2022 (3) TMI 622 - HC - Income Tax

Court sets aside assessment order and penalties, emphasizes natural justice in Income Tax case

Omkar Nath Versus National Faceless Assessment Centre Delhi (Earlier National E-Assessment Centre Delhi) & Anr.

The court ruled in favor of the petitioner, setting aside the assessment order, notice of demand, and penalty proceedings under the Income Tax Act, 1961 ... Validity of Faceless assessment u/s 144B - whether or not the principles of natural justice have been followed as required under Section 144B? - HELD THAT:- AO passed the impugned assessment order, as indicated above, on 07.06.2021, without granting an opportunity to the petitioner of a personal hearing in the matter. This being the position, clearly, the provisions of Section 144B(7)(vii) of the Act would apply in this case. See RITNAND BALVED EDUCATION FOUNDATION (UMBRELLA ORGANIZATION OF AMITY GROUP OF INSTITUTIONS) VERSUS NATIONAL FACELESS ASSESSMENT CENTRE & ORS. [2021 (6) TMI 17 - DELHI HIGH COURT] Thus the prayer made in the writ petition is allowed.The impugned assessment order dated 07.06.2021, as well as consequential notices i.e., the notice of demand issued under Section 156 of the Act, and the notice issued for initiation of penalty proceedings under Section 270A of the Act, of even date, are set aside. Issues:1. Challenge against assessment order, notice of demand, and penalty proceedings under the Income Tax Act, 1961 for AY 2018-2019.2. Compliance with principles of natural justice under Section 144B of the Act.3. Request for personal hearing and procedural requirements under the Faceless Assessment Scheme.Analysis:Issue 1: Challenge against assessment order, notice of demand, and penalty proceedingsThe petitioner challenged the assessment order dated 07.06.2021, issued under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for the assessment year 2018-2019. The primary contention was the taxation of interest received under Section 28 of the Land Acquisition Act, 1894, as a capital receipt. Discrepancies in treatment compared to another assessee and the alleged non-compliance with a Supreme Court judgment were also raised. The petitioner approached the court seeking relief against the assessment order, notice of demand, and initiation of penalty proceedings.Issue 2: Compliance with principles of natural justiceThe court focused on determining whether the principles of natural justice, as required under Section 144B of the Act, were followed during the assessment process. The court clarified that the examination of the merits of the case was not the immediate concern. The facts highlighted the petitioner's response to the show cause notice-cum-draft assessment order, subsequent queries raised by the Assessing Officer (AO), and the lack of a personal hearing before the impugned assessment order was passed on 07.06.2021. The court emphasized the importance of granting a personal hearing as per the provisions of Section 144B(7)(vii) of the Act.Issue 3: Request for personal hearing and procedural requirements under the Faceless Assessment SchemeThe court referenced a previous judgment to underscore the relevance of the specific request for a personal hearing made by the petitioner. The absence of established standards, procedures, and processes for granting personal hearings under Section 144B(7) of the Act was noted. The court highlighted the statutory provision for personal hearings, emphasizing that the revenue authorities must adhere to this requirement. Ultimately, the court allowed the prayer in the writ petition, setting aside the impugned assessment order and related notices, while granting the Assessing Officer the liberty to proceed further in accordance with the law.This detailed analysis demonstrates the court's thorough consideration of the issues raised by the petitioner regarding the assessment process, compliance with natural justice principles, and the procedural requirements under the Faceless Assessment Scheme.