Court overturns assessment order & demand notice for violating natural justice principles. Fresh assessment to be conducted.

The court set aside the assessment order and demand notice due to violations of natural justice principles under Section 144B of the Income Tax Act, 1961. The respondents were directed to conduct a fresh assessment order in accordance with the law, allowing the petitioner to challenge any future actions. The writ petition was disposed of, with instructions to publish the order online and provide a copy to the counsel via email.

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Issues:
Challenge to assessment order under Income Tax Act, 1961 for assessment year 2017-18. Violation of Faceless Scheme procedures. Natural justice principles in assessment proceedings.

Analysis:
The petitioner challenged the assessment order dated 2nd April, 2021 passed by the National Faceless Assessment Center, Delhi under the Income Tax Act, 1961. The petitioner sought a stay on the demand arising from the said order. The petitioner argued that the assessment order and income additions were legally untenable as the basis of addition was not provided, and no draft assessment order was issued as required under the Faceless Scheme.

In a similar case, the court had previously quashed an assessment order and consequential notices. The respondents accepted the notice and contended that although no show cause notice or draft assessment order was issued, the petitioner was given several opportunities to explain its case before the assessment date. However, the court found this argument contrary to the statutory scheme outlined in Section 144B of the Act.

Section 144B mandates a faceless assessment procedure, specifying the process for finalizing assessments or providing opportunities to the assessee in case of proposed variations prejudicial to their interest. The court held that the assessment proceedings in the present case violated the principles of natural justice as outlined in Section 144B of the Act.

Consequently, the court set aside the impugned assessment order and demand notice, granting the respondents liberty to pass a fresh assessment order in compliance with the law. The petitioner was also given the liberty to challenge any future actions of the respondents if aggrieved. The writ petition and pending applications were disposed of, with directions to upload the order on the website and forward a copy to the counsel via email.

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