2022 (4) TMI 1390 - HC - Income Tax

Validity of assessment u/s 144B - As argued no draft assessment order was served upon the writ applicant in accordance with the provisions of Section 144B prior to passing of the impugned assessment order - whether the respondent committed any error in passing the impugned order? - HELD THAT - What is important to be noted in the present case is that it is not just a question of giving an opportunity of hearing and for that purpose, the assessee should have the draft assessment order in his hands but, with the introduction of Section 144B of the Act, 1961, a procedure has been laid down which needs to be scrupulously followed. If in any action is in complete disregard to the statutory provisions then it is always open for this Court to overrule the objection of alternative remedy available to the assessee. In the result, this writ application succeeds and is hereby allowed. The impugned assessment order dated 20.04.2021 is hereby quashed and set aside. The matter is remitted to the respondent for denovo proceedings. The respondent shall undertake denovo proceedings in accordance with the provisions of Section 144B of the Act, 1961. The respondent shall issue a fresh Notice cum draft assessment order and the writ applicant upon receipt of the same, shall file its response in accordance with law.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Non-service of draft assessment order.
3. Availability of alternative remedy.

Detailed Analysis:

Violation of Principles of Natural Justice:
The writ applicant contended that the impugned assessment order was passed in gross violation of the principles of natural justice. Specifically, no show cause notice was issued, and no draft assessment order was served upon the writ applicant as required under Section 144B of the Income Tax Act, 1961. The court emphasized that the principles of natural justice must be upheld, and any violation thereof can be a ground for quashing the assessment order. The court referenced the case of Gandhi Realty (India) Private Limited, where a similar issue was addressed, and it was held that the failure to serve a draft assessment order constitutes a violation of natural justice.

Non-service of Draft Assessment Order:
The respondent argued that the draft assessment order and computation were uploaded and communicated to the assessee through the e-proceedings window. However, the court found that there was no evidence of the draft assessment order being served on the writ applicant. The court referred to Section 144B, which mandates the service of a draft assessment order along with a show cause notice if any variation prejudicial to the interest of the assessee is proposed. The court also cited the judgment in the case of Sribasta Kumar vs. Union of India, where the Orissa High Court set aside an assessment order for non-compliance with Section 144B.

Availability of Alternative Remedy:
The respondent raised a preliminary objection regarding the maintainability of the writ application, arguing that the writ applicant had an alternative remedy of a statutory appeal. However, the court held that the availability of an alternative remedy does not bar the High Court from exercising its jurisdiction under Article 226 of the Constitution of India, especially in cases involving a violation of natural justice. The court cited the Supreme Court's decision in Whirlpool Corporation vs. Registrar of Trade Marks, which recognized exceptions to the rule of alternative remedy, including cases of natural justice violations.

Conclusion:
The court concluded that the issues raised in the writ application are covered by the judgment in Gandhi Realty (India) Private Limited. It held that the failure to serve a draft assessment order and the resultant violation of natural justice warranted quashing the impugned assessment order. The court allowed the writ application, quashed the assessment order dated 20.04.2021, and remitted the matter for denovo proceedings in accordance with Section 144B of the Income Tax Act, 1961. The respondent was directed to issue a fresh notice cum draft assessment order, and the writ applicant was to be given an opportunity to respond and seek a hearing if desired. The court clarified that it did not express any opinion on the merits of the case.