Income Tax Assessment Order Set Aside for Violating Natural Justice; Fresh Assessment Ordered with Virtual Hearing.

The HP HC set aside the impugned assessment order under Section 143 of the Income Tax Act, 1961, due to violation of natural justice, acknowledging the petitioner's adjournment request. The matter was remitted to the National Faceless Assessment Centre for a fresh assessment, with a directive for a virtual hearing. The penalty order under Section 271B was deemed non-effective pending the new assessment. The decision underscores the necessity of procedural fairness and proper consideration of adjournment requests in tax assessments.

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Issues:
1. Quashing of assessment order under Section 143 of the Income Tax Act, 1961.
2. Violation of principles of natural justice in passing the assessment order.
3. Rejection of adjournment request by respondent No. 2.
4. Disputed acknowledgment of adjournment request by the petitioner.
5. Citation of similar cases by the petitioner's counsel.
6. Opposition to the writ petition by respondents No. 2 and 3.
7. Creation of substantial tax liability and incorrect assertion by respondents.
8. Consideration of reasons for adjournment request and time bar for return filing.
9. Decision to entertain the writ petition and provide an opportunity for a fresh assessment order.
10. Setting aside the impugned order and remitting the matter for a fresh assessment.
11. Non-effectiveness of penalty order pending the fresh assessment order.

Analysis:
The High Court of Himachal Pradesh heard a petition filed by M/s. Preethi Himachal & Company seeking the quashing of an assessment order dated 26.5.2021, passed by the National Faceless Assessment Centre, Income Tax Department, New Delhi, under Section 143 of the Income Tax Act, 1961, which raised a demand of Rs. 15,24,18,329. The petitioner alleged a violation of natural justice principles as they were not given a proper opportunity to respond to the assessment notice. The petitioner's adjournment request due to Covid-19 related issues and lockdown in Tamil Nadu was rejected by respondent No. 2, leading to the issuance of the impugned assessment order.

The petitioner's counsel argued that the adjournment request was acknowledged by the respondent on the portal, contrary to the respondent's claim of non-receipt. The petitioner cited similar cases where courts entertained petitions and remitted matters back for fresh assessment orders. However, the respondents opposed the writ petition, stating that the petitioner had ample time to respond and had an alternative appeal remedy available. The respondents also disputed the receipt of the adjournment request due to a technical glitch.

The Court noted the substantial tax liability and the incorrect assertion by the respondents regarding the adjournment request acknowledgment. Despite technical issues, the Court found in favor of the petitioner, emphasizing the need to consider the reasons for the adjournment request and the timeline for return filing. The Court decided to entertain the writ petition and directed for a fresh assessment order, providing the petitioner an opportunity for a virtual hearing. The impugned assessment order was set aside, and the matter was remitted to the National Faceless Assessment Centre for a fresh assessment within 15 days of filing a reply.

Additionally, the Court ruled that the penalty order under Section 271B would not be effective pending the fresh assessment order. The judgment highlighted the importance of providing a fair opportunity to taxpayers and ensuring procedural fairness in assessment proceedings.

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