Gujarat HC Sets Aside Faceless Order Passed Without Considering Assessee’s Reply

The petitioner, Sharanam Square LLP, engaged in the business of construction, was incorporated during the Assessment Year 2022-23 and filed its return declaring income of Rs. 23,200/-. The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) of the Income-tax Act, 1961 were issued, to which the petitioner furnished replies and documents. Subsequently, a show cause notice dated 22.03.2024 proposed an addition of Rs. 39,43,27,000/- under Section 69 of the Act in respect of land purchased from Ashima Limited for construction purposes.

The petitioner filed a detailed reply on 25.03.2024 explaining the source of funds and enclosing documentary evidence. However, the respondent passed the assessment order dated 26.03.2024 under Section 143(3) read with Section 144B, determining income at Rs. 39,43,50,220/- and raising a demand of Rs. 38,13,93,748/-, without considering the reply furnished by the petitioner.

Issue Before Court: Whether an assessment order passed under the faceless assessment scheme, without considering the assessee’s reply to the show cause notice due to technical glitches, violates the principles of natural justice.

HC’s Order: The Hon’ble High Court held that it was an undisputed fact that the petitioner’s detailed reply dated 25.03.2024 was not considered before passing the assessment order. The Court noted that even as per the respondent’s own affidavit, the reply was not visible to the Assessing Officer due to technical glitches between the ITBA system and the e-filing portal.

The Court ruled that passing an assessment order without considering the assessee’s reply amounts to a clear violation of the principles of natural justice. Therefore, the assessment order was quashed and set aside, and the matter was remanded to the respondent authorities with directions to pass a fresh order.

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