2021 (8) TMI 1343 - HC - Income Tax

Validity of Faceless Assessment - Necessity of issuance of a prior show cause notice and draft assessment order before issuing the final assessment order - HELD THAT - Since in the present case no prior Show Cause Notice as well as draft assessment order had been issued before passing the impugned assessment order, there is a blatant violation of principles of natural justice as well as mandatory procedure prescribed in Faceless Assessment Scheme and as stipulated in Section 144B of the Act. Keeping in view the aforesaid facts, the impugned assessment order, notice of demand and notice of penalty dated 19 th April, 2021 for the Assessment Year 2018-19 are set aside and the matter is remanded back to the Assessing Officer, who shall issue a draft assessment order and thereafter pass a reasoned order in accordance with law

Summary

Issues involved:
Challenge to assessment order, notice of demand, and notice of penalty under the Income Tax Act, 1961 for the Assessment Year 2018-19 based on breach of principles of natural justice and failure to issue a Show Cause Notice-cum-draft assessment order.

Analysis:

1. The petitioner filed a writ petition challenging the assessment order, notice of demand, and notice of penalty dated 19th April 2021 under the Income Tax Act, 1961 for the Assessment Year 2018-19, alleging a breach of principles of natural justice due to the absence of a mandatory Show Cause Notice-cum-draft assessment order before the final assessment order was passed.

2. The counsel for the Petitioner argued that the respondent/revenue failed to issue the required Show Cause Notice and draft assessment order, violating the principles of natural justice. In contrast, the counsel for the Respondent-Revenue contended that the final assessment order was issued without a formal Show Cause Notice due to program and systemic glitches, asserting that the petitioner had sufficient opportunities to provide necessary details and make submissions, thus denying any breach of natural justice.

3. The Court noted that Section 144B (7) of the Income Tax Act mandates the issuance of a prior Show Cause Notice and draft assessment order before the final assessment order is issued. The Court emphasized the importance of following the procedures outlined in the "Faceless Assessment Scheme" and Section 144B to ensure compliance with the law and principles of natural justice.

4. As no prior Show Cause Notice or draft assessment order was issued in the present case before the impugned assessment order was passed, the Court concluded that there was a clear violation of principles of natural justice and the prescribed procedure under the Faceless Assessment Scheme and Section 144B of the Act.

5. Consequently, the Court set aside the impugned assessment order, notice of demand, and notice of penalty for the Assessment Year 2018-19, remanding the matter back to the Assessing Officer. The Assessing Officer was directed to issue a draft assessment order and subsequently pass a reasoned order in compliance with the law.

6. The Court disposed of the writ petition and pending application with the above directions, instructing the order to be uploaded on the website immediately and a copy to be sent to the learned counsel via email for reference and further action.