2024 (6) TMI 471 - HC - Income Tax

Procedural irregularities in the faceless assessment process - Addition u/s 68 - summons u/s 133 (6) issued by AO were not even referred to in the show cause notice which is in form of the draft assessment order for making addition of unsecured loan obtained by the petitioner u/s 68 - HELD THAT - We are of the opinion that there is a clear variance between the show cause notice in form of a draft assessment order and the impugned assessment order passed by the Assessing Officer contrary to the scheme of the faceless assessment under Section 144B of the Act. It is not in dispute that the AO did not supply copy of reply received pertaining to the pursuant to the notice issued under Section 133 (6) of the Act. After issuance of the show cause notice in the form of draft assessment order, no any opportunity of cross-examination of the parties whose reply is considered to make addition under Section 68 of the Act was granted to the petitioner. This Court, in the case of Dineshkumar Chhaganbhai Nandani 2023 (6) TMI 935 - GUJARAT HIGH COURT and in the case of Darshan Enterprise 2022 (1) TMI 605 - GUJARAT HIGH COURT and in the case of Prakashchandra Chhotalal Shah ( 2023 (2) TMI 756 - GUJARAT HIGH COURT in similar facts, after referring to the relevant provisions u/s 144B of the Act, allowed the petitions quashing and setting aside the assessment order and remitting the matter back to the AO for de novo consideration. We are left with no other option but to quash and set aside the impugned assessment order and remit the entire matter to the AO for de novo consideration and to pass a fresh assessment order after providing all the relied upon documents like the reply received pursuant to the notice and summons issued u/s 133 (6) of the Act as well as the other relevant documents of the parties who did not reply to the summons providing opportunity of cross-examination.

Summary

Issues involved:
The judgment involves the quashing of an assessment order u/s 68 of the Income Tax Act, 1961 due to procedural irregularities in the faceless assessment process.

Details of the Judgment:

Issue 1: Assessment Order Quashing
The petitioner sought to quash the assessment order dated 18th March 2024 passed by the respondent under Article 226 of the Constitution of India. The petitioner had filed a return of income for Assessment Year 2022-23, and the respondent Assessing Officer proposed to add the balance of unsecured loan obtained by the petitioner as unexplained cash credit u/s 68 of the Act. The petitioner challenged this addition, citing procedural lapses in the assessment process.

Issue 2: Procedural Irregularities
The petitioner contended that the show cause notice did not reference the summons issued under Section 133 (6) of the Act to parties from whom the unsecured loan was obtained. The Assessing Officer made additions based on parties' replies without providing an opportunity for cross-examination. The petitioner argued that principles of natural justice were violated as no further opportunity was given to address the information gathered post the show cause notice.

Issue 3: Breach of Natural Justice
The petitioner highlighted the Assessing Officer's failure to provide an opportunity for cross-examination of parties whose replies were considered for making additions under Section 68 of the Act. Citing precedents and the scheme of faceless assessment u/s 144B of the Act, the petitioner argued for quashing the assessment order due to a breach of natural justice.

Judgment Summary:
The High Court found a clear variance between the show cause notice and the assessment order, contrary to the faceless assessment scheme u/s 144B of the Act. It noted that the Assessing Officer did not provide an opportunity for cross-examination post the show cause notice. Relying on previous cases, the Court quashed the assessment order and remitted the matter back to the Assessing Officer for a fresh assessment order, emphasizing the need for providing all relied upon documents and an opportunity for cross-examination. The Court directed the fresh assessment to be completed within 12 weeks.

Conclusion:
The petition was disposed of by quashing the assessment order and remitting the matter for a fresh assessment order, ensuring compliance with procedural fairness and principles of natural justice within the specified timeline.