High Court invalidates assessment order due to lack of hearing, directs restart under Income-Tax Act

The High Court found that the assessment order, which demanded Rs. 27,17,566, was invalid as the petitioner was not granted the opportunity of a hearing as required by Section 144B(9) of the Income-Tax Act, 1961. The court allowed the petition, quashed the assessment order, and directed the officer to restart the process from the point of the hearing request. The petitioner was given two weeks to make the request, with a response required within the same period. The court stressed that its decision did not address the case's merits, ensuring the matter's resolution would proceed appropriately.

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Issues:
Violation of opportunity of hearing under Section 144B of the Income-Tax Act, 1961 leading to an impugned assessment order and demand under Section 156.

Analysis:
The petitioner filed the income return for the assessment year 2017-2018 but received a draft assessment order from respondent No.1 invoking powers under Section 144 of the Income-Tax Act, 1961 due to alleged failure to file a return in response to a notice under Section 148. The petitioner requested a personal hearing via video conference before any adverse inference. Despite this, a show cause notice was issued, and an assessment order demanding Rs. 27,17,566 was passed without granting the opportunity of hearing. The petitioner contended that Section 144B entitles them to a hearing, including through video conference, which was ignored by the respondent, leading to the petition with prayers to quash the assessment order.

The High Court found that the assessment order was a clear violation of the procedure laid down under Section 144B(9) as the opportunity of hearing was not granted. Consequently, the order was deemed non-est in the eyes of the law, and the petition was allowed, quashing and setting aside the assessment order. The Court directed the officer concerned to resume the process from the stage where the hearing request was made. The petitioner was instructed to make the request within two weeks, to which the officer must respond within the same period. The entire adjudication process was mandated to be completed within twelve weeks from the judgment date.

The Court emphasized that its decision did not delve into the merits of the case and that the matter should be decided accordingly in the future proceedings. The disposal of the petition was not to obstruct either party, ensuring that the resolution of the matter continues as per due process.

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