2021 (9) TMI 714 - HC - Income Tax

Faceless Assessment Scheme u/s 144B - No prior show cause notice as well as draft assessment order have been issued - HELD THAT - Since in the present case no prior show cause notice as well as draft assessment order have been issued, there is a violation of principles of natural justice as well as mandatory procedure prescribed under Faceless Assessment Scheme and as stipulated in Section 144B of the Act. When there is a violation of principles of natural justice, the availability of an appellate remedy does not operate as a bar to the maintainability of the writ petition. In the impugned Assessment Order, Demand Notice and Notice for Penalty dated 23rd April 2021 issued under Section 143(3), Section 156 and Section 274 read with Section 271AAC(1) of the Act are set aside and the matter is remanded back to the Assessing Officer, who shall issue a show cause notice as well as draft assessment order and thereafter pass a reasoned order in accordance with law.

Summary

Issues:
Challenging Assessment Order, Demand Notice, and Penalty Notice under Income Tax Act 1961 for AY 2018-19. Violation of natural justice principles and mandatory procedure under Faceless Assessment Scheme.

Analysis:
The petition challenges the Assessment Order, Demand Notice, and Penalty Notice issued by the respondents under the Income Tax Act 1961 for the Assessment Year 2018-19. The petitioner argues that the assessment order was passed without issuing the mandatory show-cause notice and draft assessment order under Section 144B(1)(xvi)(b) of the Act. It is contended that this action violates the principles of natural justice and the provisions of Section 144B, depriving the petitioner of an opportunity for a personal hearing.

The respondent argues that the writ petition is not maintainable as the petitioner has an alternative remedy by filing an appeal. However, the Court notes that the assessment by the National Faceless Assessment Centre must follow the statutory procedure and cannot be based on the previous regime's procedures. Section 144B(1)(xvi)(b) mandates the issuance of a show-cause notice and draft assessment order before the final assessment order is issued.

As no prior show-cause notice or draft assessment order was issued in the present case, the Court finds a violation of natural justice principles and the mandatory procedure under the Faceless Assessment Scheme and Section 144B of the Act. It is established law that the availability of an appellate remedy does not bar the maintainability of a writ petition in cases of natural justice violations.

Consequently, the Court sets aside the impugned Assessment Order, Demand Notice, and Penalty Notice, remanding the matter back to the Assessing Officer. The Assessing Officer is directed to issue a show-cause notice and draft assessment order, followed by a reasoned order in accordance with the law. The writ petition and pending applications are disposed of with this direction.