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2022 (10) TMI 1134 - HC - Income TaxValidity of faceless assessment - draft assessment order is not forwarded to the petitioner - ignorance of due procedure of law - whether the respondent authorities have followed the due procedure of law as envisaged under Section 144B(1)(xvi) read with Section 144B(7)(vii) and (xii) of the Act or not, while passing the impugned assessment order dated 26th September, 2021? - HELD THAT - The answer to the above question are not res integra inasmuch as the provision of Section 144B of the Act which provides for Faceless Assessment for the assessment under Section 143(3) and 144 to be carried out as per the procedure contained therein and Sub-section (9) of Section 144B provides that notwithstanding anything contained in any other provision of the Act, the assessment made under Section 143(3) or Section 144 of the Act, shall be non-est if such assessment is not made in accordance with the procedure laid down u/s 144B of the Act. The opportunity of hearing as envisaged under Section 144B of the Act is also therefore, required to be scrupulously adhered to as the principles of natural justice are unfailingly ingrained in the procedure prescribed for Faceless Assessment. As in the facts of the case, it is not in dispute that the draft assessment order is not forwarded to the petitioner, which is required to be sent along with the show-cause notice as per the procedure prescribed u/s 144B(1) (xvi)(b) - This Court in case of Atulbhai Kantilal Mehta 2022 (1) TMI 1289 - GUJARAT HIGH COURT as well as in case of Agrawal JMC Joint Venture 2021 (10) TMI 1317 - GUJARAT HIGH COURT has held that it is no more res integra that any order passed in violation of statutory procedure prescribed under Section 144B of the Act, makes the order vulnerable as the same is passed in violation of principles of natural justice. The contention raised on behalf of the Revenue with regard to alternative and efficacious remedy available to the petitioner and preferring an appeal before the Commissioner of Income Tax is concerned, as the impugned order is passed in violation of principles of natural justice and is contrary to the procedure prescribed for Faceless Assessment as per Section 144B of the Act, we are of the opinion that the same can be challenged by invoking the extraordinary jurisdiction under Article 226 of the Constitution of India as per the decision in case of Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai Others 1998 (10) TMI 510 - SUPREME COURT This petition succeeds and is accordingly allowed. The matter is remanded back to the Assessing Officer by quashing and setting the impugned assessment order dated 26th September, 2021 along with the demand notice issued under Section 156 of the Act. The Assessing Officer shall issue show-cause notice along with the draft assessment order by granting an opportunity of personal hearing to the petitioner as per the procedure prescribed under Section 144B of the Act.
Issues:
Challenging assessment order under Income Tax Act - Violation of natural justice, Faceless Assessment procedure, Draft assessment order not served, Demand notice issued, Alternative remedy available, Jurisdiction under Article 226. Analysis: 1. Violation of Natural Justice: - The petitioner challenged the assessment order dated 26th September, 2021, under Section 147 read with Section 144B of the Income Tax Act, 1961, on the grounds of gross violation of principles of natural justice. The petitioner contended that the draft assessment order was not served, and no opportunity for personal hearing was provided, leading to a demand of Rs.3,69,42,160. - The respondent Assessing Officer passed the assessment order without issuing the draft assessment order, as required under Section 144B of the Act. The petitioner had requested adjournment and submitted detailed replies, but these were allegedly overlooked. 2. Faceless Assessment Procedure: - The Court analyzed whether the respondent authorities followed the due procedure of law as envisaged under Section 144B(1)(xvi) read with Section 144B(7)(vii) and (xii) of the Act while passing the impugned assessment order. The Faceless Assessment Scheme under Section 144B mandates adherence to the principles of natural justice and the prescribed procedure. - The Court noted that the draft assessment order was not forwarded to the petitioner along with the show-cause notice, as required by Section 144B(1)(xvi)(b) of the Act. Any order passed in violation of the statutory procedure under Section 144B renders the order vulnerable due to the breach of natural justice. 3. Alternative Remedy and Jurisdiction under Article 226: - The respondent raised objections regarding the maintainability of the petition, citing the availability of an alternative remedy through appeals before the Commissioner of Income Tax and the Income Tax Appellate Tribunal under the Faceless Appeal Scheme-2020. However, the Court held that as the impugned order violated principles of natural justice and the Faceless Assessment procedure, it could be challenged under Article 226 of the Constitution of India. - Citing the decision in Whirlpool Corporation Vs. Registrar of Trade Marks, Mumbai & Others, the Court allowed the petition, remanding the matter back to the Assessing Officer for compliance with the prescribed procedures under Section 144B of the Act. 4. Judicial Precedents and Conclusion: - The Court referenced previous judgments, such as Atulbhai Kantilal Mehta and Agrawal JMC Joint Venture cases, along with decisions from Bombay High Court and Delhi High Court, which upheld the importance of adherence to the Faceless Assessment procedure and principles of natural justice. - The petition succeeded, and the impugned assessment order was set aside, with instructions for the Assessing Officer to follow the prescribed procedures within 12 weeks. The Court clarified that the decision was based on procedural grounds and did not delve into the merits of the case. The High Court's judgment in this case focused on upholding the procedural fairness and adherence to the Faceless Assessment Scheme under the Income Tax Act, emphasizing the significance of principles of natural justice in such proceedings.
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