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2021 (7) TMI 428 - HC - Income TaxValidity of order passed by National Faceless Assessment Centre (NFAC) u/s 143 (3) read with Section 144-B - Requirement of preparing a draft assessment order u/s 144-B - challenge is that the order is violative of the principles of natural justice as no opportunity of hearing was given to the Petitioner - HELD THAT - Figures of the taxable income and demand for AY 2018-19 in the impugned assessment order of the NFAC are disproportionately high. The impugned assessment order is not only in considerable variation of the figures for the earlier AYs but is also prejudicial to the interests of the assessee - requirement of Section 144-B (1) (xvi) of the ITA Act for triggering the procedure of first preparing a draft assessment order and providing it to the Petitioner for its response stands attracted in this case. This Court sets aside the impugned assessment order of the NFAC as well as all consequential demand notices/orders and grants liberty to the Department to pass a fresh assessment order for the AY in question in accordance with law - Department shall give the Petitioner a personal hearing on a date and at a time which shall be communicated to the Petitioner sufficiently in advance.
Issues: Violation of principles of natural justice in assessment order by NFAC, Disproportionately high assessment figures for AY 2018-2019
Violation of Principles of Natural Justice: The High Court addressed the challenge in the writ petition against the assessment order passed by the National Faceless Assessment Centre (NFAC) under the Income Tax Act, raising a demand of ?735.16 crores for the Assessment Year (AY) 2018-2019. The petitioner contended that the order violated the principles of natural justice as no opportunity of hearing was provided, contrary to the mandatory requirement under Section 143 (3) read with Section 144 B of the IT Act. The petitioner cited two judgments of the Delhi High Court where similar assessment orders by NFAC were set aside due to the absence of a show cause notice-cum-draft assessment order issued to the assessee before the final assessment order was passed. The Department argued that the requirement of preparing a draft assessment order would only arise if any variation prejudicial to the assessee was proposed. Disproportionately High Assessment Figures for AY 2018-2019: The petitioner presented a comparison of returned income and demand from previous assessment years, highlighting a significant increase in the assessed income and demand for AY 2018-2019. The assessed income for AY 2016-17 and AY 2017-18 was considerably lower compared to the assessed income and demand for AY 2018-2019, which showed a substantial increase. The court noted that the figures for AY 2018-2019 were disproportionately high and prejudicial to the interests of the assessee, triggering the requirement of Section 144-B (1) (xvi) of the IT Act for preparing a draft assessment order. Consequently, the court set aside the impugned assessment order and directed the Department to pass a fresh assessment order for the AY in question after providing the petitioner with a personal hearing and ensuring cooperation in the assessment proceedings. This detailed analysis of the judgment by the Orissa High Court underlines the importance of adhering to principles of natural justice in assessment proceedings and ensuring that assessment figures are reasonable and not disproportionately high, thereby safeguarding the interests of the assessee.
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