Errors in Income Tax Orders: Delhi HC asks NFAC and CBDT to be more Cautious

A division bench of the Delhi High Court, while setting aside an assessment order passed under the new faceless assessment scheme, has directed the National Faceless Assessment Centre (NFAC) and the Central Board of Direct Taxes (CBDT) to be more cautious to avoid such mistakes.

The petitioner, PCJ Securities Private Limited contended before the Court that the petitioner never claimed depreciation of Rs.13,42,354/- in its return of income tax as mentioned in the Show Cause Notice and in the Assessment Order. He states that only a depreciation of Rs.2,50,425/- was claimed by the petitioner. He also states that the demand raised vide demand notice dated 30 March, 2022 do not pertain to the petitioner. th 4. He further states that the petitioner is assessed at Delhi whereas the Show Cause Notice dated 29 March, 2022 of Rs.2,32,08,308/- is patently incorrect and has no nexus with the addition made.

He further statesit was further contended that the petitioner is assessed at Delhi whereas the Show Cause Notice dated 29 March, 2022 of Rs.2,32,08,308/- is patently incorrect and has no nexus with the addition made.

Before the High Court, the department admitted that there are errors apparent on the face of the record. He, on instructions, states that the matter be remanded back to the Assessing Officer for de novo assessment in accordance with law.

Quashing the order and the demand notice, a bench of Justice Manmohan and Justice Dinesh Kumar Sharma observed that “This Court is actually surprised that despite an elaborate mechanism of checks and balances and multiple authorities like (assessment units, verification units, technical units, review units, Regional Faceless Assessment Centres and National Faceless Assessment Centre) being set up under Section 144B of the Act, such glaring mistakes can happen. This Court is also of the view that faceless assessment does not mean that no responsibility can be fixed for passing such an erroneous order.”

While concluding, the Court added that “The PCIT, National Faceless Assessment Centre is directed to be more cautious while passing the Assessment Orders and the CBDT is directed to ensure that such glaring mistakes do not occur in the future.”