Gujarat HC quashes faceless assessment order under Section 147 for failing to provide draft assessment copy with show cause notice

Gujarat HC quashed faceless assessment order under Section 147 read with Section 144B of Income Tax Act for non-compliance with mandatory procedure. Authorities failed to provide draft assessment order copy along with show cause notice as required under Section 144B(1)(xvi)(b). Court held assessment invalid and non-est citing violation of natural justice principles and mandatory provisions. Demand notice under Section 144 was also set aside, following precedent in Sardar Co.Op. Credit Society Ltd case.

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Issues Involved:
1. Validity of the assessment order under Section 147 read with Section 144B of the Income Tax Act, 1961.
2. Compliance with the mandatory procedure under Section 144B of the Income Tax Act, 1961.
3. Principles of natural justice in the context of faceless assessment.

Summary:

1. Validity of the Assessment Order:
The writ applicant, an individual assessee, challenged the assessment order issued under Section 147 read with Section 144B of the Income Tax Act, 1961, and the corresponding demand notice dated 30.03.2022. The applicant argued that the assessment order was issued without following the mandatory procedures prescribed under Section 144B of the Act.

2. Compliance with Mandatory Procedure:
The applicant contended that the final assessment order was passed without providing a copy of the draft assessment order as required under Section 144B(xxi). The applicant emphasized that the National Faceless Assessment Centre must serve the draft order on the assessee if any variation prejudicial to the assessee's interest is proposed. The applicant was not served with the draft order, which deprived them of the opportunity to raise objections, resulting in a demand of Rs. 28,09,842/-.

3. Principles of Natural Justice:
The court noted that the non-service of the draft assessment order, which is required to be sent along with a show cause notice as per Section 144B(1)(xvi)(b), was confirmed. The court reiterated that compliance with the mandatory procedure under Section 144B is essential, and any assessment made without following this procedure is non-est. The court referred to previous judgments, including the case of Sardar Co.Op. Credit Society Ltd., which emphasized the importance of adhering to the principles of natural justice and the mandatory provisions of the Act.

Conclusion:
The court declared the impugned final assessment order dated 30.03.2022 as non-est and quashed it, along with the corresponding demand notice. The matter was remanded back to the Assessing Officer to issue a draft assessment order along with a show cause notice, in compliance with the provisions of Section 144B of the Act. The writ petition was allowed, and the rule was made absolute.

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