Court sets aside assessment orders due to procedural violations, emphasizing importance of Show Cause Notice.

The Court set aside the impugned assessment orders due to the non-issuance of Show Cause Notice (SCN)/Draft Assessment Order (DAO) under Section 144B, emphasizing the mandatory nature of these procedural requirements. It held that the failure to issue SCN/DAO and provide an effective opportunity to respond violated principles of natural justice. The Court rejected the argument for seeking alternate remedies, stating that such violations could not be cured by appeals. The respondents were directed to issue SCN/DAO within four weeks, allowing the petitioners to be heard for new assessment orders within sixteen weeks. The writ petitions were allowed, with no costs awarded.

---

---

Issues Involved:
1. Non-issuance of Show Cause Notice (SCN)/Draft Assessment Order (DAO) under Section 144B.
2. Violation of principles of natural justice.
3. Availability of alternate remedies.
4. Compliance with the Faceless Assessment Scheme.

Issue-wise Detailed Analysis:

1. Non-issuance of Show Cause Notice (SCN)/Draft Assessment Order (DAO) under Section 144B:

The primary issue in this batch of writ petitions is the non-issuance of SCN/DAO before passing the final assessment orders under Section 144B of the Income Tax Act, 1961. The petitioners argued that the omission of SCN/DAO vitiates the assessment procedure. In most cases, the respondents admitted that no SCN/DAO was issued. The Court emphasized that the requirement of SCN/DAO is mandatory and cannot be sidestepped. The relevant clauses in Section 144B mandate the issuance of a draft order proposing variations to the return of income, which must be served upon the assessee for response before finalizing the assessment.

2. Violation of principles of natural justice:

The petitioners contended that the non-issuance of SCN/DAO and the lack of personal hearings violated the principles of natural justice. The Court noted that the Faceless Assessment Scheme aims to eliminate the interface between the Assessing Officer and the assessee, but it does not dispense with the need for procedural fairness. The Court held that the failure to issue SCN/DAO and the lack of effective opportunity to respond and be heard constituted a violation of natural justice.

3. Availability of alternate remedies:

The respondents argued that the petitioners should be relegated to alternate remedies, such as filing appeals against the assessment orders. However, the Court rejected this contention, stating that the procedural violations in the assessment process could not be cured by relegating the petitioners to alternate remedies. The Court emphasized that the non-issuance of SCN/DAO is a fundamental procedural irregularity that vitiates the assessment orders.

4. Compliance with the Faceless Assessment Scheme:

The Court examined the compliance with the Faceless Assessment Scheme, which requires the issuance of SCN/DAO before finalizing the assessments. The Court referred to various judgments, including ACIT v. Hotel Blue Moon, Sapthagiri Finance & Investments v. ITO, and CIT v. Alstom T & D India Ltd., which held that the absence of statutory notices invalidates the assessments. The Court concluded that the failure to issue SCN/DAO in the present cases is a procedural irregularity that vitiates the assessment orders.

Conclusion:

The Court set aside the impugned assessment orders, except for the order in W.P.No.14373 of 2021, which was dealt with separately. The respondents were granted liberty to issue SCN/DAO within four weeks from the date of receipt of the order. The petitioners were to be heard, and new assessment orders were to be passed de novo. The entire exercise was to be completed within sixteen weeks from the date of receipt of the order. The writ petitions were allowed, and the connected miscellaneous petitions were closed with no order as to costs.

---