Court sets aside assessment order & notice of demand for AY 2018-2019, emphasizes compliance with Income Tax Act procedures.

The court set aside the assessment order, notice of demand, and show cause notices for AY 2018-2019, remanding the matter back to the Assessing Officer. The Assessing Officer was directed to issue a show cause notice and draft assessment order before passing a reasoned order in accordance with the law. The court emphasized the importance of following prescribed procedures under Section 144B(1)(xvi)(b) of the Income Tax Act, highlighting that even if principles of natural justice were followed, statutory mandates must be complied with.

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Issues:
Challenge to assessment order, show cause notices, and penalty imposition for AY 2018-2019.

Analysis:
The petitioner challenged the assessment order, notice of demand, and show cause notices dated April and August 2021, seeking penalty imposition under Sections 274 and 271AAC(1) of the Income Tax Act, 1961 for AY 2018-2019. The petitioner argued that the assessment order was jurisdictionally flawed and violated natural justice requirements under the faceless assessment scheme and CBDT instructions. The petitioner emphasized the lack of a valid show cause notice and draft assessment order before creating a substantial tax demand. Reference was made to CBDT instruction no. 20/2015, emphasizing the fair opportunity for the assessee to explain their position before adverse inferences are drawn.

The respondent contended that principles of natural justice were met as the petitioner received adequate notice and responded with a detailed reply. Referring to a Supreme Court judgment, the respondent argued that the effect on punishment due to non-furnishing of reports should be relative to the punishment awarded, and not all cases warrant reinstatement with back-wages.

The court noted that Section 144B(1)(xvi)(b) of the Act mandates issuance of a show cause notice and draft assessment order before the final assessment order. Highlighting the importance of following the prescribed procedure, the court held that failure to issue prior notices constituted a violation of the law. The court emphasized that assessments under Section 144B must strictly adhere to the prescribed procedure, citing established legal principles that tasks must be performed as prescribed by law. Even if principles of natural justice were followed, statutory mandates must be complied with.

Consequently, the court set aside the impugned assessment order, notice of demand, and show cause notices, remanding the matter back to the Assessing Officer. The Assessing Officer was directed to issue a show cause notice and draft assessment order before passing a reasoned order in accordance with the law. The writ petition and pending applications were disposed of with these directions, and the order was to be uploaded on the website and forwarded to the counsel via email.

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