The legality of an income tax assessment order passed in violation of Section 144B of the Income Tax Act, 1961. The Bombay High Court held the order to be invalid due to the failure to issue a mandatory show-cause notice-cum-draft assessment order, thus breaching the principles of natural justice.

1. Nature of the Petition:

   • A writ petition under Article 226 of the Constitution challenging the assessment order and subsequent demand notice dated 12 June 2021 for the assessment year 2018–19.

2. Grounds of Challenge:

   • Non-compliance with mandatory provisions under Section 144B of the IT Act, which require a show-cause notice-cum-draft assessment order before passing an assessment order.
   • Breach of natural justice as the petitioner was not provided an opportunity to respond to the proposed additions.

3. Key Findings of the Court:

   • The respondent (Faceless Assessment Officer) failed to issue the show-cause notice and provide proof of dispatch, despite the assessment order indicating otherwise.
   • The statutory procedure under Section 144B(1), particularly sub-clauses (xiv), (xix), (xx), and (xxii), was not followed.
   • The assessment order was summarily passed, overlooking detailed submissions made by the petitioner.

Background and Facts:

• Para 3-5: The petitioner filed its return for A.Y. 2018-19 and was selected for scrutiny. Despite repeated requests for time to furnish details, the Assessing Officer passed an adverse order without issuing a show-cause notice.
• Para 6-7: RTI queries revealed no evidence of a show-cause notice being issued or dispatched, contradicting the claim in the assessment order.

Legal Violations Alleged:

• Para 8-10: The petitioner highlighted breaches of mandatory procedural requirements under Section 144B, emphasizing the denial of a fair hearing and failure to consider responses.
• Para 12-13: The provisions of Section 144B(1), which mandate the issuance of a show-cause notice for variations prejudicial to the assessee, were reproduced and analyzed.

Court's Reasoning:

• Para 14-15: The court found that the non-issuance of a show-cause notice invalidates the assessment order. Natural justice principles require giving the assessee an opportunity to respond before passing any order prejudicial to them.
• Para 16-17: Reliance was placed on the Supreme Court judgment in Tin Box Co. v. CIT, reaffirming that procedural defects cannot be cured at the appellate stage.

Relief Granted:

• Para 18-19: The assessment order and consequential demand notice were quashed. The court directed the respondents to follow the due procedure within three months.

Acts and Sections Discussed:

1. Income Tax Act, 1961:

   • Section 144B: Faceless assessment procedure.
   • Section 143(3): Assessment after scrutiny.
   • Section 68: Addition for unexplained cash credits.

2. Constitution of India:

   • Article 226: Writ jurisdiction of High Courts.

Ratio Decidendi:

Non-compliance with the mandatory procedural requirements under Section 144B, particularly the failure to issue a show-cause notice-cum-draft assessment order, renders the assessment order invalid. The breach of statutory principles of natural justice cannot be rectified through appellate remedies.

Subjects:

Faceless Assessment Procedure under Income Tax Act and Principles of Natural Justice.

#FacelessAssessment #IncomeTaxAct1961 #Section144B #NaturalJustice #WritPetition