2024 (7) TMI 513 - HC - Income Tax

Validity of Faceless assessment order - violation of principles of natural justice - petitioner no. 1 was not afforded adequate opportunity to respond to the additional show cause - HELD THAT - As in the instant case, it is noticed that the petitioner no. 1 had been denied the very opportunity to respond to the second/additional show cause. Additionally in terms of Section 144B (6) (viii) of the said Act, it is the duty of the Faceless Assessment Unit in case of proposing variations to afford an opportunity to the assessee to show cause why the assessment should not be completed as per the income or loss proposed in the variations. In our view, failure to afford adequate opportunity to the petitioner no. 1 to respond also constitutes violation of statutory provisions apart from violation of principles of natural justice. Since, the petitioner no. 1 did not get the opportunity to respond to the additional show-cause, in my view, the petitioners cannot be asked to pursue statutory remedy as the defect cannot be cured by affording opportunity to the petitioners to prefer an appeal. Having regard to the aforesaid, the assessment order passed by the Faceless Assessment Unit u/s 143 (3) r.w.s. 144B of the said Act cannot be sustained and the same is accordingly set aside. The matter is remanded back to the Faceless Assessment Unit with a direction to permit the petitioner no. 1 to file its response to the additional show cause within a period of 15 days from date. For the said purpose, the Faceless Assessment Unit shall activate the submit response button on the portal so as to enable the petitioner no. 1 to submit its response. Faceless Assessment Unit is also directed to intimate the petitioner no. 1 via online portal the date and time of virtual meeting/video hearing and upon giving an opportunity of hearing to the petitioner no. 1 to hear out and dispose of the scrutiny assessment proceeding within a period of 10 weeks from the date of communication of this order. Notice issued Section 274 read with Section 271AAD (1) (i) of the said Act and the notice for penalty under Section 274 read with Section 271B of the said Act stand quashed.

Summary

Issues:
Challenge to assessment order under Income Tax Act, 1961 based on violation of principles of natural justice and statutory provisions.

Analysis:
The writ petition challenges an assessment order issued under Section 143(3) of the Income Tax Act, 1961, along with Section 144B, concerning the Assessment Year 2022-23. The petitioners argue that the additional show cause notice issued was in violation of statutory provisions as it was served before withdrawing the initial notice. They rely on a judgment by a coordinate Bench of the Calcutta High Court to support their claim. The petitioners contend that despite requesting a personal hearing and joining a video conference meeting, the Faceless Assessment Unit did not participate, leading to a perceived lack of opportunity for a personal hearing.

The respondents argue that the issue of whether the petitioner was given a hearing opportunity cannot be revisited based on the findings in the assessment order. They assert that the Assessing Officer had the authority to issue an additional show cause notice without withdrawing the initial notice. The respondents emphasize that the petitioner has an alternative remedy through an appeal and should not bypass it by resorting to writ jurisdiction.

The Court notes that the petitioner was not provided adequate time to respond to the additional show cause notice, as per the Standard Operating Procedure (SOP) guidelines. The Court finds that the assessment order was vitiated due to a violation of natural justice principles. It highlights that the petitioner's right to respond to the additional notice was denied, constituting a breach of statutory provisions and natural justice principles. The Court rules that the defect cannot be rectified by appealing and sets aside the assessment order.

The Court remands the matter to the Faceless Assessment Unit, directing them to allow the petitioner to respond to the additional show cause notice within 15 days. The Unit is instructed to activate the response submission button on the portal and schedule a virtual meeting for a hearing within 10 weeks. Consequently, the penalty notices issued on the same date as the assessment order are quashed. The writ petition is disposed of without costs, and parties may obtain a certified copy of the order upon request.