2021 (6) TMI 1 - HC - Income Tax

Faceless assessment u/s 144B - Validity of assessment order passed u/s 143(3) r.w.s. 143(3A) 143(3B) - principal grievance of the petitioner that the impugned assessment order was passed without issuance of a show cause notice-cum draft-assessment order - HELD THAT - The statute i.e., Section 144B(1)(xiv), (xv), (xvi)(b) and (xxii) provides for issuance of a show cause notice-cum-draft assessment order, and an opportunity to the petitioner/assessee to respond to the same where income of the assessee is varied by the respondent/revenue. Admittedly, the petitioner s income was varied to its prejudice with the addition of ₹ 90,25,535/-. As a matter of fact, had the show cause notice cum draft assessment been served on the petitioner, its authorised representative could have requested for a personal hearing in the matter. The respondent/ revenue, to our minds, could not have side-stepped such safeguards put in place by the legislature. The justification proffered by Mr. Bhatia that notices were issued prior to the passing of the impugned assessment order, does not impress us. This submission flies in the face of the schematic design of the statute. Accordingly, the impugned assessment order and the notice issued under Section 156 and Section 270A read with Section 274 of the Act are set aside. Liberty is, however, given to the respondent/revenue to pass a fresh assessment order, albeit, as per law.

Summary

Issues involved:
1. Violation of principles of natural justice in assessment proceedings under the Income Tax Act, 1961 and the Faceless Assessment Scheme, 2019.

Analysis:
The petitioner sought relief from filing court fees and sworn affidavits, which was granted subject to exceptions. The main issue raised was the absence of a show cause notice-cum-draft assessment order served on the petitioner before the impugned assessment order dated 20.04.2021. The petitioner contended that this contravened Section 144B of the Income Tax Act and the Faceless Assessment Scheme. The respondent accepted notice but argued based on the available record. The court noted the petitioner's filing history and the lack of proper notices leading to the impugned assessment order, adding a significant amount to the petitioner's declared loss and taxing them under Section 115BBEE.

The court observed that principles of natural justice were violated as the petitioner's income was varied without proper notice, denying them the opportunity for a personal hearing as provided by the statute. The court rejected the respondent's argument that prior notices sufficed, emphasizing the importance of following legislative safeguards. Consequently, the impugned assessment order and related notices were set aside, granting liberty to the revenue to pass a fresh assessment order in compliance with the law. The revenue was directed to grant a personal hearing to the petitioner's authorized representative via video conferencing and provide advance notice of the hearing via email.

In conclusion, the court found a breach of natural justice in the assessment proceedings, leading to the setting aside of the impugned assessment order and related notices. The judgment emphasized the importance of following statutory procedures and providing opportunities for personal hearings to ensure fairness in assessment processes under the Income Tax Act and the Faceless Assessment Scheme.