Court overturns assessment order and penalty proceeding under Faceless Assessment Scheme for breach of natural justice.

The court set aside the assessment order, notice of demand, and penalty proceeding due to a violation of natural justice in the Faceless Assessment Scheme. The matter was remanded back to the Assessing Officer with directions to issue a draft assessment order and pass a reasoned order in compliance with the law. The court disposed of the writ petition, ordering the uploaded publication of the decision on the website and forwarding it to the counsel via email.

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Issues:
Challenging assessment order, notice of demand, and penalty proceeding under Income-tax Act, violation of natural justice in Faceless Assessment Scheme.

Analysis:
The petition challenged an assessment order, notice of demand, and penalty proceeding issued by the National Faceless Assessment Centre under the Income-tax Act. The petitioner contended that the assessment order was passed without issuing a show-cause notice and draft assessment order as required by the Faceless Assessment Scheme, violating principles of natural justice. The respondent argued that prior notices had been issued, citing one from November 17, 2020 under section 142(1) of the Act. The court noted that the Faceless Assessment Scheme mandates issuing a show-cause notice and draft assessment order before the final assessment order. Citing established legal principles, the court emphasized that the government must adhere to the rules they have set. As no prior show-cause notice or draft assessment order was issued in this case, the court found a violation of natural justice and the mandatory procedure under the Faceless Assessment Scheme.

The court set aside the impugned assessment order, notice of demand, and penalty proceeding, remanding the matter back to the Assessing Officer. The Officer was directed to issue a draft assessment order and then pass a reasoned order in accordance with the law. The court disposed of the writ petition and instructed for the order to be uploaded on the website and forwarded to the counsel via email.

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