Court overturns tax assessment for 2018-19, citing procedural violations and lack of natural justice.

The Court set aside the assessment order, notice of demand, and penalty for the Assessment Year 2018-19 due to the absence of a Show Cause Notice and draft assessment order, which violated principles of natural justice and the prescribed procedures under the Faceless Assessment Scheme and Section 144B of the Income Tax Act. The matter was remanded back to the Assessing Officer with directions to issue a draft assessment order and pass a reasoned order in compliance with the law. The writ petition was disposed of accordingly, with instructions for immediate website upload and email notification to counsel.

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Issues involved:
Challenge to assessment order, notice of demand, and notice of penalty under the Income Tax Act, 1961 for the Assessment Year 2018-19 based on breach of principles of natural justice and failure to issue a Show Cause Notice-cum-draft assessment order.

Analysis:

1. The petitioner filed a writ petition challenging the assessment order, notice of demand, and notice of penalty dated 19th April 2021 under the Income Tax Act, 1961 for the Assessment Year 2018-19, alleging a breach of principles of natural justice due to the absence of a mandatory Show Cause Notice-cum-draft assessment order before the final assessment order was passed.

2. The counsel for the Petitioner argued that the respondent/revenue failed to issue the required Show Cause Notice and draft assessment order, violating the principles of natural justice. In contrast, the counsel for the Respondent-Revenue contended that the final assessment order was issued without a formal Show Cause Notice due to program and systemic glitches, asserting that the petitioner had sufficient opportunities to provide necessary details and make submissions, thus denying any breach of natural justice.

3. The Court noted that Section 144B (7) of the Income Tax Act mandates the issuance of a prior Show Cause Notice and draft assessment order before the final assessment order is issued. The Court emphasized the importance of following the procedures outlined in the "Faceless Assessment Scheme" and Section 144B to ensure compliance with the law and principles of natural justice.

4. As no prior Show Cause Notice or draft assessment order was issued in the present case before the impugned assessment order was passed, the Court concluded that there was a clear violation of principles of natural justice and the prescribed procedure under the Faceless Assessment Scheme and Section 144B of the Act.

5. Consequently, the Court set aside the impugned assessment order, notice of demand, and notice of penalty for the Assessment Year 2018-19, remanding the matter back to the Assessing Officer. The Assessing Officer was directed to issue a draft assessment order and subsequently pass a reasoned order in compliance with the law.

6. The Court disposed of the writ petition and pending application with the above directions, instructing the order to be uploaded on the website immediately and a copy to be sent to the learned counsel via email for reference and further action.

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