Invalidity of Assessment Order under Faceless Assessment Scheme

The High Court held that the assessment order issued in breach of the Faceless Assessment Scheme, 2019, without granting the petitioner a personal hearing or issuing a mandatory draft assessment order, was invalid. Despite the petitioner's requests, no personal hearing was provided, and the draft assessment order was not issued as required by the Scheme. Consequently, the Court set aside the assessment order dated March 2, 2021, along with related notices, directing the respondents to comply with legal provisions.

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Issues:
1. Compliance with the Faceless Assessment Scheme, 2019.
2. Granting of personal hearing to the petitioner.
3. Issuance of draft assessment order in accordance with legal provisions.

Comprehensive Analysis:

Compliance with the Faceless Assessment Scheme, 2019:
The petitioner had filed returns for AY 2018-2019 and received a notice initiating scrutiny assessment. Subsequently, notices were issued in January 2021, calling upon the petitioner to provide further details and documentary evidence. The High Court noted that these notices were not draft assessment orders but requests for additional information. The petitioner argued that the assessment order passed in March 2021 was in breach of the Faceless Assessment Scheme, as the request for a personal hearing was ignored, and a mandatory draft assessment order was not issued. The Court held that the assessment order was issued without clear application of mind, and as per the Scheme, any assessment order not passed in conformity should be treated as non-est.

Granting of Personal Hearing:
The notices provided the petitioner with the option to seek a personal hearing for making oral submissions through video conferencing. Despite the petitioner's repeated requests for a personal hearing in responses dated January and February 2021, the respondent did not grant the same nor provided reasons for not doing so. The High Court emphasized that the failure to grant a personal hearing, especially when requested by the petitioner, was a significant ground for setting aside the assessment order.

Issuance of Draft Assessment Order:
While the assessment order mentioned the issuance of draft assessment orders on January 18 and February 1, 2021, it was revealed that the draft assessment order was generated in the ITBA system only on February 25, 2021. The Court noted that no draft assessment order was issued at all, let alone on February 1, 2021. The communication seeking further documentary evidence cannot be considered a draft assessment order. The failure to comply with the requirement of serving a notice with a draft assessment order as per the Scheme was another reason cited for interfering with the assessment order.

In conclusion, the High Court quashed and set aside the assessment order dated March 2, 2021, along with the consequential notices of demand and penalty. The respondents were directed to take appropriate steps in accordance with the law, and the petition was disposed of.

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