Facts of the Case

The petitioner challenged the draft assessment order dated 25 March 2021 and the final assessment order dated 24 May 2021 for Assessment Year 2017–18. The impugned orders were passed under Sections 143(3), 144C, and 144B of the Income Tax Act.

The primary grievance was that the assessment orders were passed without issuing a mandatory show cause notice, thereby violating statutory procedure and principles of natural justice.

Issues Involved

  1. Whether passing an assessment order without issuing a show cause notice under Section 144B is valid?
  2. Whether such omission violates principles of natural justice under the Faceless Assessment Scheme?
  3. Whether the assessment orders are liable to be set aside on procedural grounds alone?

Petitioner’s Arguments

  • The impugned draft assessment order was passed without issuance of a show cause notice, which is mandatory under Section 144B.
  • The action of the department is in clear violation of principles of natural justice.
  • The Faceless Assessment Scheme mandates strict compliance with procedural safeguards, including opportunity of hearing.
  • Therefore, both draft and final orders are liable to be quashed.

Respondent’s Arguments

  • The respondent did not oppose the petition.
  • It was submitted that the department had no objection if the matter is remanded back to the Assessing Officer.

Court Findings / Order

  • The Delhi High Court observed that non-issuance of show cause notice is a violation of mandatory procedure under Section 144B.
  • The Court held that such action is contrary to principles of natural justice.
  • Accordingly:
    • The draft assessment order dated 25 March 2021 and
    • The final assessment order dated 24 May 2021
      were set aside.
  • The matter was remanded back to the Assessing Officer with directions:
    • To pass a fresh assessment order
    • After issuing a show cause notice under Section 144B(1)(xvi)
    • Within the prescribed time

Important Clarification

  • The Court reinforced that Section 144B is mandatory and not procedural formality.
  • Any assessment order passed under the faceless regime without granting opportunity of hearing is invalid.
  • Even if the department concedes, the Court ensures procedural compliance for fairness.

Sections Involved

  • Section 143(3), Income Tax Act, 1961
  • Section 144C, Income Tax Act, 1961
  • Section 144C(3), Income Tax Act, 1961
  • Section 144B, Income Tax Act, 1961
  • Section 144B(1)(xvi), Income Tax Act, 1961
  • Faceless Assessment Scheme (First Amendment), 2021

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:2052-DB/MMH14072021CW62692021_204044.pdf


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