2023 (11) TMI 650 - HC - Income Tax

Validity of assessment passed u/s 143(3) r.w.s. u/s 144B - gross violation of the principle of natural justice - whether by not issuing show cause notice while framing the assessment, principles of natural justice have at all been violated? - HELD THAT - The impugned order was passed by the respondent in violation of principles of natural justice without issuing show cause notice while framing assessment and affording an opportunity of personal hearing by not following the prescribed procedure laid down as per the provisions of section 144B of the Act, 1961 for Faceless assessment. In the result, this petition succeeds and is accordingly allowed. The impugned order of assessment passed by the respondent u/s 147 read with Section 144B and demand notice for the assessment year 2018-19 u/s 156 of the Act are quashed and set aside.

Summary

Issues Involved:
1. Violation of principles of natural justice.
2. Issuance of show cause notice and opportunity for personal hearing.
3. Compliance with Section 144B of the Income Tax Act, 1961.

Summary:

1. Violation of Principles of Natural Justice:
The petitioner argued that the impugned assessment order dated 28.09.2021 was passed in gross violation of the "principles of natural justice" as no show cause notice was issued before making the addition u/s 68 of the Income Tax Act, 1961. The petitioner highlighted that the principles of natural justice must be adhered to in every case to prevent miscarriage of justice.

2. Issuance of Show Cause Notice and Opportunity for Personal Hearing:
The petitioner contended that a show cause notice and an opportunity for personal hearing are necessary before passing any adverse order. The respondent, however, argued that a show cause notice incorporating the draft assessment order was issued, and the petitioner was allowed to present their case through video conference. Despite this, the petitioner claimed that the final assessment was made without issuing a show cause notice for the addition made u/s 68.

3. Compliance with Section 144B of the Income Tax Act, 1961:
The court examined whether the assessment procedure under Section 144B was followed. It was found that no draft assessment along with a show cause notice was given to the petitioner, violating the prescribed procedure for faceless assessment. The court referenced a Division Bench ruling that emphasized the necessity of following the detailed procedure outlined in Section 144B, including providing an opportunity for personal hearing through video conferencing.

Conclusion:
The court concluded that the impugned order was passed in violation of the principles of natural justice and without following the prescribed procedure under Section 144B. Consequently, the assessment order dated 28.09.2021 and the demand notice for the assessment year 2018-19 were quashed and set aside. The respondent was directed to proceed with the assessment afresh, ensuring compliance with Section 144B by issuing a show cause notice-cum-draft assessment order and providing an opportunity for hearing. This exercise must be completed within 12 weeks from the date of receipt of the court's order. The court clarified that it did not examine the merits of the case.