings as required in accordance with law, even if the matter is not remanded to the Assessing Officer, it will always be open for the Department to initiate fresh assessment proceedings in accordance with law and setting aside the Assessment Orders shall not come in the way of the Revenue."
8.3 We are of the considered opinion that the issue of allowing opportunity of hearing by way of issuance of show cause notice and draft assessment order is no more res integra as several Courts of law as stated above, have examined the issue at length before deciding the issue in favour of respective assessees. Therefore, we find sufficient merits in the contentions of the assessee that the impugned assessment order is void ab initio as the mandatory procedure u/s 144B of the Act was not followed by the AO. In terms of section 144B(1)(xvi)(b), where any variation is prejudicial to the interest of assessee, the NFAC must issue a draft assessment order along with a show cause notice which are apparently missing in this case, a fact on record which has also been confirmed by the ld.CIT(DR).Thus, the AO has not followed the due procedure which vitiated the assessment order, thus the same is liable to be quashed. Therefore, respectfully following the binding decision of hon'ble jurisdictional High Court in the case of Trendsutra Client P a g e | 19 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai Services P. Ltd.(supra), we quash the assessment order and set aside the appellate order. However, the Revenue may take such de novo proceedings as required in accordance with law.The legal ground no. 1 is , therefore allowed.
9. Since we have already quashed the assessment order, ground no.2 concerning merits of the addition made becomes academic in nature requiring no adjudication which however, is kept open.
10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 12/03/2026.
Sd/- Sd/- [Justice (Retd.)C. V. BHADANG] [PRABHASH SHANKAR] PRESIDENT ACCOUNTANT MEMBER Place: मुं बई/Mumbai दिनाुं क /Date 12.03.2026 Lubhna Shaikh / Steno
आदे श की प्रतितलतप अग्रेतिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयक्त / CIT
4. दिभागीय प्रदिदनदि, आयकर अपीलीय अदिकरण DR, ITAT, P a g e | 20 ITA No. 4396/Mum/2023 A.Y. 2018-19 Sahyadri Erectors Private Limited, Mumbai Mumbai
5. गार्ड फाईल / Guard file.
सत्यादपि प्रदि //True Copy// आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अतिकरण/ ITAT, Bench, Mumbai.