Facts of the Case

The petitioner, Indo Laminates Private Limited, filed its return of income for Assessment Year 2021-22 on 15.03.2022. The case was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) mechanism.

Subsequently:

  • Notice under Section 143(2) dated 28.06.2022 was issued.
  • Multiple notices under Section 142(1) were issued (18.10.2022, 02.11.2022, 11.11.2022).
  • The petitioner responded on 08.12.2022.

However:

  • A show-cause notice dated 09.12.2022 was issued without considering the reply dated 08.12.2022.
  • The petitioner was given time only till 13.12.2022 (11:30 AM).
  • The petitioner attempted to respond on 14.12.2022 but could not due to closure of the e-proceedings portal.
  • Emails were sent to authorities, but no response was received.

Eventually:

  • Assessment order and demand notice dated 19.12.2022 were passed.

Issues Involved

  1. Whether issuance of show-cause notice without considering the petitioner’s prior reply violates principles of natural justice.
  2. Whether insufficient time granted to respond violates the SOP under Section 144B.
  3. Whether the assessment order is liable to be quashed for procedural irregularities.

Petitioner’s Arguments

  • The show-cause notice dated 09.12.2022 was issued without considering the reply dated 08.12.2022.
  • Insufficient time was provided, violating minimum 7-day requirement under SOP Clause N.1.3.
  • The e-proceeding portal prevented submission of response.
  • Multiple attempts via email were made but ignored.
  • The entire process violated principles of natural justice and statutory procedure.

Respondent’s Arguments

  • The Revenue accepted notice and did not insist on filing a counter-affidavit.
  • It relied on the assessment proceedings conducted under the faceless assessment scheme.

Court Findings / Order

  • The reply dated 08.12.2022 was already on record, yet ignored while issuing show-cause notice.
  • The minimum 7-day time requirement under SOP dated 03.08.2022 was violated.
  • There was a clear breach of procedural fairness and natural justice.

Order:

  • The impugned:
    • Show-cause notice
    • Assessment order
    • Demand notice

were quashed.

  • Liberty granted to the Assessing Officer to conduct fresh (de novo) assessment in accordance with law.

Important Clarification by Court

  • SOP dated 03.08.2022 is binding and aligned with Section 144B(6)(xi).
  • Authorities must ensure adequate opportunity of hearing (minimum 7 days).

Non-compliance renders proceedings invalid.

Sections Involved

  • Section 143(2) – Notice for Scrutiny Assessment
  • Section 142(1) – Inquiry before Assessment
  • Section 144B – Faceless Assessment Scheme
  • Section 144B(6)(xi) – Opportunity of being heard
  • SOP for Assessment Unit dated 03.08.2022 (Clause N.1.3)

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59031012023CW12032023_204242.pdf

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