Stay granted on assessment order & penalty proceedings due to natural justice breach under Income Tax Act

The court granted a stay on the operation of the assessment order, notice of demand, and penalty proceedings initiation notice due to prima facie breach of natural justice in the assessment process under the Income Tax Act. The petitioner's grievance about the premature assessment order led to the court scheduling the next hearing to allow the respondent to provide instructions and potentially contest the petition. The stay order aimed to prevent adverse consequences to the petitioner until further examination and resolution of the procedural irregularities.

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Issues: Breach of principles of natural justice in passing an assessment order under the Income Tax Act, 1961.

Analysis:
1. Breach of Principles of Natural Justice: The petitioner, represented by Mr. Ajay Vohra, argued that there was a breach of principles of natural justice in the assessment process. The show cause notice-cum-draft assessment order required a response by a specific deadline, but the assessment order was passed before the deadline, raising concerns about fairness and due process.

2. Violation of Timeline: The petitioner claimed that the respondent passed the assessment order under Section 143(3) read with Section 144B of the Income Tax Act for the assessment year 2018-2019 before the deadline specified in the notice. This violation of the timeline set in the notice raised doubts about the procedural regularity of the assessment process.

3. Grievance Submission: Upon discovering the premature assessment order, the petitioner lodged a grievance through the e-filing portal, highlighting the technical issue faced while trying to upload a response before the actual deadline. This action demonstrated the petitioner's efforts to address the procedural irregularities promptly.

4. Stay Order: The court, considering the prima facie breach of natural justice, granted a stay on the operation of the impugned assessment order, the notice of demand, and the penalty proceedings initiation notice. This stay order was issued to prevent any adverse consequences to the petitioner until the matter could be further examined and resolved.

5. Future Proceedings: The court scheduled the next hearing for 19.05.2021 to allow the respondent an opportunity to provide instructions. If the respondent decided to contest the petition, a counter-affidavit was to be filed. This procedural step ensured that both parties had a chance to present their arguments and evidence before the court made a final decision on the matter.

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