Facts of the Case

The petitioner challenged the assessment order dated 07.04.2021 passed under Sections 143(3), 143(3A), and 143(3B) of the Income Tax Act for Assessment Year 2018–2019, along with consequential notices issued under Sections 156 and 274 read with Section 270A.

The petitioner originally declared income of ₹87,55,390, later revised to ₹73,59,500. However, the assessing authority made an addition of ₹13,95,890 in the impugned order.

The core grievance raised was that the assessment order was passed without issuing a show cause notice-cum-draft assessment order, which is mandatory under the faceless assessment regime.

Issues Involved

  1. Whether an assessment order passed without issuing a draft assessment order/show cause notice is valid under Section 144B of the Income Tax Act.
  2. Whether violation of the Faceless Assessment Scheme renders the assessment order void.
  3. Whether consequential notices (demand and penalty) can survive when the primary order is invalid.

Petitioner’s Arguments

  • The assessment order was passed in violation of mandatory procedural requirements under Section 144B.
  • No show cause notice-cum-draft assessment order was issued before making variations in income.
  • The absence of such notice deprived the petitioner of an opportunity to respond.
  • Hence, the entire assessment and consequential proceedings are liable to be quashed.

Respondent’s Arguments

  • The respondent relied on an earlier judgment of the Delhi High Court passed on the same day in a similar matter.
  • It was submitted that the issue is covered and may be decided based on existing legal position.
  • No detailed reply was filed, and the matter was argued on available records.

Court’s Findings / Order

  • The Court observed that there was a variation in declared income, which triggered mandatory compliance under Section 144B.
  • It held that issuance of a show cause notice-cum-draft assessment order is compulsory under the Faceless Assessment Scheme, 2019.
  • Since no such notice was issued, the assessment order was passed in violation of law.

Final Order

  • The impugned assessment order dated 07.04.2021 was set aside.
  • Consequential notices under Sections 156 and 274 read with 270A were also quashed.
  • Liberty was granted to the Revenue to pass a fresh assessment order in accordance with law.
  • The petitioner was to be granted a personal hearing via video conferencing.

Important Clarification by Court

  • Compliance with Section 144B is mandatory and not procedural formality.
  • Any variation in income requires issuance of a draft assessment order and opportunity of hearing.
  • Violation of faceless assessment procedure renders the entire assessment invalid.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:1720-DB/RAS27052021CW54912021_011636.pdf


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