2022 (4) TMI 1189 - HC - Income Tax

Validity of Faceless assessment u/s 144B - denial of natural justice - No prior show cause notice as well as draft assessment order issued - HELD THAT - In the present case, as no prior show cause notice as well as draft assessment order had been issued, there is a violation of principle of natural justice as well as mandatory procedure prescribed under Faceless Assessment Scheme and as stipulated in Section 144B of the Act. It is settled law that when there is a violation of principle of natural justice, the availability of an appellate remedy does not operate as a bar to the maintainability of the writ petition. Keeping in view the aforesaid, the impugned assessment order issued under Section 147 read with Sections 144/144B, demand notice under Section 156 and penalty proceedings initiated under Section 271(1)(c) are set aside and the matter is remanded back to the Assessing Officer, who shall issue a show cause notice as well as draft assessment order to the petitioner and thereafter pass a reasoned order in accordance with law.

Summary

Issues:
Challenge to assessment order, demand notice, and penalty notice for Assessment Year 2015-16. Violation of natural justice and statutory procedure in faceless assessment under Section 144B of the Income Tax Act, 1961.

Analysis:
The petitioner filed a writ petition challenging the assessment order, demand notice, and penalty notice dated 23rd March, 2022, for the Assessment Year 2015-16. The petitioner sought to restrain the respondent from proceeding further based on the impugned orders. The petitioner contended that no draft assessment order or show cause notice was issued before the assessment order, denying them a reasonable opportunity of hearing.

The court noted that the assessment was conducted by the National Faceless Assessment Centre in Delhi and should adhere to the statutory procedure prescribed for assessment by that authority. It emphasized that the procedure must align with the provisions of the Faceless Assessment Scheme and Section 144B of the Act. Section 144B(1)(xvi)(b) mandates the issuance of a show cause notice and draft assessment order before the final assessment order.

As the show cause notice and draft assessment order were not issued in this case, the court found a violation of the principles of natural justice and the mandatory procedure under the Faceless Assessment Scheme and Section 144B of the Act. The court clarified that the availability of an appellate remedy does not bar the maintainability of a writ petition in cases of natural justice violations.

Consequently, the court set aside the impugned assessment order, demand notice, and penalty proceedings initiated under the Act. The matter was remanded back to the Assessing Officer, directing them to issue a show cause notice and draft assessment order to the petitioner and pass a reasoned order in accordance with the law. The court disposed of the writ petition and pending application, leaving the rights and contentions of all parties open without commenting on the merits of the controversy.