Assessment order quashed for violating natural justice - insufficient response time and denied hearing request under sections 147 and 144B

Gujarat HC quashed assessment order u/s 147 r.w.s. 144B finding violation of natural justice principles. Assessee was granted only two days to respond to show cause notice and despite requesting video conferencing hearing, no opportunity was provided. Court held that insufficient time and denial of hearing request constituted procedural breach. Following precedent in Advance Realty Developers case, HC ruled assessment order was non-est due to statutory procedure violation. Consequentially, demand notice and penalty notice were also quashed and set aside.

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Issues:
1. Compliance with principles of natural justice in passing the assessment order.
2. Validity of the assessment order dated 29.03.2022 under Section 147 read with Section 144B of the Income Tax Act, 1961.
3. Request for virtual hearing and breach of principles of natural justice.
4. Interpretation of Section 144B (6) and Section 144B (7) (vii) of the Act.

Detailed Analysis:
Issue 1: The petition sought to quash the assessment order, demand notice, and penalty notice dated 29.03.2022, under Section 147 read with Section 144B of the Income Tax Act, 1961, on the grounds of non-compliance with the principles of natural justice.

Issue 2: The assessee, a private limited company, had its case reopened for Assessment Year 2013-2014. The respondent issued a show cause notice proposing additions, to which the assessee responded. Despite requesting a virtual hearing, the assessment order was passed without considering the request. The petitioner argued that the order and consequential notices were illegal due to a breach of natural justice.

Issue 3: The petitioner contended that granting only two days for response, especially over a weekend, and not considering the request for a virtual hearing amounted to a violation of natural justice. The respondent argued that the procedure followed was correct and no interference was warranted.

Issue 4: The court analyzed Section 144B (6) and Section 144B (7) (vii) of the Act. It noted that the time given for response was short, and the request for a video conferencing hearing was not addressed. Referring to a previous decision, the court emphasized the importance of following procedural requirements and providing opportunities for hearings in cases of significant variations.

Final Decision: The court found that the time given for response was inadequate, and the failure to respond to the request for a video conferencing hearing violated natural justice principles. Consequently, the assessment order, demand notice, and penalty notice were quashed and set aside. The matter was remanded to the Assessing Officer for a de novo assessment after providing the assessee with a hearing opportunity. The court did not delve into the merits of the case, leaving the Assessing Officer to pass a fresh order in accordance with the law.

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