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Absence of show cause notice by the assessee would be violation of the principles of natural justice leading to the Assessment Order passed being declared void: The High Court of Delhi

It is mandatory for the National E-Assessment Centre to provide an opportunity to the assessee, by serving a notice calling upon him to show cause as to why the variation proposed in the Draft Assessment Order, which is prejudicial to the interest of the assessee, be not made. The aforesaid has been inferred by the Delhi High Court in the case of RMSI Private Limited v. National E-Assessment Centre, Delhi [W.P.(C) 6482/2021 & CM APPL. 20366/2021] which was decided by a two-judge bench comprising Justice Manmohan and Justice Navin Chawla on 14th July 2021.

The facts of the case are as follows. This petition has been filed by the petitioner challenging the Assessment Order passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) against the petitioner under the E-Assessment Scheme, 2019 for the Assessment Year 2017-18. The learned counsel for the petitioner submitted that the Impugned Assessment Order is liable to be set aside inasmuch as it is not preceded by the issuance of a ‘Draft Assessment Order’ followed by a ‘Revised Draft Assessment Order’. On the contrary, the counsel for respondent raised a preliminary objection on the maintainability of the present petition, contending that the petitioner has already challenged the impugned assessment order by way of an appeal. He further submitted that in absence of a provision akin to Section 144B (9) of the Act, issuance of a Draft Assessment Order cannot be held to be mandatory and failure to issue such order cannot be treated as fatal. However, the counsel for petitioner contended that absence of a provision akin to Section 144B (9) of the Act from the Scheme would not be of much relevance in as much as the Scheme has been framed under Section 143(3A) of the Act and is mandatory to be followed by the Authorities.

The court conducted a perusal of the facts and arguments at hand. It conducted an analysis of Clause 5 (1) (viii) and (x) of the E-Assessment Scheme, 2019 and was of the opinion that “A reading of the above provision would clearly show that it is mandatory for the National E-Assessment Centre to provide an opportunity to the assessee, by serving a notice calling upon him to show cause as to why the variation proposed in the Draft Assessment Order, which is prejudicial to the interest of the assessee, be not made. Absence of such notice would clearly be a violation of the principles of natural justice leading to the Assessment Order passed being declared void.” It further declared that “In the present case as well, the impugned Assessment Order having been passed without complying with the procedure laid down in the Scheme and in violation of principles of natural justice, the writ petition would be maintainable. 14. Consequently, the Impugned Assessment Order dated 31.03.2021 passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Act is set aside. However, the respondent is given liberty to pass a fresh Assessment Order in accordance with law. The petitioner shall also have liberty to challenge any action of the respondent/Revenue in accordance with law, in the event that it is aggrieved by the same”

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