2021 (5) TMI 461 - HC - Income Tax

Court overturns assessment order due to natural justice violation, emphasizes fair process in income tax proceedings

The High Court of Madras, under the direction of Honourable Dr. Justice Anita Sumanth, addressed a challenge to an assessment order dated 23.03.2021 for ... Principles of natural justice - pre-assessment show-cause notice - faceless assessment scheme - waiting till the end of the working day - setting aside assessment order and de novo assessmentPrinciples of natural justice - pre-assessment show-cause notice - faceless assessment scheme - Whether the assessment order dated 23.03.2021 was vitiated by gross violation of principles of natural justice because it was passed before the expiry of time granted in the pre-assessment show-cause notice under the faceless assessment scheme. - HELD THAT: - The Court found that the pre-assessment notice dated 19.03.2021 expressly afforded the petitioner time to respond until 23:59 hours on 23.03.2021. The assessing authority, however, finalized and passed the assessment order on 23.03.2021 before the expiry of the time so granted, thereby depriving the petitioner of the opportunity to file the response promised by the notice. The Court treated this as a gross breach of principles of natural justice and relied on the settled expectation-recognised in the cited authority-that an officer should await the end of the working day when time has been posted for response. The circumstance that the order was passed under the faceless assessment scheme did not cure the breach where the time limit in the notice itself was ignored. [Paras 3, 4]The assessment order was held to be vitiated by violation of natural justice and set aside.Setting aside assessment order and de novo assessment - waiting till the end of the working day - Remedial directions following setting aside of the assessment order. - HELD THAT: - Having set aside the impugned order for breach of natural justice, the Court directed a limited remedial course: the petitioner was to be given an opportunity to file his response to the show-cause notice within two weeks from the date of the order, and the assessing authority was directed to complete the assessment afresh after hearing the petitioner within six weeks. The order thus mandates a de novo assessment process that cures the procedural infirmity by ensuring the opportunity to be heard. The Court declined to award costs. [Paras 5]Petition allowed; assessment order set aside and assessment remitted for de novo completion after the petitioner files his response within the specified timeframe.Final Conclusion: Writ petition allowed; impugned assessment order dated 23.03.2021 set aside for breach of principles of natural justice, petitioner permitted to file response within two weeks, and the assessment to be completed de novo by the assessing authority within six weeks; no costs. Issues Involved:Challenge to assessment order dated 23.03.2021 for assessment year 2018-19 under the Income Tax Act, 1961 based on violation of principles of natural justice.Analysis:Issue 1: Violation of Principles of Natural JusticeThe petitioner challenged the assessment order dated 23.03.2021, alleging a gross violation of principles of natural justice. The pre-assessment notice was issued on 19.03.2021, requiring the petitioner to respond by 23:59 hours of 23.03.2021. However, the impugned assessment order was passed on the same day, before the deadline, indicating a clear breach of natural justice principles. Reference was made to a previous judgment by a single Judge of the Court, emphasizing the importance of waiting until the end of the working day to finalize proceedings. The Assessing Officer in this case had granted time until 23:59 hours, making the violation even more apparent.Issue 2: Disposal of Writ PetitionThe Court set aside the impugned assessment order, directing the petitioner to file a response to the show cause notice within two weeks from the judgment date. The assessment was ordered to be completed afresh within six weeks from the judgment date after providing an opportunity for the petitioner to be heard. The Writ Petition was disposed of accordingly, with no costs imposed, and connected Miscellaneous Petitions were closed.In conclusion, the High Court of Madras, under the direction of Honourable Dr. Justice Anita Sumanth, addressed the challenge to the assessment order dated 23.03.2021 for the assessment year 2018-19, highlighting the violation of principles of natural justice. The Court set aside the impugned order, directing a fresh assessment process to be conducted within specified timelines, ensuring the petitioner's right to be heard and responding to the show cause notice. This judgment serves as a significant reminder of the importance of upholding natural justice principles in administrative proceedings under the Income Tax Act, 1961.