Facts of the Case

The Petitioner challenged the assessment order dated 25 May 2022 for Financial Year 2016–17 along with consequential notices issued by the Income Tax Department.

It was contended that notices were issued to an incorrect and unrelated email address, resulting in improper service. Despite this, the Petitioner submitted a detailed reply to the draft assessment order within the prescribed time. However, the Assessing Officer passed the final assessment order without considering the Petitioner’s submissions.

Additionally, the Petitioner argued that the assessment order contained incorrect factual assumptions, including allegations of property purchase and payment which never occurred.

Issues Involved

  1. Whether passing an assessment order without considering the assessee’s reply violates principles of natural justice.
  2. Whether improper service of notices vitiates the assessment proceedings.
  3. Whether the assessee is mandatorily required to approach the Dispute Resolution Panel (DRP) before filing objections.

Petitioner’s Arguments

  • Notices were not properly served as they were sent to an incorrect email address.
  • The Petitioner had duly filed a detailed reply to the draft assessment order under Section 144C, which was ignored.
  • The final assessment order was merely a verbatim reproduction of the draft order without application of mind.
  • The findings in the assessment order were factually incorrect, including allegations of property transactions.
  • The Petitioner was not obligated to approach the DRP and could choose to challenge the order before the Assessing Officer and appellate authority.

Respondent’s Arguments

  • The Revenue contended that the Petitioner had an adequate alternative remedy and could raise all objections before the Commissioner of Income Tax (Appeals) [CIT(A)].

Court’s Findings / Order

The Delhi High Court held that there was a clear violation of principles of natural justice as the Petitioner’s replies, though available on the Income Tax portal, were not considered by the Assessing Officer.

On this ground alone:

  • The assessment order dated 25 May 2022 was set aside
  • Demand notice under Section 156 was quashed
  • Penalty notice under Section 271(1)(c) was set aside
  • The matter was remanded back to the Assessing Officer for fresh adjudication within 12 weeks after considering the Petitioner’s reply

Important Clarification

  • Even if an alternative remedy exists, writ jurisdiction can be invokd where there is a violation of natural justice.
  • Consideration of the assessee’s reply is a mandatory procedural requirement in assessment proceedings.
  • Mechanical reproduction of draft assessment orders without dealing with submissions is unsustainable in law.

Sections Involved

  • Section 144C – Draft Assessment Procedure
  • Section 148 – Income Escaping Assessment
  • Section 142(1) – Inquiry Before Assessment
  • Section 156 – Demand Notice
  • Section 271(1)(c) – Penalty for Concealment

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2839-DB/MMH27072022CW111282022_194008.pdf

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