High Court quashes assessment order & penalty proceedings for 2018-19, citing natural justice violation.

The High Court set aside the assessment order, notice of demand, and penalty proceedings for the Assessment Year 2018-19, directing the petitioner to file a reply within two weeks and the respondent to pass a fresh assessment order within four weeks. The court found a violation of the principle of natural justice due to the petitioner's inability to respond to the assessment proceedings during the Covid-19 lockdown, emphasizing the importance of upholding fundamental rights and ensuring a fair opportunity for the petitioner to present their case.

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Issues:
Challenging assessment order, violation of principle of natural justice, alternative efficacious remedy, maintainability of writ petition.

Challenging Assessment Order:
The petitioner filed a writ petition challenging the assessment order dated 23rd May 2021, notice of demand, and notice for penalty proceedings for the Assessment Year 2018-19. The petitioner contended that due to the lockdown imposed in the NCT of Delhi because of the Covid-19 pandemic, they were unable to file a reply to the show cause notice and draft assessment order. The Assessing Officer proceeded to pass the assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961, without considering the circumstances preventing the petitioner from responding. The petitioner's Chartered Accountant affirmed the inability to access necessary documents and login credentials due to the lockdown, supporting the claim of violation of natural justice.

Violation of Principle of Natural Justice:
The court acknowledged the petitioner's inability to reply to the show cause notice and draft assessment order due to the Covid-19 pandemic. The Chartered Accountant's affidavit confirmed the challenges faced in accessing essential documents and login credentials. The court observed that the petitioner had a statutory right to respond independently, and the previous replies filed were deemed irrelevant in this context. Consequently, the court found a violation of the principle of natural justice in the assessment proceedings.

Alternative Efficacious Remedy and Maintainability of Writ Petition:
The respondent argued that the petitioner had the option to appeal before the Commissioner of Income Tax (Appeals) under Section 246 of the Act, suggesting an alternative remedy was available. However, the court held that the availability of an alternative remedy does not bar the writ jurisdiction of the High Court in cases involving the enforcement of fundamental rights, violation of natural justice, lack of jurisdiction, or challenge to legislation. As the present writ petition was maintainable due to the violation of natural justice, the court set aside the assessment order, notice of demand, and penalty proceedings, directing the petitioner to file a reply within two weeks and the respondent to pass a fresh assessment order within four weeks thereafter.

In conclusion, the court allowed the writ petition, emphasizing the importance of upholding principles of natural justice, especially during exceptional circumstances like the Covid-19 pandemic, and ensuring the petitioner's right to a fair opportunity to respond to assessment proceedings.

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