Bombay High Court set aside assessment order for non-compliance with statutory provisions under the Income Tax Act, 1961 and violation of principles of natural justice, emphasizing the importance of personal hearing and due process.

The High Court held that the assessment order dated 09 September 2022 was null and void for violating principles of natural justice and the statutory requirement of personal hearing under Section 144B of the Income Tax Act. Consequently, the demand notice and penalty notices were also quashed.

The right to a personal hearing is intrinsic to the principles of natural justice and statutorily mandated under Section 144B of the Income Tax Act. Any order passed without adhering to this requirement is illegal and unenforceable.

of the judgment elaborate on the procedural lapses and the importance of complying with statutory provisions and natural justice principles. (Paras 28–38)

Acts and Sections Discussed – Constitution of India, Article 226 – Writ Jurisdiction Income Tax Act, 1961 – Section 143(3) – Assessment Order – Section 144B – Faceless Assessment Scheme – Section 156 – Demand Notice – Section 270A – Penalty for Under-reporting and Misreporting of Income – Section 271AA(1) – Penalty for Failure to Keep and Maintain Information and Documents

Subjects – Natural Justice – Audi Alteram Partem – Personal Hearing – Faceless Assessment – Demand Notice – Penalty Proceedings – Assessment Order – Null and Void – Writ Petition

Nature of Litigation – The writ petition was filed under Article 226 of the Constitution of India challenging the assessment order, demand notice, and penalty notices issued under the Income Tax Act, 1961.

Relief Sought – The petitioner sought to quash the assessment order dated 09 September 2022, demand notice, and penalty notices on grounds of non-compliance with principles of natural justice and procedural requirements under Section 144B of the Income Tax Act, 1961.

Reason for Filing the Case – The assessment order was passed without granting the petitioner a personal hearing despite a specific request, violating the statutory mandate under Section 144B of the Income Tax Act and the principle of audi alteram partem.

Previous Decisions – No prior decisions on the issue. The matter was directly brought before the High Court due to procedural violations and lack of an effective remedy.

Issues –

1. Whether the assessment order was rendered null and void due to non-compliance with principles of natural justice.

2. Whether the failure to grant a personal hearing despite a statutory requirement under Section 144B vitiated the subsequent demand notice and penalty proceedings.

Submissions/Arguments –

Petitioner’s Arguments: a) The assessment order was passed without granting a mandatory personal hearing despite a formal request. b) The statutory mandate under Section 144B requiring a fair hearing was disregarded, leading to procedural illegality. c) The demand notice and penalty notices issued based on an invalid assessment order were also void.

Respondents’ Arguments: a) The petitioner failed to submit the hearing request within the stipulated timeline. b) The assessment order was passed based on material available on record and the petitioner’s written submissions. c) The demand and penalty notices were lawful consequences of the assessment order.