High Court sets aside assessment order for breach of natural justice principles under Income Tax Act.

The High Court found a breach of natural justice principles in an assessment order under the Income Tax Act for the assessment year 2018-2019 regarding unsecured loans. The Court set aside the assessment order due to the Assessing Officer's failure to consider the petitioner's explanations and request for a personal hearing. The Court directed the AO to reconsider the petitioner's submissions, provide a personal hearing, and issue a speaking order for transparency. The writ petition was disposed of in favor of the petitioner, instructing a fresh assessment in compliance with natural justice principles.

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Issues:
Breach of principles of natural justice in the assessment order under Income Tax Act, 1961 for the assessment year 2018-2019 regarding unsecured loans.

Analysis:
The petitioner contended a breach of natural justice principles due to the assessment order being passed without considering their response and request for a personal hearing. The petitioner explained the unsecured loans received, but the AO made an addition to the declared income under Section 68 of the Income Tax Act. The respondent argued the addition was due to discrepancies between the audit report and balance sheet concerning unsecured loans for the financial year 2017-2018.

The High Court noted the failure of the AO to consider the petitioner's explanation and material submitted, along with the request for a personal hearing. The Court emphasized the importance of natural justice principles and the need for the AO to take into account all relevant information before finalizing an assessment order. Despite the respondent's submission in the counter-affidavit, the Court decided to set aside the impugned assessment order.

The Court directed the AO to reconsider the petitioner's reply and submissions dated 12.03.2021, providing a personal hearing to the petitioner's authorized representative. The AO was instructed to send the hearing details via registered email and ensure proper communication with the petitioner. It was emphasized that the AO must pass a speaking order, providing a copy to the petitioner for transparency and procedural fairness.

In conclusion, the High Court disposed of the writ petition in favor of the petitioner, setting aside the assessment order and instructing the AO to conduct a fresh assessment considering the petitioner's submissions and ensuring compliance with natural justice principles.

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