Failure to issue draft assessment and s.144B show-cause notice and deny personal hearing quashes assessment and penalties

HC held that failure to issue the draft assessment order and the mandatory show-cause notice under s.144B, and denial of an opportunity of personal hearing, violated the statutory scheme and principles of natural justice. The court quashed and set aside the assessment order, the penalty notice and all consequential orders for AY 2018-19, directing that proceedings be reopened only in accordance with the statutory requirements.

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Issues:
1. Challenge to assessment order under Income Tax Act for AY 2018-19.
2. Non-issuance of draft assessment order and show-cause notice under Section 144B of the IT Act.
3. Violation of statutory provisions and breach of natural justice.
4. Relief sought through writ petition.

Detailed Analysis:
1. The petitioner challenged the assessment order passed by respondent No.1 under Section 143(3) of the Income Tax Act for the assessment year 2018-19. The petitioner contended that the order passed on 22.04.2021 was contrary to the law.
2. The petitioner raised concerns regarding the non-issuance of the draft assessment order and show-cause notice under Section 144B of the IT Act. The petitioner argued that this deprived them of an opportunity for a hearing and caused grievance. The respondent contended that the petitioner had already responded to various notices issued under Section 142(1) of the Act, showing cause on all issues raised.
3. The Court noted that Section 144B mandates the issuance of a draft assessment order and show-cause notice while assessing income in a faceless manner. In this case, neither the draft assessment order nor the show-cause notice was issued, leading to a breach of natural justice. The Court referred to a previous judgment highlighting the importance of following statutory provisions for assessment procedures.
4. The Court allowed the petition, quashing the assessment order and the notice of penalty for AY 2018-19. It directed the respondents to initiate the process from the stage left off by providing the draft assessment order and show-cause notice within four weeks. The petitioner was instructed to adhere to timelines set by the respondents for expeditious disposal of the matter, with the findings and observations of the Court not affecting either party in further proceedings.

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