Natural justice in reassessment proceedings: shorter response time than the prescribed SOP led to setting aside the notice and assessment.

A show-cause notice issued in reassessment proceedings was invalid because the prescribed SOP required at least seven days' response time unless curtailed by limitation, and the notice granted only five days despite the limitation period expiring later. That shortened period denied a reasonable opportunity to respond and breached procedural fairness and natural justice. The notice and resulting assessment order were therefore set aside, and the matter was remanded for fresh assessment after due hearing.

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Issues: Whether the show-cause notice and assessment order passed under Section 144 of the Income-tax Act, 1961 were liable to be set aside for non-compliance with the prescribed response time and violation of natural justice.

Analysis: The assessment proceedings were governed by the Standard Operating Procedure contained in the circular dated 03.08.2022, which required a minimum response period of seven days for a show-cause notice unless curtailed by limitation. The notice granted only five days, while the assessment limitation was to expire much later. The reduced time did not accord with the prescribed procedure and deprived the petitioner of a reasonable opportunity to respond. This amounted to a breach of procedural fairness and the principles of natural justice.

Conclusion: The show-cause notice and the assessment order were rightly set aside, and the matter was remanded for fresh assessment after due opportunity of hearing. The issue is decided in favour of the assessee.

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