2022 (1) TMI 965 - HC - Income Tax

Validity of assessment order u/s 143(3) - Violation of principles of natural justice - challenge made to the assessment order passed by respondent No.3 and the notices issued thereof - grievance of the petitioner that no reasonable opportunity was provided to furnish the reply to the notice along with the information and documents - HELD THAT - The arguments of the learned counsel appearing for the petitoner that the objections filed by the petitoner was not considered by the Assessing Officer, appears to have some force. At this juncture, it will be beneficial to refer to the judgment of the Hon'ble Apex Court in the case of Magadh Sugar Energy Limited 2021 (10) TMI 691 - SUPREME COURT Similarly in the case of Vodafone India Limited 2014 (1) TMI 88 - BOMBAY HIGH COURT while considering the show cause notice issued to the assessee giving less than 24 hours to respond to the show cause notice observed that the same is a flaw in the decision making process and therefore amenable to judicial review; it has further observed that it has been stated times without number that Justice must not only be done but also appear to have been done, the non-consideration of the petitioner's response to the notice by making it impossible to the petitoner to file its reply for the consideration of the Assessing Officer does cause prejudice to the petitioner leading to palpable injustice; thus, warranting the exercise of writ jurisdiction. Thus, without going into merits or demerits of the case, it would be suffice in restoring the proceedings to the Assessing Officer to provide reasonable opportunity of hearing to the petitioner with liberty to file additional reply, annulling the assessment order. Accordingly, we set aside the assessment order and the demand notices. The proceedings are restored to the file of the Assessing Officer for re consideration

Summary

Issues:
Challenge to assessment order and demand notices under Income Tax Act, 1961 for the assessment year 2018-19. Claim of limited liability partnership [LLP] firm against breach of natural justice in assessment proceedings.

Analysis:
The writ petition challenges the assessment order dated 29.09.2021 passed by respondent No.3 for the assessment year 2018-19, along with demand notices issued under various sections of the Income Tax Act, 1961. The petitioner, a limited liability partnership [LLP] firm engaged in real estate business, contends that the assessment proceedings lacked natural justice principles. The petitioner was selected for scrutiny on income and property issues, with proceedings under the Faceless Assessment Scheme, 2019. The petitioner claims inadequate time to respond to notices, leading to the assessment order being concluded on 29.09.2021, allegedly breaching principles of natural justice.

The petitioner argues that the short notice provided for objections, and the subsequent assessment order passed without considering the petitioner's reply, violated natural justice principles. Citing legal precedents like the High Court of Bombay and the Hon'ble Apex Court rulings, the petitioner asserts that the violation of natural justice exceptions justifies the writ petition despite the availability of alternative remedies. The respondent's contention regarding the petitioner's status as resident or non-resident influencing the assessment order is noted.

Upon careful consideration, the court finds merit in the petitioner's arguments regarding the breach of natural justice. Referring to legal principles from the Hon'ble Apex Court and the High Court of Bombay, the court emphasizes the importance of upholding natural justice in assessment proceedings. The court sets aside the assessment order and demand notices, restoring the proceedings to the Assessing Officer for reconsideration. The petitioner is granted four weeks to file additional replies and documents, with instructions for the Assessing Officer to conduct the assessment promptly and in accordance with the law.

In conclusion, the court's decision to annul the assessment order and demand notices underscores the significance of natural justice in assessment proceedings. The judgment emphasizes the need for fair procedures and reasonable opportunities for taxpayers to respond, ensuring a just and lawful assessment process. The restoration of proceedings to the Assessing Officer with specific directives aims to uphold the principles of natural justice and facilitate a fair reconsideration of the petitioner's case.