Court overturns Assessment Order for lack of fair hearing during lockdown, stresses natural justice in tax proceedings

The Court set aside the Assessment Order dated 27th April 2021, finding a violation of principles of natural justice due to the petitioner not being given a meaningful opportunity to respond during the lockdown period. The matter was remanded back to the respondent for further action in accordance with the law. The decision underscored the importance of ensuring a fair opportunity to be heard, particularly in situations like lockdowns that may impede timely responses, and stressed the need to adhere to statutory mandates and principles of natural justice in income tax assessment proceedings.

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Issues:
Challenge to assessment order passed under Section 143(3) of the Income Tax Act, 1961 alleging lack of opportunity to be heard due to lockdown and adjournment application.

Analysis:
The petitioner challenged the assessment order dated 27th April, 2021, passed under Section 143(3) of the Income Tax Act, 1961, on the grounds of not being given a meaningful opportunity to be heard. The petitioner was asked to file a response by 23rd April 2021 through a draft assessment order cum show cause notice. However, due to a complete lockdown in Delhi from 19th April 2021, the petitioner requested an adjournment on 25th April 2021 as it couldn't prepare the response. Despite this, the respondent passed the assessment order on 27th April 2021, falsely stating that the petitioner had not filed a reply and had agreed to the additions made by the revenue.

The respondent argued that the adjournment application filed after the last date for filing the response was inconsequential. Additionally, the respondent claimed that three earlier notices had been issued to the petitioner, thereby complying with the principles of natural justice. However, upon review, the Court found that the notices were issued under Section 142(1) of the Act and not under Section 144B, thus not meeting the statutory mandate.

The Court acknowledged the lockdown in Delhi between 19th April 2021 and 27th April 2021, noting that the petitioner was not given a meaningful opportunity to respond to the draft assessment order. Consequently, the Court held that there was a violation of principles of natural justice. The impugned Assessment Order dated 27th April 2021 was set aside, and the matter was remanded back to the respondent for further action in accordance with the law. The petition along with pending applications was disposed of with these directions.

In conclusion, the Court's decision emphasized the importance of providing a fair opportunity to be heard, especially in cases where external circumstances such as a lockdown impact the ability to respond within the stipulated timelines. The judgment highlighted the necessity of complying with statutory mandates and principles of natural justice in assessment proceedings under the Income Tax Act, 1961.

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