Gujarat High Court: Quashed Assessment Order Of Income Tax For Not Following Natural Justice

The Gujarat High Court in the case Map Refoils India Ltd. Versus National Faceless E-Assessment Center observed and the assessment order of income tax worth Rs. 101 crores has been quashed on the grounds of a violation of the principle of natural justice by the National Faceless Assessment Center.

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

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

However, the final assessment order has been passed by the department, wherein making huge additions without providing an opportunity to hear from the petitioner on the basis of new material that was never being mentioned in the order of draft assessment or any of the earlier notices. It has also been contended by the assessee that neither any material nor information from any inquiry which is made after the draft assessment order was made available to assess any time before the receipt of the final assessment order, the same being in complete violation of the provisions of Section 144B.

Thus, the draft assessment order and final assessment order are totally different. The major thrust being making additions is the inquiry made after the draft assessment order, which was never being made available to the assessee even when the opportunity was required to be given to the assessee as per the express provisions provided under Section 144B. Further, the court held that as per the provisions of Section 144B(7), in case of a variation prejudicial to the assessee as being proposed in the draft assessment order, the assessee is entitled to request a personal hearing, which, upon such request as it 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 Section 144B(7) of Sub Clause (h) of Clause (xii) of the Act, 1961. Accordingly, the court quashed the order of assessment passed by the respondent under Section 143(3) read with Section 144B and a notice has been demanded under Section 156.