Assessment order under Section 144(b) quashed for lack of hearing opportunity and proof of notice receipt

The HC quashed and set aside the assessment order and demand notice issued under section 144(b) due to failure to provide the assessee an opportunity of hearing. The court found no proof that the notice was received by the assessee. The revenue was directed to serve a fresh notice via email before proceeding further.

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ISSUES:

Whether the procedure prescribed under Section 144(b) of the Income Tax Act for faceless assessment, including service of notice and opportunity of hearing, was complied with.Whether the failure to serve the show cause notice on the updated email IDs of the assessee violates principles of natural justice.Whether an assessment order passed without affording an opportunity of hearing to the assessee is valid.

RULINGS / HOLDINGS:

The Court held that under Section 144(b), "an opportunity to the assessee is imperative" in faceless assessments, including service of notice and chance to respond before concluding the inquiry.The Court found that the impugned Assessment Order and demand notice were passed without affording the petitioner an opportunity of hearing, which is a violation of the principles of natural justice.The Court quashed and set aside the Assessment Order and demand notice on the ground that they were passed without serving the show cause notice on the updated email IDs of the petitioner and without affording an opportunity of hearing.The Court directed the revenue to serve a fresh notice on the email IDs updated by the petitioner and allow the petitioner to respond within the stipulated period before passing a fresh order.

RATIONALE:

The Court applied the statutory framework under Section 144(b) of the Income Tax Act, which specifically contemplates a faceless assessment procedure involving service of notices through the National Faceless Assessment Centre and providing the assessee an opportunity to respond at multiple stages.The Court emphasized that compliance with the procedure, including proper service of notices and affording opportunity of hearing, is mandatory to uphold the principles of natural justice.The Court noted the absence of proof that the show cause notice dated 4.3.2025 was served on the petitioner's updated email IDs, which were acknowledged by the Income Tax Department, thereby invalidating the assessment process.No dissenting or concurring opinions were recorded.

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