2024 (4) TMI 715 - HC - Income Tax

Assessment order quashed for denying opportunity to file objections against draft order violating natural justice

The Bombay HC quashed a faceless assessment order and demand notice issued without providing a draft order to the assessee, finding violation of natural ... Validity of Faceless Assessment - demand notice was issued without furnishing a draft order to the Petitioners - violation of principles of natural justice in not furnishing a draft order to the assessee and affording the assessee an opportunity to file its objection to the same - HELD THAT:- An opportunity must be given to the Department to follow the correct procedure and proceed with the matter in accordance with the law. In short, the error on the part of the Department was corrected, but the Department was allowed to proceed after such correction, thereby affording the assessee sufficient opportunity consistent with the principles of natural justice and fair play. Secondly, M/S CWT India Pvt. Ltd. (2023 (9) TMI 438 - BOMBAY HIGH COURT), though rendered after the decision of the Hon'ble Supreme Court in Mantra Industries Ltd. [2023 (5) TMI 498 - SC ORDER], does not appear to have taken cognisance of the decision (supra). Perhaps this decision may not have even been cited before the Bench. Instead, the reference can usefully be made to the decision in Faqir Chand [2021 (8) TMI 488 - DELHI HIGH COURT], Kottex Industries Pvt. Ltd. (2022 (10) TMI 1134 - GUJARAT HIGH COURT], Piramal Enterprises Ltd. (2021 (8) TMI 48 - BOMBAY HIGH COURT] where the impugned assessment orders were quashed but liberty was granted to the Department to proceed further in accordance with law and after complying with principles of natural justice and fair play. Thus, for all the above reasons, we quash and set aside the impugned assessment order and notice and remand the matter to the Assessing Officer/ Department to take corrective measures and pass a fresh order. Issues involved:The petition challenges the final assessment order and demand notice for not following the procedure u/s 144C (1) of the IT Act.Summary:Issue 1: Compliance with Section 144C of the IT ActThe petitioners challenge the final assessment order and demand notice issued without a draft assessment order as required u/s 144C (1) of the IT Act. The petitioner's counsel argued that similar cases have been quashed by various courts due to non-compliance with this provision. The respondent's counsel cited a Supreme Court decision where the matter was remanded to the Assessment Officer for a fresh order following due procedure.Issue 2: Quashing of Assessment OrderThe court acknowledged that the impugned order was made without providing a draft order to the petitioners, violating the requirement u/s 144C (1) of the IT Act. The court considered the arguments of both parties regarding the course of action to be taken after quashing the assessment order and notice.Issue 3: Remand for Corrective MeasuresThe court referred to a Supreme Court decision where a similar situation led to the matter being remanded for a fresh assessment order following due procedure. The court decided to quash the impugned assessment order and notice, remanding the matter to the Assessing Officer/Department for corrective measures and a fresh order within a specified timeframe.In conclusion, the court quashed the assessment order and notice, remanding the matter for corrective measures and a fresh order in accordance with the law. All contentions on merits were left open for consideration by the Assessing Officer/Department post-remand.