Court Quashes Order Over Procedural Flaws, Imposes Costs on Respondent, Highlights Natural Justice Violations.

The HC quashed the impugned order dated 31.03.2022, citing procedural irregularities, contradictions, and violations of natural justice principles. The writ petition was allowed, and costs were imposed on the respondent, payable to the Allahabad HC Legal Services Committee. The respondents must recover the cost from the responsible officer, with compliance verification scheduled in three months.

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Issues involved:
The judgment involves a challenge to the cancellation of an assessment order under the Income Tax Act, specifically under section 263, on the grounds of being prejudicial to the interest of the Revenue. The issues revolve around the legality of the proceedings, natural justice principles, and the sufficiency of evidence and findings in the impugned order.

Details of the Judgment:

Challenge to Order Cancellation:
The petitioner, engaged in the business of gold bars and ornaments, challenged the cancellation of the assessment order dated 22.12.2019 by respondent no. 1. The cancellation was based on the assertion that the original order was erroneous and prejudicial to the Revenue's interest. The petitioner contended that the proceedings were initiated on a change of opinion without proper inquiry or opportunity for the assessee to be heard.

Procedural Irregularities:
The petitioner raised concerns about the lack of natural justice in the proceedings. It was argued that the notice under section 263 was issued on 27.03.2022, received by the petitioner on the date fixed for reply, and an adjournment application was promptly submitted. However, the impugned order was passed on 31.03.2022, without considering the adjournment request. Discrepancies in the order sheets and signatures further cast doubt on the validity of the proceedings.

Contradictory Findings in the Impugned Order:
The judgment highlighted contradictions within the impugned order. Paragraph 4 stated that no reply was submitted by the assessee, while paragraph 5 mentioned the submission of a reply after examination. The court noted that the respondent authority failed to provide evidence of the alleged reply, undermining the credibility of the findings and the decision-making process.

Violation of Natural Justice Principles:
The court emphasized the violation of natural justice principles due to the lack of opportunity for the petitioner to defend or present its case adequately. Citing precedent, the court ruled that the impugned order could not be sustained. Additionally, the impugned order failed to provide findings as required by the Income Tax Act, rendering it unsustainable in the eyes of the law.

Quashing of the Impugned Order:
In light of the procedural irregularities, contradictions, and violations of natural justice, the court quashed the impugned order dated 31.03.2022. The writ petition was allowed with a cost imposed on the respondent, to be deposited with the Allahabad High Court Legal Services Committee. The respondents were directed to recover the cost from the erring officer, with a follow-up listing scheduled after three months for compliance verification.

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