Faceless assessment order set aside for combining show cause notice with draft assessment order violating Section 144B procedure

HC set aside faceless assessment order under Section 144 read with Section 144B due to gross procedural non-compliance. Court held that combining show cause notice with draft assessment order is impermissible, and failure to issue separate draft assessment order vitiates proceedings. Assessment authority granted liberty to restart proceedings from Section 144B(1)(xi) stage, treating it as show cause notice proceeding, and complete assessment following proper Section 144B procedure.

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Issues involved:
The writ petition seeks to quash an order passed by the 1st Respondent u/s 144 read with 144B of the Income Tax Act, 1961 for the assessment year 2018-19, alleging non-compliance with the procedure laid down in Section 144B of the Act.

Issue 1 - Compliance with Assessment Procedure:
The petitioner's case was selected for scrutiny under the E-Assessment Scheme, and various notices were issued, but it was contended that the assessment order was passed without following the mandatory procedures of Section 144B of the Act. The petitioner argued that there was no transfer of assessment from the Central Assessment Circle to the regular assessment circle, as required. Additionally, no intimation was issued by the National Faceless Assessment Centre as mandated by Section 144B(1)(iii) of the Act. The petitioner was not notified about the assignment of assessment to the 1st respondent or the National Faceless Assessment Centre, and no notices under relevant sections were served, rendering the assessment order non-compliant with Section 144B of the Act.

Issue 2 - Combination of Show Cause Notice and Draft Assessment Order:
The petitioner contended that the assessment order was a composite proceeding comprising a show cause notice and a draft assessment order, which is impermissible under the law. Citing a previous judgment, it was argued that a draft assessment order must be preceded by a show cause notice, and failure to issue a draft assessment order vitiates the proceeding. The Court found that the absence of a proper draft assessment order rendered the impugned assessment order unsustainable.

Decision:
The Court set aside the impugned assessment order due to gross non-compliance with the procedure under Section 144B of the Act. The appropriate authority was granted liberty to proceed from the stage of Section 144B(1)(xi)(i) and complete the assessment in compliance with the prescribed procedure, after providing the petitioner with a hearing in accordance with the law. The writ petition was disposed of with no costs, and connected miscellaneous petitions were closed.

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