Court sets aside assessment order due to breach of natural justice, emphasizes fair hearing during pandemic

The court ruled in favor of the petitioner, setting aside the assessment order and demand notice due to a breach of natural justice principles. The assessment proceedings were remanded for fresh consideration within twelve weeks, emphasizing the importance of providing the assessee with a fair hearing, especially during challenging circumstances like the pandemic. The decision was solely based on the procedural violation without delving into the substantive merits of the case.

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Issues:
Challenge to assessment order and demand notice based on violation of natural justice principles by disregarding adjournment application.

Detailed Analysis:
1. Filing of Petition and Grounds: The petitioner filed a petition under Article 226 of the Constitution to set aside the assessment order and demand notice for the assessment year 2018-19 under sections 143(3) and 144-B of the Income Tax Act, 1961. The petitioner alleged violation of natural justice principles due to the denial of an adjournment request, resulting in a substantial demand.

2. Basic Facts and Assessment Process: The petitioner, a partnership firm in construction, filed its return declaring income for the assessment year. After scrutiny, a draft assessment order was prepared by the respondent, leading to a show-cause notice to the petitioner regarding the determined income. The petitioner requested time extensions due to the pandemic situation, but the respondent proceeded to pass the assessment order without granting the adjournment.

3. Legal Arguments: The petitioner's advocate argued that the refusal to adjourn the proceedings and the subsequent passing of the order disregarded natural justice principles, especially during the challenging circumstances of the pandemic. The respondent, on the other hand, claimed to have given sufficient opportunities for responses but declined the adjournment request.

4. Comparison with Previous Case: Reference was made to a similar case where the court emphasized the statutory requirement of providing the assessee with an opportunity to respond to draft assessment orders. The court highlighted the importance of complying with the statutory provision for a fair hearing, especially during the pandemic, and criticized the authorities for a lack of leniency.

5. Judgment and Remand: The court ruled in favor of the petitioner, setting aside the assessment order and demand notice, citing a breach of natural justice principles. The assessment proceedings were remanded to the Assessing Officer for a fresh consideration from the draft assessment stage, with a directive to complete the process within twelve weeks.

6. Final Remarks: The court clarified that the decision to allow the petition and quash the order was solely based on the breach of natural justice, without delving into the merits of the case. The petition was allowed, and the rule was made absolute accordingly.

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