2021 (11) TMI 1135 - HC - Income Tax

Validity of assessment order - denial of principles of natural justice and fair play - no opportunity of being heard in the matter given - HELD THAT - A narration of the facts, would clearly go to indicate that the impugned assessment order has been made in contravention to the basic principles of natural justice and fair play, inasmuch as the petitioner was not granted an opportunity to file its reply on the proposed additions and a further opportunity of being heard in the matter. Once that be so, obviously, impugned order cannot be sustained. In taking this view, we are duly supported by the judgments rendered in case Deep Gard versus Union of India 2021 (6) TMI 589 - DELHI HIGH COURT and Zeus Housing Company versus Union of India 2021 (9) TMI 1461 - BOMBAY HIGH COURT We find merit in this petition and the same is accordingly allowed and the impugned assessment order alongwith consequential notice of demand and notice for initiating penalty is set aside.

Summary

Issues:
Challenge to assessment order and notice of demand under Income Tax Act for assessment year 2018-19.

Analysis:
The petitioner challenged the assessment order and consequential notice of demand issued under Section 156 of the Income Tax Act for the assessment year 2018-19. The petitioner filed its return of income, which was processed under Section 143(1)(a) of the Act. Subsequently, the case was selected for complete scrutiny through CASS, citing reasons related to deductions claimed for industrial undertakings. The petitioner responded to the notices issued by the respondents under Section 142(1) by submitting detailed replies. An assessment order proposing additions to the income was passed by the respondent, and a show cause notice was issued to the petitioner. The petitioner requested an adjournment to file a detailed reply, but the respondent passed the impugned order without accepting or rejecting the request, leading to the filing of the instant petition.

The High Court observed that the impugned assessment order was made in violation of the principles of natural justice and fair play as the petitioner was not given an opportunity to respond to the proposed additions or to be heard in the matter. Citing judgments from the Delhi High Court and the Bombay High Court, the Court emphasized the importance of affording a fair opportunity to the petitioner. Consequently, the Court held that the impugned order could not be sustained. The petition was allowed, and the assessment order along with the consequential notice of demand and notice for initiating penalty were set aside. However, the respondents were granted liberty to take steps in accordance with the law by providing an opportunity for the petitioner to be heard in response to the show cause notice.

In conclusion, the High Court disposed of the instant petition and any pending applications, emphasizing the importance of adhering to principles of natural justice and fair play in assessment proceedings under the Income Tax Act.