2022 (9) TMI 1323 - HC - Income Tax

Assessment u/s 144B - violation of principles of natural justice - HELD THAT - Assessment order u/s 143(3) r.w.s.144B of the Act as well as the notice u/s 274 read with Section 270A of the Act are hereby set aside. The assessment proceedings are remanded to the AO to be taken up afresh from the stage of the draft assessment order. The AO shall pass appropriate order after giving opportunity to the petitioner to file reply. The entire assessment proceedings culminating into the final assessment order shall be completed within twelve weeks from the date of receipt of this order. We make it clear that we have allowed the petition and quashed the order and notice, as mentioned above, only on the ground of breach of natural justice without going into much less expressing any opinion on the merits of the case of the either side.

Summary

Issues:
Challenge to assessment order and demand notice based on violation of natural justice principles by disregarding adjournment application.

Detailed Analysis:
1. Filing of Petition and Grounds: The petitioner filed a petition under Article 226 of the Constitution to set aside the assessment order and demand notice for the assessment year 2018-19 under sections 143(3) and 144-B of the Income Tax Act, 1961. The petitioner alleged violation of natural justice principles due to the denial of an adjournment request, resulting in a substantial demand.

2. Basic Facts and Assessment Process: The petitioner, a partnership firm in construction, filed its return declaring income for the assessment year. After scrutiny, a draft assessment order was prepared by the respondent, leading to a show-cause notice to the petitioner regarding the determined income. The petitioner requested time extensions due to the pandemic situation, but the respondent proceeded to pass the assessment order without granting the adjournment.

3. Legal Arguments: The petitioner's advocate argued that the refusal to adjourn the proceedings and the subsequent passing of the order disregarded natural justice principles, especially during the challenging circumstances of the pandemic. The respondent, on the other hand, claimed to have given sufficient opportunities for responses but declined the adjournment request.

4. Comparison with Previous Case: Reference was made to a similar case where the court emphasized the statutory requirement of providing the assessee with an opportunity to respond to draft assessment orders. The court highlighted the importance of complying with the statutory provision for a fair hearing, especially during the pandemic, and criticized the authorities for a lack of leniency.

5. Judgment and Remand: The court ruled in favor of the petitioner, setting aside the assessment order and demand notice, citing a breach of natural justice principles. The assessment proceedings were remanded to the Assessing Officer for a fresh consideration from the draft assessment stage, with a directive to complete the process within twelve weeks.

6. Final Remarks: The court clarified that the decision to allow the petition and quash the order was solely based on the breach of natural justice, without delving into the merits of the case. The petition was allowed, and the rule was made absolute accordingly.