2023 (10) TMI 780 - HC - Income Tax

Breach of natural justice in AY 2017-18 assessment: Court sets aside order, mandates new process with fair hearing.

The court found a breach of natural justice principles in the assessment process for AY 2017-18 due to insufficient response time and lack of information ... Validity of Faceless Assessment - Standard Operating Procedure (SOP) - AO ought to have granted a minimum of seven days to the petitioner to submit her response - breach of the principles of natural justice - HELD THAT:- In the facts of the case, what is seen is that the Section 142(1) notice was issued as far back as on 10.04.2023. The petitioner responded to the same on 17.04.2023. AO, at that juncture, had enough time to take appropriate steps, including issuing a show cause notice, if he intended to propose variations in the petitioner’s income. AO, by waiting till 25.05.2023, created a situation whereby, he could not have granted clear seven (7) days for filing a response, as stipulated in the SOP. AO took an extreme position by providing only twenty-four hours to the petitioner to file a response. Perhaps, a couple of days more could have been given, having regard to the narrow timeframe that was available to him. More importantly, in this case, since the petitioner has taken the position that she has not entered into a transaction with Atul Tyagi, it was incumbent upon the AO to furnish relevant material which would in the very least, prima facie, demonstrate that the assertion was believable. Thus we are of the view that the best way forward would be to set aside the impugned assessment order, with liberty to the AO to pass a fresh order, after giving an opportunity to the petitioner to file a reply. Issues Involved:The judgment concerns a writ petition related to Assessment Year (AY) 2017-18. The main issue revolves around the breach of principles of natural justice in the assessment process.Details of the Judgment:Issue 1: Allegation of Unverified TransactionThe petitioner was alleged to have transferred a significant amount to another individual's account for entry purposes. The case against the petitioner was based on a statement made by the account holder, admitting to being an entry provider. The petitioner denied the transaction and requested relevant information from the Assessing Officer (AO).Issue 2: Breach of Principles of Natural JusticeThe petitioner argued that the AO did not provide sufficient time to respond to the show cause notice, as per the Standard Operating Procedure (SOP) guidelines requiring a minimum of seven days. The AO only allowed a day for response, which the petitioner contended was insufficient and breached natural justice principles.Judgment Summary:The court acknowledged the breach of natural justice principles due to the inadequate time given for response and the lack of supporting information provided by the AO. The court set aside the assessment order and granted the AO the opportunity to pass a fresh order after providing relevant material to the petitioner. The court directed the AO to grant two weeks for the petitioner to respond, conduct a personal hearing, and issue a speaking order. The writ petition was disposed of accordingly.