Court quashes assessment order for breach of natural justice, emphasizes procedural fairness in tax assessments

The Court allowed the writ petition, quashing the assessment order, notice of demand, and penalty proceedings due to a breach of natural justice principles. The petitioner was denied the opportunity to respond before the assessment order was passed, leading to serious consequences. The Court emphasized the importance of respecting statutory rights and procedural fairness in tax assessments. The respondent was granted liberty to issue a fresh assessment order in compliance with the law, highlighting the significance of upholding legal requirements to prevent prejudice to taxpayers.

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Issues:
Challenge to assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for AY 2018-2019, notice of demand under Section 156, and notice for penalty proceedings under Section 274 read with Section 270A issued on the same date. Breach of principles of natural justice due to passing of assessment order before response deadline. Resistance by respondent based on availability of alternative remedy and prior opportunities given.

Analysis:
The petitioner challenged the assessment order, notice of demand, and penalty proceedings issued under the Income Tax Act for AY 2018-2019, citing a breach of principles of natural justice. The petitioner contended that the assessment order was passed before the deadline to file a response, leading to a denial of opportunity to present objections or explanations. The Court noted the petitioner's claim of attempting to upload a response before the deadline, indicating a potential procedural lapse. The respondent resisted the petition, arguing the availability of an alternative statutory remedy and prior opportunities given to the petitioner.

The Court found merit in the petitioner's argument, ruling that the impugned orders could not be sustained due to the breach of principles of natural justice. The assessment order was passed before the response deadline, denying the petitioner the opportunity to present objections or explanations. The Court rejected the respondent's argument regarding the availability of an alternative remedy, emphasizing that the denial of opportunity had serious consequences for the petitioner. Additionally, the Court highlighted that issuance of a show cause notice-cum-draft assessment order obligated the revenue to provide the petitioner with an opportunity to respond, which was a statutory right that could not be curtailed.

The Court allowed the writ petition, quashing the impugned assessment order, notice of demand, and notice for penalty proceedings. However, the respondent was granted the liberty to pass a fresh assessment order in accordance with the law. The Court's decision underscored the importance of upholding principles of natural justice in assessment proceedings and ensuring that statutory rights of parties are respected. The judgment serves as a reminder of the significance of procedural fairness and adherence to legal requirements in tax assessments to prevent undue prejudice to taxpayers.

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