2021 (11) TMI 1126 - HC - Income Tax

Reopening of assessment u/s 147 - Denial of natural justice - necessity to provide sufficient opportunity to the petitioner to respond - AO proceeded to assess the assessee by the orders impugned in this case when they failed to respond within 48 hours of serving the show cause notice - HELD THAT - Consideration of the objections raised by an assessee is the platform from which the rights and obligations of the asses plicit provisions of Section 144(B) (1)(xxii) of the Act, the assessee will be put to prejudice. It is clear from the circumstances that have transpired in the instant case, from the time of show cause notice till the date of assessment, for both the assessment years, that the show cause notices failed to privide sufficient opportunity to the petitioner to respond. The violation of principles of natural justice in the orders impugned is manifest. Accordingly the orders of assessment produced shall stand set aside and the 1st respondent is directed to pass fresh orders of assessment after granting a reasonable opportunity of being heard after granting it sufficient time to file an objection to the petition to show cause notice. The objections, if any, to the show cause notices shall be filed by the petitioner within a period of 15 days from the date of receipt of a copy of this judgment and the assessing authority shall thereafter, fix a date for hearing of the petitioner.

Summary

Issues: Violation of principles of natural justice in assessment orders under the Faceless Assessment scheme.

In this case, a charitable society registered under Section 12A of the Income Tax Act, 1961, filed returns for the assessment years 2015-2016 and 2016-2017 showing 'Nil' income, stating that the entire income was utilized for charitable purposes. However, the assessments were reopened under Section 148 of the Act, and the petitioner was informed that the assessments would be conducted under the Faceless Assessment scheme. The petitioner was served with show cause notices for both assessment years, and subsequent assessment orders were issued within a very short timeframe, alleging non-response from the petitioner.

The petitioner challenged the assessment orders, arguing that they violated the principles of natural justice as they were issued without granting a reasonable opportunity to respond and be heard. The Court noted that every order must be made after providing a fair opportunity for response and hearing, as it is a fundamental aspect of natural justice. The Court emphasized that the consideration of objections raised by an assessee is crucial for determining their rights and obligations, and failure to grant sufficient opportunity to respond would prejudice the assessee.

The Court found that the show cause notices did not provide adequate time for the petitioner to respond, leading to a clear violation of principles of natural justice in the assessment orders. Consequently, the Court set aside the assessment orders and directed the assessing authority to pass fresh orders after granting the petitioner a reasonable opportunity to be heard and sufficient time to file objections to the show cause notices. The Court also nullified the consequential penalty notices issued. The petitioner was given 15 days to file objections to the show cause notices, and the assessing authority was instructed to schedule a hearing thereafter.

Ultimately, the writ petition was allowed, and the assessment orders along with the penalty notices were set aside, emphasizing the importance of adhering to principles of natural justice in assessment proceedings under the Faceless Assessment scheme.