2018 (3) TMI 1209 - HC - Income Tax

Assessment passed by AO u/s 143(3) - denial of principle of natural justice - Held that - As decided in the case of Anil Kumar Versus Presiding Officer 1985 (5) TMI 252 - SUPREME COURT wherein it has been held by the Hon ble Supreme Court that if relevant documents or material pointed out by a delinquent employee in defence of the charges levelled against him in a departmental enquiry are not adverted to by the enquiry officer they are not discussed and the enquiry officer records a finding without taking note of the documents and the submissions the finding of the enquiry officer is perverse based on his ipse dixit and in violation to the principles of natural justice. Based on the aforesaid principle in these cases also we find that the Assessing Officer has proceeded to pass the assessment orders on the basis of legal principle but while doing so has not discussed the show cause filed by the petitioners and the relevant documents which they had brought on record in their defence including the valuation report. That being the position we see no reason to reject the claim made by the petitioners on the contrary we are satisfied that the order passed is in gross violation of the principles of natural justice. - Decided in favour of assessee.

Summary

Issues:
Challenging an order of assessment passed under Section143(3) of the Income Tax Act, 1961 for various periods based on the failure to consider relevant materials and objections raised by the petitioners.

Analysis:
The petitioners, individuals deriving income from various sources, filed returns for scrutiny under the CASS. Despite submitting detailed responses and documents, including a valuation report, they contested the assessment order's arbitrary nature. The petitioners argued that the order was passed hastily without objectively considering the submitted materials, violating principles of natural justice. Citing previous judgments, the petitioners contended that such an order is unsustainable.

The Revenue's counsel, however, argued that the order was detailed and error-free, emphasizing that all relevant considerations were made. Upon hearing both parties, the Court observed that while the petitioners submitted a comprehensive reply with supporting documents, the Assessing Officer's order lacked proper discussion on the objections raised, the valuation report, and the petitioners' submissions. The Court noted that the order was based on legal principles without adequately addressing the petitioners' contentions, leading to a violation of natural justice principles.

Relying on a Supreme Court judgment, the Court emphasized that a quasi-judicial authority must consider and discuss relevant materials and objections before making a decision. In this case, the Assessing Officer failed to properly address the materials and objections raised by the petitioners, rendering the order a violation of natural justice principles. Consequently, the Court held that the assessment orders were quashed, directing the petitioners to appear before the Assessing Officer with relevant documents for a lawful decision by a specified date.