Court quashes assessment order for violating natural justice and non-compliance with tax law, orders fresh assessment.

The court ruled in favor of the petitioner, finding that the assessment order violated principles of natural justice and failed to comply with mandatory provisions of Section 144B of the Income Tax Act, 1961. The court quashed the assessment order and demand notice, directing the respondent to conduct a fresh assessment following the prescribed procedure, including issuing a show cause notice-cum-draft assessment order and providing a personal hearing through video conferencing. The court emphasized the importance of procedural fairness under the faceless assessment scheme and set a 12-week timeline for completion.

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Issues Involved:
1. Violation of principles of natural justice.
2. Non-compliance with mandatory provisions of Section 144B of the Income Tax Act, 1961.
3. Denial of opportunity for a personal hearing through video conferencing.

Detailed Analysis:

Violation of Principles of Natural Justice:
The petitioner argued that the assessment order passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, violated the principles of natural justice. The petitioner was not provided with an opportunity for a personal hearing through video conferencing as mandated by the faceless assessment scheme. This omission was seen as a breach of the procedural fairness required under the law.

Non-compliance with Mandatory Provisions of Section 144B:
The petitioner highlighted that the respondent did not adhere to the mandatory provisions of clauses (xiv), (xvi), and (xxii) of sub-section (1) of Section 144B. Specifically, the respondent failed to issue a draft assessment order and show cause notice, which are prerequisites for providing the assessee an opportunity to explain the proposed additions. The court noted that Section 144B(1) starts with a non-obstante clause, emphasizing that the faceless assessment must follow the prescribed procedure, overriding any contrary provisions in the Act.

Denial of Opportunity for Personal Hearing:
The petitioner contended that the respondent did not provide an opportunity for a personal hearing through video conferencing, as required under Section 144B(7)(vii), (viii), and (ix). The court observed that the faceless assessment scheme necessitates such hearings to be conducted through video conferencing to ensure transparency and fairness. The failure to provide this opportunity was deemed a significant procedural lapse.

Judgment:
The court ruled in favor of the petitioner, stating that the impugned order was passed in violation of the principles of natural justice and without following the prescribed procedure under Section 144B. The court quashed the assessment order dated 08.06.2021 and the corresponding demand notice under Section 156. The respondent was directed to proceed with the assessment afresh, adhering to the provisions of Section 144B, including issuing a show cause notice-cum-draft assessment order and providing an opportunity for a personal hearing through video conferencing. This process was to be completed within 12 weeks from the receipt of the court's order.

The court referenced several precedents, including decisions from the Bombay High Court and its own prior judgments, which supported the necessity of following the procedural safeguards under the faceless assessment scheme. The rule was made absolute to the extent mentioned, and direct service was permitted. The court clarified that it did not examine the merits of the case.

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