Opportunity to be heard: ex parte best judgment tax assessment set aside where insolvency stay prevented IRP and management from presenting material.

Whether an ex parte best judgment assessment under tax law can be set aside where the Interim Resolution Professional assumed de jure control during a stayed Corporate Insolvency Resolution Process and both the IRP and company management were bona fide prevented from placing material before the Assessing Officer; court applied principles of procedural fairness and found the appellate remedy would be illusory given practical obstacles, concluding the assessment required setting aside and remanding for a fresh/comprehensive notice, an adequate period to respond (at least thirty days) and a fresh order after considering the petitioner's reply and documents.

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Issues: Whether the ex parte best judgment assessment order dated 24.03.2025 passed under Section 143(3) read with Section 144B of the Income tax Act, 1961, can be set aside on the ground that the Interim Resolution Professional (appointed under Section 16 of the Insolvency and Bankruptcy Code, 2016) and the company's management were bona fide prevented from placing material before the Assessing Officer during the stay/seizure of the Corporate Insolvency Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, and whether the assessee is entitled to a fresh notice and opportunity to be heard.

Analysis: The record shows appointment of an Interim Resolution Professional and subsequent stay that effectively halted the CIRP, resulting in the IRP being de jure in charge but lacking effective access to facts, transactions and documents, while the management lacked legal authority to represent the company. The additions made by the Assessing Officer relate to the cost of acquisition of property which was not placed before the Assessing Officer. Given the inability of the IRP and management to present factual and legal pleas before assessment, and the practical obstacles to obtaining effective relief on appeal (including payment conditions that would be onerous for a company emerging from insolvency), the appellate remedy would be illusory. In these circumstances, the impugned ex parte best judgment assessment requires setting aside and remanding for issuance of a fresh/comprehensive notice with an adequate period to respond; on receipt of the reply and documents the Assessing Officer should pass a fresh order in accordance with law and, if expedient, afford an audience to the authorised representative.

Conclusion: The impugned assessment order dated 24.03.2025 is set aside and the writ petition is allowed; the Assessing Officer shall issue a fresh/comprehensive notice (if any additions are proposed), allow at least thirty days to respond and furnish documents, and thereafter pass a fresh order in accordance with law. The petitioner is entitled to a fresh opportunity to be heard.

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