Court sets aside assessment order for AY 2015-16 under Section 144B due to procedural violations

The court set aside the assessment order, demand notice, and penalty proceedings for Assessment Year 2015-16 due to a violation of natural justice and statutory procedure in faceless assessment under Section 144B of the Income Tax Act, 1961. The matter was remanded back to the Assessing Officer to issue a show cause notice and draft assessment order to the petitioner and pass a reasoned order in accordance with the law. The court emphasized adherence to the Faceless Assessment Scheme and Section 144B provisions, highlighting the importance of following prescribed procedures.

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Issues:
Challenge to assessment order, demand notice, and penalty notice for Assessment Year 2015-16. Violation of natural justice and statutory procedure in faceless assessment under Section 144B of the Income Tax Act, 1961.

Analysis:
The petitioner filed a writ petition challenging the assessment order, demand notice, and penalty notice dated 23rd March, 2022, for the Assessment Year 2015-16. The petitioner sought to restrain the respondent from proceeding further based on the impugned orders. The petitioner contended that no draft assessment order or show cause notice was issued before the assessment order, denying them a reasonable opportunity of hearing.

The court noted that the assessment was conducted by the National Faceless Assessment Centre in Delhi and should adhere to the statutory procedure prescribed for assessment by that authority. It emphasized that the procedure must align with the provisions of the Faceless Assessment Scheme and Section 144B of the Act. Section 144B(1)(xvi)(b) mandates the issuance of a show cause notice and draft assessment order before the final assessment order.

As the show cause notice and draft assessment order were not issued in this case, the court found a violation of the principles of natural justice and the mandatory procedure under the Faceless Assessment Scheme and Section 144B of the Act. The court clarified that the availability of an appellate remedy does not bar the maintainability of a writ petition in cases of natural justice violations.

Consequently, the court set aside the impugned assessment order, demand notice, and penalty proceedings initiated under the Act. The matter was remanded back to the Assessing Officer, directing them to issue a show cause notice and draft assessment order to the petitioner and pass a reasoned order in accordance with the law. The court disposed of the writ petition and pending application, leaving the rights and contentions of all parties open without commenting on the merits of the controversy.

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