Assessment Order Quashed Due to Procedural Error

The court quashed the assessment order and demand notice due to non-compliance with the mandatory procedure under Section 144B of the Income Tax Act, 1961. The matter was remanded to the respondent for reassessment following the proper procedure within eight weeks.

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Issues Involved:
1. Breach of principles of natural justice.
2. Non-compliance with the procedure under Section 144B of the Income Tax Act, 1961.
3. Validity of the assessment order and demand notice.

Issue-Wise Detailed Analysis:

1. Breach of Principles of Natural Justice:
The petitioner argued that the assessment order dated 26/4/2021 and the notice of demand under Section 156 of the Income Tax Act, 1961, were issued without adhering to the principles of natural justice. Specifically, the petitioner contended that they were not provided with a draft assessment order or an opportunity for a personal hearing before the final assessment was made.

2. Non-Compliance with the Procedure under Section 144B of the Income Tax Act, 1961:
Section 144B(1) mandates a faceless assessment procedure, which includes issuing a draft assessment order and providing the assessee with an opportunity to respond to any variations prejudicial to their interest. The court emphasized that the use of the term "shall" in Section 144B(1) indicates a mandatory requirement. The National Faceless Assessment Center must issue a show-cause notice if any variation prejudicial to the assessee is proposed, allowing the assessee to respond and request a personal hearing if necessary. The court noted that the failure to issue a draft assessment order and show-cause notice constituted a breach of the mandatory procedure, rendering the assessment non-est under Section 144B(9).

3. Validity of the Assessment Order and Demand Notice:
The court found that the draft assessment order was not served on the petitioner, and no show-cause notice was issued, despite the proposed variation being prejudicial to the assessee's interest. This non-compliance invalidated the assessment order and the consequent demand notice. The court referenced its earlier judgment in Multiplier Brand Solutions Pvt. Ltd. Vs. Additional / Joint / Deputy / Assistant Commissioner of Income Tax Officer & Ors., which held that non-compliance with Section 144B renders the assessment order non-est.

Judgment:
The court quashed and set aside the assessment order dated 26/4/2021 and the notice of demand under Section 156 of the Income Tax Act, 1961. The matter was remanded to the respondent to complete the assessment proceedings following the procedure outlined in Section 144B, with the entire exercise to be completed within eight weeks from the date of the order. Rule was made absolute in the above terms.

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