Assessment Order Quashed for Procedural Lapses; Fresh Show Cause Notice Ordered Under Section 144B of Income-tax Act

The court quashed the assessment order dated 23.09.2021 and the associated demand notice due to procedural lapses, including the denial of video conferencing requests and rejection of books of accounts without proper consideration. It directed the respondent to issue a fresh show cause notice and adhere to procedural requirements under Section 144B of the Income-tax Act, ensuring compliance with principles of natural justice. The court emphasized that all legal contentions remain open for the petitioner in the new proceedings.

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Issues Involved:
1. Denial of video conferencing requests.
2. Rejection of books of accounts.
3. Addition to income proposed in the assessment.
4. Compliance with faceless assessment procedures under Section 144B of the Income-tax Act, 1961.
5. Principles of natural justice.

Detailed Analysis:

1. Denial of Video Conferencing Requests:
The petitioner made at least four requests for a personal hearing through video conferencing, which were denied by the respondent. The court noted that the respondent's rejection of these requests, citing no legal aspect to be heard, was not justified. The court emphasized that the provision under Section 144B of the Income-tax Act allows the assessee the right to seek an audience, and the repeated denial of this request constituted a breach of the principles of natural justice.

2. Rejection of Books of Accounts:
The respondent rejected the petitioner's books of accounts and estimated the net profit at a rate significantly higher than proposed in the show cause notice. The court found that the assessment was completed by rejecting the books of accounts without proper consideration of the petitioner's submissions, which warranted judicial intervention.

3. Addition to Income Proposed in the Assessment:
The petitioner contended that the final assessment resulted in an addition to income that was 50 times more than what was proposed in the show cause notice. The court recognized this as a serious grievance, noting that such a significant increase without adequate justification or opportunity for the petitioner to respond was improper.

4. Compliance with Faceless Assessment Procedures under Section 144B:
The court extensively discussed the procedural requirements under Section 144B, which governs faceless assessments. It highlighted that the provision mandates the service of a notice to the assessee and an opportunity to respond. The court referred to previous judgments, including those from the Orissa and Delhi High Courts, which emphasized the necessity of complying with these procedural requirements. The court concluded that the failure to provide a draft assessment order and the denial of a hearing violated the statutory obligations under Section 144B.

5. Principles of Natural Justice:
The court reiterated that the denial of the petitioner's requests for a hearing through video conferencing and the significant additions to income without proper notice and opportunity to respond breached the principles of natural justice. The court held that these procedural lapses rendered the assessment order invalid.

Conclusion:
The court quashed the assessment order dated 23.09.2021 and the associated demand notice, directing the respondent to issue a fresh show cause notice and comply with the procedural requirements under Section 144B. The court underscored that all contentions available under the law would remain open for the petitioner to raise in the fresh proceedings.

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