Natural justice in faceless assessment: failure to consider the assessee's reply rendered the assessment order unsustainable.

An assessment order under the Income-tax Act was found unsustainable because the assessing authority failed to consider the assessee's reply already on record, even though a notice under Section 142(1) had been issued. The decisive defect was the denial of a meaningful opportunity before completion of assessment: the omission to deal with the reply rendered the process unfair and contrary to natural justice, including in faceless assessment proceedings. The order was quashed and fresh assessment was directed after considering the reply and granting a hearing.

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Issues: Whether the assessment order was vitiated for violation of the principles of natural justice on account of non-consideration of the assessee's reply and denial of adequate opportunity during assessment proceedings.

Analysis: The assessment proceedings were conducted under the Income-tax Act, 1961, after a notice under Section 142(1) and the assessee had filed a reply. Although the assessee did not seek an adjournment after the short time granted for the subsequent notice, the decisive fact was that the impugned assessment order did not consider even the earlier reply already on record. The omission to consider that reply rendered the assessment process unfair and contrary to the requirement of a meaningful opportunity before completion of assessment, including in the context of faceless proceedings.

Conclusion: The assessment order was rightly held to be unsustainable for breach of natural justice and was quashed, with a direction for fresh assessment after considering the assessee's reply and affording hearing.

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