Court overturns tax assessment order for 2018-19 due to procedural errors under Faceless Assessment Scheme.

The court set aside assessment order Ext.P7 issued under the Income Tax Act 1961 for the assessment year 2018-19 due to the assessing Officer's failure to follow the procedure under the Faceless Assessment Scheme. The court directed the Assessing Officer to reconsider the case by issuing the necessary show-cause notice and draft assessment order as per the Scheme, and to pass fresh orders after considering the assessee's objections/explanations in a timely manner. This decision was made under Article 226 of the Constitution of India, emphasizing the importance of adherence to legal procedures in assessments.

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Issues:
Challenge to assessment order under Income Tax Act 1961 for the assessment year 2018-19. Violation of procedure under the Faceless Assessment Scheme leading to a flawed assessment order.

Analysis:
The petitioner challenged the Ext.P7 assessment order issued under the Income Tax Act 1961 for the assessment year 2018-19. The assessment was purportedly carried out under the Faceless Assessment Scheme, which was transformed into Section 144B of the Act from 1/04/2021. The petitioner's grievance was that the Assessing Officer proposed to modify the return without issuing the mandatory show-cause notice as required by the Scheme, rendering the assessment order legally flawed.

The procedure under the Scheme mandates issuing a show-cause notice if a modification to the return is proposed. The National e-assessment Centre is required to finalize the draft assessment order through two modes: finalizing the proposed assessment if it does not prejudice the assessee, or granting another opportunity if a modification prejudicial to the assessee is proposed. The petitioner contended that the assessing Officer failed to follow this procedure by not serving the show-cause notice or the draft assessment order upon the assessee.

The court noted that the assessing Officer decided to modify the return without serving the necessary notices to the assessee, thereby violating the procedure under the Scheme. The court held that when the decision-making process is contrary to law or vitiated, invoking jurisdiction under Article 226 of the Constitution of India is appropriate. Consequently, the assessment order Ext.P7 was set aside, and the Assessing Officer was directed to reconsider the case by issuing the draft assessment order and necessary show-cause notice as per the Faceless Assessment Scheme. The Assessing Officer was instructed to pass fresh orders after considering the objections/explanations of the assessee in a time-bound manner.

In conclusion, the court found a clear violation of the procedure under the Faceless Assessment Scheme in issuing the assessment order, leading to its setting aside and the directive for a fresh assessment following the correct procedure.

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