Assessment order quashed for violating natural justice. Faceless Assessment regime procedures upheld.

The assessment order issued against the petitioner was set aside due to a violation of natural justice principles. The court directed the respondents to accept objections within thirty days and consider them, granting a hearing to the petitioner within two months from the date of filing objections under the Faceless Assessment regime. The writ petition was allowed in favor of the petitioner.

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Issues: Allegation of assessment order issued without natural justice principles compliance.

The petitioner alleged that an assessment order issued against them lacked compliance with the principles of natural justice. The petitioner declared a net loss for the assessment year 2018-19, and their return was selected for scrutiny under the Faceless Assessment Scheme. The petitioner responded promptly to notices and was served with a show cause notice under Section 144B(xvi) of the Income Tax Act, 1961, granting them seven days to respond. When the petitioner requested a further four days to gather material from multiple sources, the assessing officer did not respond and proceeded to issue the assessment order on 24.04.2021, without granting the requested time. The petitioner argued that this violated the provisions of Section 144B(1)(vii) and Section 144B(1)(xxii) of the Income Tax Act, 1961, which require a response to requests for extension of time, thus breaching the principles of natural justice.

The Faceless Assessment Scheme aims to enhance transparency and eliminate physical interaction between the assessee and the tax officer while ensuring a reasonable opportunity for the assessee to respond to notices. The relevant sections 144B(1)(vii) and 144B(1)(xxii) of the Income Tax Act, 1961, allow for the filing of responses within specified times or extended periods upon application to the National Faceless Assessment Centre. The statute contemplates the granting of extended time to furnish a response, and when the petitioner requested additional time citing the need to gather materials, the assessing officer was obligated to respond to the request. The lack of response violated the principles of natural justice, as the petitioner could have reasonably expected their request for adjournment to be accepted before the assessment was completed.

The judgment concluded that the assessment order (Ext.P8) was set aside due to a clear violation of the principles of natural justice. The respondents were directed to accept any objections to the show cause notice within thirty days from opening a link for filing objections under the Faceless Assessment regime. If objections were filed within the stipulated time, the respondents were instructed to consider them and pass appropriate orders after granting a hearing to the petitioner within two months from the date of filing objections. The writ petition was allowed in favor of the petitioner.

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