High Court Sets Aside Assessment Order Due to Violation of Natural Justice

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Case Name:

Centum Finance Limited vs. National Faceless Assessment Centre, Delhi & Anr. (High Court of Delhi)

W.P.(C) 6977/2021 & CM APPL. 22034/2021

Date: 12th August 2021

Key Takeaways:

1. The assessment order was set aside due to a violation of natural justice.

2. The compliance date for the show cause-cum-draft assessment order was found to be extremely narrow, and the e-filing portal was allegedly dysfunctional during that period.

3. The Respondent/Revenue was given liberty to call for further information, if thought necessary, before proceeding to frame the Assessment Order.

The High Court of Delhi at New Delhi, with the case number W.P.(C) 6977/2021 & CM APPL. 22034/2021. The case involves Centum Finance Limited as the petitioner and the National Faceless Assessment Centre, Delhi (earlier National E-Assessment Centre) & Anr. as the respondents. The judgment was delivered on 12th August 2021 by Hon’ble Mr. Justice Manmohan and Hon’ble Mr. Justice Navin Chawla.

The petitioner challenged the assessment order and demand notice dated 11th June, 2021, passed by the National Faceless Assessment Centre, Delhi under Section 143(3) (of Income Tax Act, 1961) read with Section 144B (of Income Tax Act, 1961). The petitioner sought a stay on the demand arising out of the impugned assessment order.

The court found that the impugned assessment order was passed without providing adequate opportunity to submit a reply in response to the show cause-cum-draft assessment order dated 23rd May, 2021. The court also noted that the compliance date for the show cause-cum-draft assessment order was 7th June, 2021, and the action of the Respondent in passing the impugned assessment order was in violation of the directions issued by the Directorate of Income Tax (Systems) and CBDT.

The court further observed that the e-filing portal was allegedly dysfunctional, and there were good enough reasons to set aside the impugned assessment order. The court clarified that the Respondent/Revenue would be at liberty to call for further information, if thought necessary, before proceeding to frame the Assessment Order.

In conclusion, the court disposed of the present writ petition along with the pending application and ordered that the order be uploaded on the website forthwith and a copy of the order be forwarded to the learned counsel through e-mail.

FAQ:

Q1: What was the main issue in the case?

A1: The main issue was the challenge against the assessment order and demand notice passed by the National Faceless Assessment Centre, Delhi, on the grounds of violation of natural justice and non-compliance with the directions issued by the Directorate of Income Tax (Systems) and CBDT.

Q2: What was the outcome of the judgment?

A2: The court set aside the impugned assessment order and provided liberty to the Respondent/Revenue to call for further information, if thought necessary, before proceeding to frame the Assessment Order.

Q3: Why was the assessment order set aside?

A3: The assessment order was set aside due to the violation of natural justice and the narrow compliance date for the show cause-cum-draft assessment order, coupled with the alleged dysfunctionality of the e-filing portal during that period.

1. The petition has been heard by way of video conferencing.

2. Present writ petition has been filed challenging the assessment order

and demand notice dated 11th Assessment Centre, Delhi under Section 143(3) (of Income Tax Act, 1961) read with Section 144B (of Income Tax Act, 1961). Petitioner also seeks stay on the demand arising out of the impugned assessment order.

3. Learned counsel for the Petitioner states that the impugned assessment order has been passed without observing the principles of natural June, 2021 passed by the National Faceless justice, inasmuch as, the compliance date for show cause-cum-draft assessment order dated 23rd May, 2021 was 07th June, 2021. He points out that the action of the Respondent in passing the impugned assessment order was in violation of the directions issued vide Notification No. 486/2020-21 dated 19th May 2021 by Directorate of Income Tax (Systems) and CBDT press release dated 20th May, 2021 which inter alia provided regarding non- availability of e-filing services from 01st June, 2021 to 06th June, 2021 and also provided that "All officers may be directed to fix any compliances only from 10th June onwards to give taxpayers time to respond on the new system. If they have already scheduled any hearing or compliance which requires submissions online during this period, they may prepone or adjourn the hearing and reschedule the work items after this period, etc".

4. Learned counsel for the Petitioner submits that the impugned assessment order has been passed without observing the principles of natural justice, inasmuch as, due to launch of new income tax e-filing portal, the existing portal was discontinued from 01st June, 2021 and the new income tax e-filing portal did not work after the launch and, therefore, compliance till 07th June, 2021 could not be made and the impugned assessment order was passed on 11th June, 2021.

5. On 26th July, 2021, this Court had issued notice to the Respondents. Mr. Kunal Sharma, learned counsel on behalf of the respondents had sought time to obtain instructions. The matter was adjourned to 02nd August, 2021, on which date, Mr. Kunal Sharma had again sought time to obtain instructions. The matter was then adjourned for today. The position is no different as Mr. Kunal Sharma, again seeks an adjournment to obtain instructions.

6. We are of the view that the Respondents have had more than sufficient time to obtain instructions. Consequently, the request for adjournment of Mr. Kunal Sharma is declined.

7. Having perused the paperbook, we are of the view that the impugned assessment order has been passed without providing adequate opportunity to

submit reply in response to the show cause-cum-draft assessment order

dated 23rd May, 2021.

8. We also feel that as the timeframe set out in the show cause notice dated 23rd May, 2021 was extremely narrow and since the e-filing portal was allegedly dysfunctional, there are good enough reasons to set aside the

impugned assessment order, with liberty to the Assessing Officer to continue

the assessment proceedings from the stage at which they were positioned

when the show cause notice dated 23rd May, 2021 was issued. It is ordered

accordingly.

9. We clarify that the Respondent/Revenue will be at liberty to call for further information, if thought necessary, before proceeding to frame the

Assessment Order. With the aforesaid directions, the present writ petition

along with pending application stands disposed of

10. The order be uploaded on the website forthwith. Copy of the order be also forwarded to the learned counsel through e-mail.

MANMOHAN, J

NAVIN CHAWLA, J

AUGUST 12, 2021