High Court remands assessment order, criticizes Department's refusal to grant time during pandemic.

The High Court set aside the assessment order and related notices, remanding the proceedings to allow the petitioner to file a response. The Court criticized the Department's refusal to grant time during the pandemic, deeming it unreasonable and prejudicial to the assessee. Emphasizing the need for a more flexible approach, the Court directed the completion of assessment proceedings within twelve weeks, solely based on the breach of natural justice. The petition was allowed in favor of the petitioner without delving into the case's merits.

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Issues:
Confrontation with draft assessment order under Section 144B of the Income Tax Act during the pandemic period and denial of time to file a response.

Analysis:
The petitioner, an assessee, was presented with a draft assessment order under Section 144B of the Income Tax Act and sought time to respond during the pandemic. The High Court examined whether the Department's refusal to grant time for a reply was justified. The petitioner prayed to set aside the assessment order dated 27.05.2021, related notices, and penalty under Sections 143(3) and 144B of the Act for the Assessment Year 2018-19. The petitioner, a Hindu Undivided Family, filed the return of income on 30.08.2018, followed by a notice under Section 143(2) and a request for documents under the Faceless Assessment Scheme, 2019. The petitioner requested an adjournment on 29.01.2021, responding to the Department's reminders regarding new grounds raised by the Revenue. Subsequently, on 16.05.2021, a draft assessment order was passed, and the petitioner sought fifteen days to respond, which was not granted or decided upon by the Department. The final assessment order was passed on 27.05.2021 without allowing the petitioner to present their case.

The Court referred to a notification dated 13th August 2020, emphasizing the opportunity for the assessee to respond to proposed modifications in the draft assessment order. The faceless assessment scheme, made statutory from 01.04.2021, mandated providing the assessee with an opportunity to reply before the final assessment order. Failure to adhere to this statutory provision was deemed prejudicial to the assessee. The Court noted that the Department's refusal to grant time for response during the peak of the Covid-19 pandemic was unreasonable, especially when there was ample time for final assessment. The Court criticized the Department's inflexible approach and emphasized the need for a more lenient stance during such challenging times.

Consequently, the Court set aside the assessment order and related notices, remanding the assessment proceedings to the Assessing Officer to allow the petitioner to file a reply. The Court directed the completion of the assessment proceedings within twelve weeks, solely based on the breach of natural justice without delving into the case's merits. The petition was allowed, and the rule was made absolute in favor of the petitioner.

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