Faceless Assessment: HC quashes Order passed by AO without considering reply filed by the assessee

This is a case of faceless assessment under Section 144 B of the Income Tax Act, where a show-cause notice along with the draft assessment order was issued to the writ applicant assessee on 14.06.2021. The assessee was asked to file his reply on or before 26.07.2021.

Accordingly, the assessee filed his reply to the show-cause notice.

This is evident from the stance of the Revenue itself as reflected in the affidavit-in-reply, more particularly, the averments made in para 10 thereof as under:

“10. So far the contention raised in Para-2.4 of the petition, I state and submit that the petitioner has filed the submission vide acknowledgement dated 26.07.2021 in response to draft show cause notice dated 14.07.2021.

It is further submitted by the petitioner that the detailed point wise reply for Para Nos.2 (i) to 2 (v) of the petitioner against the additions proposed in the draft assessment order issued vide draft show cause notice dated 14.07.2021. The petitioner has stated that it had made submissions and these details called for by the Assessing Officer were submitted either at the stage of the reply to the show cause notice issued on 14.07.2021 and earlier during the course of the assessment proceedings. This aspect is factually correct and hence, no comments are offered at present.

However, The Assessing Officer in the impugned assessment order has observed as under:

“Show cause notice along with draft assessment order was issued to the assessee on 14/07/2021 to furnish the reply on or before 26/07/2021. However, there was no response from the assessee.”

Order of Gujarat High Court:

11. Thus, it appears that the Assessing Officer remained under an erroneous impression that the writ applicant – assessee has not filed his reply to the show cause notice. There is a detailed reply filed by the writ applicant – asseessee, which is on record. The aforesaid is suggestive of the fact that the Assessing Officer failed to consider the reply filed by the assessee and proceeded to pass the impugned assessment order.

12. On the aforesaid ground alone, we are inclined to quash and set aside the impugned assessment order and remit the matter to the Assessing Officer for a fresh consideration. While considering the matter afresh, the Assessing Officer shall take into consideration the reply, which has been filed by the assessee. The assessee shall also be heard before passing the final assessment order.

We clarify that we have even otherwise not expressed any opinion on merits of the case. We have thought fit to interfere only on the ground that the case is one of violation of the principles of natural justice.

In the result, this writ application succeeds and is hereby allowed. The impugned assessment order is hereby quashed and set aside. The matter is remitted to the Assessing Officer for a fresh consideration. Let the entire fresh exercise be undertaken at the earliest and completed within two months from the date of receipt of this writ of this order.