Facts of the Case

The petitioner challenged multiple actions of the Income Tax Department, including:

  • Notice issued under Section 133(6) dated 05.12.2022
  • Proposal under Section 144B dated 13.12.2022
  • Final assessment order dated 15.12.2022

The petitioner contended that although notices were uploaded on the portal, they were not effectively served, as emails were directed to spam and no real-time SMS alerts were received. Further, it was argued that the show-cause notice proposing variation in income was not properly served.

Additionally, the petitioner claimed that in a faceless assessment, a draft assessment order was mandatory before passing the final order.

Issues Involved

  1. Whether non-service or improper service of notices vitiates faceless assessment proceedings.
  2. Whether passing a final assessment order without issuing a draft assessment order violates Section 144B.
  3. Whether denial of personal hearing in faceless assessment breaches statutory provisions and principles of natural justice.

 Petitioner’s Arguments

  • Notices and communications were not effectively served; emails were diverted to spam and no SMS alerts were received.
  • The show-cause notice proposing variation in income was not properly communicated.
  • Under Section 144B(1)(xvi)(a), a draft assessment order ought to have been passed before finalizing the assessment.
  • The petitioner was denied an opportunity of personal hearing, which is mandatory when variation is proposed.

Respondent’s Arguments

  • The show-cause notice already contained the proposed variation; hence, issuance of a draft assessment order was not required.
  • An income or loss determination proposal was prepared internally for review purposes.
  • Such proposal was not required to be shared with the assessee.

 Court Findings / Order

The Delhi High Court held:

  • Even if a draft assessment order was not prepared, once a variation is proposed, Section 144B(6)(vii) and (viii) become applicable.
  • These provisions mandate granting an opportunity of personal hearing if requested by the assessee.
  • The absence of such opportunity renders the assessment procedurally defective.

Final Order:

  • The assessment order dated 15.12.2022 was set aside.
  • Matter remanded for de novo assessment.
  • Revenue directed to:
    • Serve income/loss determination proposal
    • Provide opportunity of response
    • Grant personal hearing via faceless mechanism

Important Clarification

  • The Court clarified that even in absence of a formal draft assessment order, if variation is proposed through an income/loss determination proposal, procedural safeguards under Section 144B(6) must be followed.
  • Personal hearing is not discretionary once requested—it is mandatory.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59027022023CW4772023_143048.pdf

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