According to the provisions under Section 144B of the Income Tax Act, when hearing has been envisioned and incorporated, it is imperative to observe principles of natural justice as stipulated; held, a division bench of Justice Sunil P Deshmukh and Justice Abhay Ahuja, while adjudicating the matter in Piramal Enterprises Ltd. v. CIT; [WRIT PETITION (L) NO.11040 OF 2021.]
The petitioner carries on various businesses including pharmaceuticals comprising manufacturing pharmaceutical formulations as well as trading in pharmaceutical goods. It purchases raw material for manufacturing its formulations as well as purchases goods for trading. According to petitioner, in its profit and loss account, it breaks up expenditure in broad categories viz; cost of material consumed, purchase of stock in trade and change in inventory of finished goods work in progress and stock in trade. Its details are disclosed in schedule to profit and loss account. In the balance-sheet, inventory (closing stock) comprises the items raw material, work in progress, finished goods, stock in trade and spares and is given in consolidated figures. The petitioner submits that the aforesaid disclosures are made for understanding as to the amount shown in profit and loss account of income tax return tallies with annual accounts. It is being submitted that such a method of disclosure in return of income does not, in any way, affect the income declared or the correctness of amount declared in the profit and loss account or the return of income.
Since the return of income comprises fixed line items, the petitioner had to make the disclosures as aforesaid in particular form which practice it has been following from the beginning of filing of return of income electronically. The petitioner discloses all types of inventories (closing stocks) as is disclosed in annual accounts, in the balance-sheet. The petitioner also refers to that during course of assessment proceeding, various show-cause notices were issued from time to time seeking details and the petitioner had filed its replies with submissions with respect to issues sought to be raised. Sub-section (9) of section 144B declares that assessment made under section 143(3) or under section 144(4) referable to subsection (2) other than sub-section (8) on or after 1st 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.
The Court upon considering the aforesaid facts allowed the petition and stated that; “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. In the circumstances, when an assessee approaches with response to show cause notice, the request made by an assessee, as referred to in clause (vii) of sub section 7 of section 144B, would have to be taken into account and it would not be proper, looking at the prescribed procedure with strong undercurrent to have hearing on a request after notice, to say that petitioner would have opportunity pursuant to section 144C in the present matter, would intercept operation of the scheme contained under section 144B.”