2021 (10) TMI 1214 - HC - Income Tax

Validity of assessment u/s 144B - no draft assessment order was issued as required under sub clause (xvi) of sub Section (1) of Section 144B - Addition u/s 68 - there is a specific allegation that there is not even a whisper of these additions either in the alleged draft assessment order or in any of the notices issued in the course of assessment proceedings and no opportunity whatsoever was given to petitioner to file its objections against these additions - HELD THAT - In the affidavit in reply of respondent, there is no denial of this fact. In the affidavit in reply, the affiant has gone on the merits of the two additions but does not deny the fact that neither the alleged draft assessment order or any of the notices have not even referred to this proposed additions under Section 68 of the Act. Issuance of show cause notice is the preliminary step which is required to be undertaken. The purpose of show cause notice is to enable a party to effectively deal with the case made out by respondent - See Om Shri Jigar Association Vs. Union of India - 1994 (5) TMI 24 - GUJARAT HIGH COURT Therefore, on this ground also the impugned order is required to be set aside. This Hon ble Court be pleased to issue a Writ of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records of the case leading to the passing of the impugned order u/s 143(3) r.w.s. 144B of the Act for the assessment year 2018-19 and after going through the same and examining the question of legality thereof quash, cancel and set aside such impugned order.

Summary

Issues: Impugning assessment order under Income Tax Act for A.Y.-2018-2019 due to lack of draft assessment order, addition under Section 68 without show cause notice, and denial of personal hearing.

1. Lack of Draft Assessment Order: The petitioner challenged the assessment order for A.Y.-2018-2019 under the Income Tax Act, citing the absence of a draft assessment order as required under Section 144B. The respondent's affidavit mentioned a show cause notice dated 18th February 2021, which the petitioner argued cannot be considered a draft assessment order. The notice sought additional details and documents, not constituting a draft assessment order. The court found this discrepancy significant and a ground to set aside the assessment order.

2. Addition under Section 68 without Show Cause Notice: The petitioner contested additions under Section 68 of the Act, amounting to significant sums, alleging that these were not mentioned in the draft assessment order or any notices during the assessment proceedings. The respondent did not refute this claim in their affidavit. The court emphasized the importance of issuing a show cause notice to allow the party to respond effectively, as established in legal precedent. The failure to provide this opportunity was deemed a crucial flaw justifying setting aside the impugned order.

3. Denial of Personal Hearing: Despite the petitioner's request for a personal hearing during the assessment proceedings, no such hearing was granted. The court noted that the respondent acknowledged the petitioner's request for a video conference/personal hearing, which was scheduled but could not be held due to technical issues. The court considered the denial of a personal hearing as a significant procedural irregularity, further supporting the decision to set aside the assessment order.

4. Judgment and Relief: After considering arguments from both parties and reviewing the petition and affidavit in reply, the court granted the prayer clauses (a) and (c) of the petition. This involved issuing a Writ of Certiorari under Article 226 of the Constitution of India to quash the impugned order and a Writ of Prohibition to prevent further action based on the flawed assessment order. The petition was disposed of with no order as to costs, indicating a favorable outcome for the petitioner in challenging the assessment order based on procedural deficiencies and lack of due process.