High Court sets aside assessment order for procedural violations under Income Tax Act, emphasizing natural justice requirements.

The Calcutta High Court allowed the appeal, setting aside the assessment order due to violations of natural justice in the assessment process under the Income Tax Act, 1961. The Court emphasized the necessity of issuing a show cause notice under Section 144B(1)(xii)(b) and directed the assessing officer to provide the assessee with an opportunity to file objections and documents. Penalty proceedings initiated were also set aside, with instructions for their resumption post a fresh assessment. The Court highlighted the importance of procedural fairness and adherence to statutory requirements in assessment proceedings.

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Issues:
Violation of principles of natural justice in assessment order under Income Tax Act, 1961.

Analysis:

Issue 1: Existence of alternate remedy and jurisdiction under Article 226
The Court deliberated on whether the existence of an alternate remedy under the statute would bar the exercise of jurisdiction under Article 226 of the Constitution. Citing precedents, the Court emphasized that exceptions to the rule of alternate remedy arise in cases of fundamental rights enforcement, natural justice violation, lack of jurisdiction, or legislative challenge. The Court retained discretion to entertain a writ petition, especially in cases of natural justice violation.

Issue 2: Violation of principles of natural justice in assessment process
The assessing officer issued a notice under Section 142(1) of the Income Tax Act, seeking information on agriculture income. The assessee promptly responded with all relevant details. However, subsequent to this, no further notice, opportunity for a personal hearing, or request for additional information was provided to the assessee before the assessment order was passed. The assessment order contained contradictory statements regarding information submission by the assessee, indicating procedural irregularities.

Issue 3: Compliance with statutory requirements for faceless assessment
The Court examined Section 144B of the Income Tax Act concerning faceless assessment. It highlighted the mandatory provisions under Section 144B(1)(xii) for issuing a show cause notice to the assessee in cases of proposed variations prejudicial to their interest. The assessing officer failed to follow this provision, leading to a violation of natural justice and statutory procedure.

Conclusion:
The Court allowed the appeal, set aside the assessment order, and remanded the matter to the assessing officer for a fresh decision. Emphasizing the necessity of issuing a show cause notice under Section 144B(1)(xii)(b), the Court directed the assessing officer to provide the assessee with an opportunity to file objections and documents. The penalty proceedings initiated as a consequence of the assessment order were also set aside, allowing for their resumption in accordance with the law post a fresh assessment. No costs were awarded, and parties were instructed to receive certified copies promptly.

This detailed judgment by the Calcutta High Court underscores the significance of procedural fairness, adherence to statutory requirements, and the Court's discretionary power in addressing violations of natural justice in assessment proceedings under the Income Tax Act, 1961.

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