Assessment Order Overturned for Non-Compliance with Procedures; Case Remanded for Proper Adherence to Natural Justice.

The HC set aside the assessment order dated 21st April 2021, finding non-compliance with Section 144B of the Income-tax Act, 1961, due to the absence of a show cause notice and draft assessment order. The Court remanded the matter to the Assessing Officer to adhere to statutory procedures, ensuring compliance with principles of natural justice. The order was directed to be uploaded and shared with counsel.

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Issues:
Challenge to assessment order under Income-tax Act, 1961 for non-compliance with statutory provisions of Section 144B.
Applicability of Section 144B to assessment year 2018-2019.
Violation of principles of natural justice and mandatory procedure under Faceless Assessment Scheme.

Detailed Analysis:
The judgment involves a challenge to an assessment order dated 21st April 2021 passed under Section 143(3) read with 144B of the Income-tax Act, 1961. The petitioner contested that the assessment order was issued without following the statutory provisions of clauses (xiv) to (xvi) of Section 144B (1) and 144B (9) of the Act. The petitioner argued that the order was passed without a draft assessment order and without issuing a show cause notice regarding the variation in the declared income, alleging a violation of statutory provisions and contending that the order is non est in law.

The respondent, on the other hand, argued that Section 144B of the Act does not apply to the assessment year in question, which is 2018-2019. However, the petitioner relied on a circular issued by the CBDT dated 31st March 2021 to establish that the provisions of Section 144B would apply to pending proceedings as of 1st April 2021, including the petitioner's assessment.

After hearing both parties, the Court held that the Circular dated 31st March 2021 issued by CBDT clarified that Section 144B of the Act would apply to assessment proceedings pending on 1st April 2021, even if they related to assessment years prior to 2021. The Court emphasized the mandatory requirement of issuing a show cause notice and a draft assessment order before finalizing the assessment, as provided under Section 144B(1)(xvi)(b) and 144B(9) of the Act.

Consequently, the Court found that the absence of a prior show cause notice and draft assessment order in the present case constituted a violation of principles of natural justice and the mandatory procedure under the Faceless Assessment Scheme. As a result, the impugned assessment order dated 21st April 2021 was set aside, and the matter was remanded back to the Assessing Officer to follow the prescribed procedure, including issuing a show cause notice and draft assessment order before passing a reasoned order in compliance with the law. The Court disposed of the writ petition with this direction and ordered the uploading of the order on the website and forwarding a copy to the respective counsel via email.

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