Delhi High Court nullifies assessment order for lack of procedural fairness

The Delhi High Court set aside an assessment order dated 15.04.2021 due to the violation of Section 144B of the Income Tax Act, 1961, as the petitioner was not provided with a show-cause notice cum draft assessment order. The court accepted the petitioner's contentions, quashing the assessment order, notices of demand, and penalty proceedings. The court granted liberty to the respondent to issue a fresh assessment order, emphasizing adherence to procedural requirements for fair assessment proceedings while affirming the petitioner's right to pursue legal remedies if necessary.

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Issues: Violation of Section 144B of the Income Tax Act, 1961 in assessment order; Setting aside of assessment order dated 15.04.2021; Liberty for fresh assessment order

In this judgment by the Delhi High Court, the petitioner challenged an assessment order dated 15.04.2021 and subsequent orders due to non-issuance of a show-cause notice cum draft assessment order as required by Section 144B of the Income Tax Act, 1961. The court noted that although the respondent/revenue had not filed a counter-affidavit, they claimed to have provided opportunities for the petitioner to explain their case before the assessment order date. The court held this practice to be contrary to the statutory scheme of Section 144B, as argued by the petitioner's counsel. Consequently, the court accepted the petitioner's assertions and set aside the impugned assessment order dated 15.04.2021, along with the accompanying notices of demand and penalty proceedings issued under various sections of the Act. The writ petition and pending application were disposed of accordingly.

Regarding the respondent's request for liberty to pass a fresh assessment order, the court granted this request, stating that if such a step is permissible under the law, there should be no hindrance. However, the court clarified that if any further actions are taken, the petitioner retains the right to pursue appropriate legal remedies available to them. The judgment highlights the importance of adhering to procedural requirements laid down in the Income Tax Act, ensuring fairness and compliance with statutory provisions in assessment proceedings.

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