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2022 (4) TMI 1084 - HC - Income TaxFaceless Assessment Scheme u/s 144B - mandatory provision of issuance of a show cause notice and draft assessment order before issuing a final assessment order - HELD THAT - In the present case, as no prior show cause notice as well as draft assessment order had been issued, there is a violation of principle of natural justice as well as mandatory procedure prescribed under Faceless Assessment Scheme and as stipulated in Section 144B of the Act. It is a settled law that 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. Keeping in view the aforesaid, the impugned assessment order issued under Section 147 read with Section 144B, demand notice under Section 156 and penalty proceedings initiated under Section 271(1)(c) of the Act, all dated 19th March, 2022 are set aside and the matter is remanded back to the AO, who shall issue a show cause notice as well as draft assessment order to the petitioner and thereafter pass a reasoned order in accordance with law.
Issues:
Challenge to assessment order under Income Tax Act, 1961 for Assessment Year 2016-17 without prior show cause notice and draft assessment order. Violation of principles of natural justice and mandatory procedure under Faceless Assessment Scheme. Analysis: Issue 1: Challenge to Assessment Order The petitioner filed a writ petition challenging the assessment order dated 19th March, 2022, passed under Section 147 read with Section 144B of the Income Tax Act, 1961, for the Assessment Year 2016-17. The petitioner sought to restrain the respondent from proceeding further based on the impugned assessment order, demand notice, and penalty notice, all issued on the same date. Issue 2: Violation of Procedure The petitioner's counsel argued that the respondent did not provide a draft assessment order and show cause notice under Section 144B(xvi)(b) of the Act before passing the assessment order. This lack of prior notice denied the petitioner a reasonable opportunity of being heard, which is a fundamental principle of natural justice. Issue 3: Legal Analysis The court noted that under the Faceless Assessment Scheme, as mandated by Section 144B(1)(xvi)(b) of the Act, the National Faceless Assessment Centre must issue a show cause notice and draft assessment order before finalizing the assessment. In this case, the absence of these preliminary steps constituted a violation of the statutory procedure and principles of natural justice. Issue 4: Remedy and Decision Despite the availability of an appellate remedy, the court held that a writ petition is maintainable when there is a breach of natural justice. Consequently, the court set aside the assessment order, demand notice, and penalty proceedings, remanding the matter back to the Assessing Officer. The Assessing Officer was directed to issue a show cause notice and draft assessment order to the petitioner before passing a reasoned order in compliance with the law. Conclusion The court's decision emphasized the importance of following the prescribed procedures under the Faceless Assessment Scheme and upholding principles of natural justice. By setting aside the impugned orders and remanding the matter for proper assessment procedures, the court ensured fairness and adherence to legal requirements without expressing any opinion on the merits of the underlying dispute.
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