Gujarat High Court Quashes Assessment Order Of Income Tax Worth Rs. 101 Crores For Not Following Natural Justice

The Gujarat High Court has quashed the assessment order of income tax worth Rs. 101 crores on the grounds of a violation of the principle of natural justice by the National Faceless Assessment Center.

The division bench of Justice N.V. Anjaria and Justice Bhargav D. Karia has observed that the respondent/department will be at liberty to proceed with assessment under the provisions of Section 144B of the Income Tax Act, 1961, as permissible under the law, after issuance of a show cause notice and draft assessment order so as to provide an opportunity of hearing to the petitioner.

The petitioner/assessee is in the business of refining and trading different kinds of edible oil from crude and raw cotton wash oil. The case of the petitioner was taken under scrutiny and assessment under the E-assessment Scheme, 2019, and a notice under Section 143(2) was issued. The notices under Section 142(1), along with detailed questionnaires, were also issued. In response to notices, the petitioner and assessee submitted their replies from time to time.

The department passed the final assessment order, making huge additions without providing an opportunity to hear from the petitioner on the basis of new material that was never mentioned in the draft assessment order or any of the earlier notices.

The assessee contended that, despite the petitioner providing all of the details required by the assessor, the assessor issued the assessment order without providing the petitioner with an opportunity to be heard, resulting in a violation of natural justice principles.

The assessee urged that neither any material nor information from any inquiry made after the draft assessment order was made available to assess any time before the receipt of the final assessment order, which is in complete violation of the provisions of Section 144B. The draft assessment order and final assessment order are different. The major thrust for making additions is the inquiry made after the draft assessment order, which was never made available to the assessee even when the opportunity was required to be given to the assessee as per the express provisions of Section 144B.

The court held that as per the provisions of Section 144B(7), in case of a variation prejudicial to the assessee as proposed in the draft assessment order, the assessee is entitled to request a personal hearing, which, upon such request, may be provided by the authority if the case of the assessee is covered by the circumstances provided therein in the exercise of powers under Sub Clause (h) of Clause (xii) of Section 144B(7) of the Act, 1961.

The court quashed the order of assessment passed by the respondent under Section 143(3) read with Section 144B and demanded notice under Section 156.

Case Title: Map Refoils India Ltd. Versus National Faceless E-Assessment Center

Citation: R/Special Civil Application No. 16261 of 2021

Date: 16/12/2022

Counsel For Petitioner: Advocate Hardik Vora

Counsel For Respondent: Senior Advocate M.R. Bhatt

Click Here To Read The Order