Income Tax assessment order not valid if reply to show cause notice was not considered by National Faceless Assessment Centre (NFAC) : High Court

ORDER

1. This Writ Petition is filed challenging the assessment order passed by the respondent under section 143(3) r.w.s.144B of Income Tax Act, 1961, dated 07.12.2022.

2. Mr. N.V. Narayanan, learned counsel appearing for the petitioner submitted that the petitioner filed her return of income for the AY 2021-22. The petitioner’s case was selected for scrutiny by the respondent and initially, a show cause notice dated 24.11.2022 was issued requiring the petitioner to show cause, as to why, the assessment should not be completed as per Draft Assessment Order. In the said show cause notice, the respondent provided time to file reply on or before 01.12.2022 at 13:19 hours and though the petitioner has filed her reply on 01.12.2022, in the impugned order dated 07.12.2022, in paragraph 12, it has been stated that the petitioner has not filed any reply. Further, the learned counsel contended that no opportunity of personal hearing was provided to the petitioner before passing the impugned order. Therefore, the petitioner submitted that without considering the reply filed by the petitioner and without providing any opportunity of personal hearing, the impugned order came to be passed and hence the same is liable to be set aside.

3. Per contra, the learned Senior Standing Counsel appearing for the respondent drew the attention of this Court to para No.7 of the counter affidavit filed by the respondent, wherein, it has been stated at the remarks column as follows ”…Before the reply got reflected in the ITBA, the proposal was submitted to the Department…’ and submitted that generally it takes one to two days for the submissions to get reflected in the case history of Income Tax Business Application-Permanent Accountant Number (ITBA-PAN) and in the present case, the reply submitted by the petitioner/assessee on 01.12.2022 got reflected in ITBA only after the proposal was sent to ILDP for approval, followed by which draft order was submitted to NFAC on 06.12.2022 and thereafter, final assessment order was passed on 07.12.2022. Therefore, the respondent was not able to consider the reply of the petitioner while passing the impugned order. However, he fairly submitted that if any order is passed by this court, the same would be complied with by the department.

4. Considered the submissions made by the petitioner and the learned Senior Standing Counsel for the respondent and perused the materials available on record.

5. Though the petitioner filed her reply to the show cause notice dated 24.11.2022 within the time limit prescribed i.e., before 01.12.2022 at 13.19 hours, the respondent has not considered the same on account of the fact that the reply got reflected in ITBA-PAN only after the proposal was sent to ILDP for approval, which culminated in passing the final assessment order on 07.12.2022, by recording, as if the petitioner has not filed her reply. Thus, considering the fact that the reply filed by the petitioner got reflected in ITBA only after the assessment proposal was sent to ILDP for approval, the respondent-Department has not considered the petitioner’s reply while passing the impugned order dated 07.01.2022. Apart from non consideration of the reply filed by the petitioner, it is the grievance of the petitioner that the impugned order came to be passed on 07.12.2022 without granting an opportunity of personal hearing to the petitioner. Therefore, this Court is of the view that the impugned order is not sustainable not only due to non-consideration of the reply filed by the petitioner but also suffers from violation of the principles of natural justice. Hence, this Court is inclined to set aside the impugned order.

6. Accordingly, this Writ Petition is allowed, the impugned order dated 07.12.202 passed by the respondent is set aside and the matter is remitted back to the respondent for fresh consideration, in which case, the respondent is directed to consider the reply filed by the petitioner dated 01.12.2022 and after affording an opportunity of personal hearing to the petitioner shall pass the assessment order within a period of three months from the date of receipt of a copy of this order. No costs. Consequently, the connected miscellaneous petition is closed.