2024 (8) TMI 825 - HC - Income Tax

Validity of Faceless Assessment order - shorter period provided to respond - violation of principles of natural justice - Mandation to provide minimum of seven days time to respond - HELD THAT - As in terms of Clause N.1.3 the assessing unit is bound to follow the principles of natural justice and the assessing unit is required to offer a response time of minimum 7 days from the date of issuance of show cause unless the issue of limitation intervenes. In the present case time provided to respond was less than three days. Nothing has been placed before this Court to demonstrate that the portal remained activated even after the expiry of the period mentioned in the show-cause, there is no email communication disclosed by the respondents to demonstrate that the petitioner was notified with regard to the portal being kept activated or with regard to the submit response button on the portal being kept activated, for the petitioner to submit its response beyond the period for submission of response in terms of the show cause notice. Since the petitioner was not afforded adequate opportunity, the petitioner could not respond to the show cause and the assessing unit had passed the assessment order without the petitioner s response.The aforesaid order should be set aside and the matter should be remanded to the Faceless Assessment Unit with further opportunity to the petitioner to file its response to the show-cause. The petitioner shall be at liberty to file its response with the Faceless Assessment Unit within a period of 10 days from date.Faceless Assessment Unit shall open a micro portal for the petitioner to submit its response

Summary

Issues:
Challenging assessment order under Income Tax Act for assessment year 2022-23; Failure to afford petitioner opportunity to respond adequately to proposed variations in show cause notice.

Analysis:
The petitioner challenged the assessment order dated 11th March 2024 passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961. The petitioner's advocate argued that the assessing officer failed to provide adequate opportunity for the petitioner to respond to the proposed variations in the show cause notice dated 1st March 2024. It was contended that the time provided for response was insufficient, violating the principles of natural justice and the SOP for Faceless Assessment Unit under Section 144B of the Act. The SOP mandates a minimum response time of 7 days, which was not adhered to in this case. The petitioner sought the order to be set aside and the matter remanded for a proper response opportunity.

The respondent's advocate argued that the petitioner had the opportunity to respond but chose not to do so within the given time frame. It was claimed that the portal remained activated for 7 days for the petitioner to file its response. However, the court noted that there was no evidence of communication regarding the portal's status beyond the initial response period. The court found the lack of communication problematic and referred to a similar judgment to support its view.

The court emphasized the importance of following the SOP guidelines issued by the Central Board of Direct Taxes for Faceless Assessment Units. It noted that the show cause notice in this case did not provide the required 7-day response time, which was a violation of both the SOP and principles of natural justice. The court rejected the respondent's argument that the assessment order was valid since it was passed after the 7-day period, highlighting the lack of evidence of portal activation post-initial response period.

Consequently, the court set aside the assessment order and remanded the matter back to the Faceless Assessment Unit. The petitioner was granted 10 days to file a response, and the Unit was directed to inform the petitioner via email about the activation of a micro portal for submission. The court instructed the Unit to expedite the proceedings within 8 weeks from the date of the order. The writ petition was disposed of with all parties instructed to act based on the server copy of the order downloaded from the Court's official website.