High Court sets aside Income Tax assessment order for breach of natural justice, grants petitioner direct challenge.

The High Court set aside an assessment order under the Income Tax Act due to a breach of natural justice principles. Despite the availability of an appeal process, the Court allowed the petitioner, an Urdu Education Society, to challenge the order directly. The Court found that the petitioner was not given sufficient time to respond to notices and the assessment order, leading to a violation of natural justice. The Court directed the tax authority to provide the petitioner with a personal hearing and granted additional time for a structured response, ultimately ruling in favor of the petitioner and setting aside the assessment order and all related orders.

---

---

Issues:
Challenge to assessment order under Income Tax Act based on breach of natural justice principles.

Analysis:
The petitioner, an Urdu Education Society, challenged an assessment order dated 20-4-2021 under the Income Tax Act, claiming a breach of natural justice principles. The High Court acknowledged the alternate remedy of appeal but decided not to compel the petitioner to pursue it due to the substantiated breach of natural justice. Citing the Whirlpool Corporation case, the Court highlighted exceptions where alternative remedies do not bar the Court's jurisdiction, such as violation of natural justice principles. The Court proceeded to analyze the facts of the case.

The petitioner had filed a return declaring NIL income for the assessment year 2018-2019 under Section 11 of the Act. The assessment was conducted under the E-Assessment Scheme 2019, and various notices were issued to the petitioner for scrutiny. The petitioner faced challenges in responding to notices due to the unavailability of records caused by the Covid-19 pandemic and the unfortunate demise of the individual responsible for accounts and taxation matters. Furthermore, incorrect contact details of the petitioner's Chartered Accountant led to communication issues with the department.

The significant development in the case was a show cause notice issued on 15-4-2021 proposing a substantial addition to the declared income, which the petitioner disputed. The petitioner requested additional time to respond due to pandemic-related difficulties, but the assessment order was passed on 20-4-2021 without granting sufficient time for a structured response. The Court found that the principles of natural justice were egregiously violated as the petitioner was given only two working days to respond to the show cause notice and draft assessment order, leading to the order's setting aside.

The Court directed the tax authority to grant the petitioner a personal hearing with a seven-day notice and allowed the submission of relevant documents through a separate portal if required. Emphasizing that the judgment was based on the peculiar facts of the case, the Court clarified that it should not be considered a precedent. Ultimately, the petition was disposed of in favor of the petitioner, setting aside the assessment order and all consequential orders.

---