Gujarat HC quashes tax assessment and demand notice for denying mandatory personal hearing under Section 143(3) and 144B

Gujarat HC quashed assessment order under Section 143(3) read with Section 144B and demand notice under Section 156 of Income Tax Act due to breach of natural justice principles. Court held petitioner was denied mandatory opportunity of personal hearing. Assessment order and demand notice set aside. Revenue authority permitted to restart assessment proceedings from draft assessment order stage after providing proper hearing opportunity to petitioner as required under law.

---

---

Issues:
Challenge to Assessment Order under Income Tax Act based on breach of principles of natural justice and denial of opportunity of personal hearing.

Analysis:
The petitioner challenged the Assessment Order dated 11.03.2024 under Section 143 (3) read with Section 144B of the Income Tax Act, 1961, citing a violation of the principle of natural justice. The petitioner contended that there was insufficient time granted for response, with three out of four issues raised for the first time. Despite requesting an adjournment on 05.03.2024, the impugned Assessment Order was passed on 11.03.2024 without any communication of denial of adjournment. The petitioner argued that there was ample time available for the Assessing Officer to pass the order by 31.03.2024. The petitioner relied on legal precedents to support the claim of a breach of natural justice.

The respondent, on the other hand, argued that the petitioner's right to file a reply was blocked on 09.03.2024 as the granted time had lapsed. The Assessing Officer mentioned in the Assessment Order that the request for adjournment was denied due to time constraints of the assessment. The respondent contended that all replies by the petitioner were considered, indicating no denial of the opportunity to make submissions and no breach of natural justice principles.

The Court acknowledged that the petitioner's adjournment request on 05.03.2024 was neither accepted nor denied, with no communication of denial until the Assessment Order was served. Citing a breach of natural justice, the Court referred to a previous case where a similar violation was noted. The Court highlighted the mandatory provision in Section 144B for providing an opportunity of hearing to the assessee when a variation prejudicial to their interest is proposed. The Court emphasized the importance of personal hearing and the necessity to follow the prescribed procedure for Faceless assessment.

Based on the arguments and legal provisions, the Court found that the petitioner should have been granted the opportunity of a hearing as per the Act. Consequently, the Court allowed the petition, quashed the Assessment Order dated 11.03.2024, and set aside the demand notice under Section 156 of the Act. The respondent was directed to proceed with the assessment from the stage of the draft Assessment Order, providing a hearing to the petitioner within 12 weeks. The Court clarified that the decision was solely based on the breach of natural justice, without examining the merits of the case, and remanded the matter for a fresh order with a hearing in accordance with the law.

---