AO passes order without issuing any show-cause notice and draft assessment order as stipulated in the Faceless Assessment Scheme

The Delhi High Court has ruled that the Faceless Assessment Scheme mandates the issuance of a show-cause notice and a draft assessment order before a final assessment order can be made. In this case, the Assessing Officer failed to follow this procedure, violating both the scheme's rules and the principles of natural justice. Consequently, the court set aside the assessment order, demand notice, and penalty notice, remanding the case back for proper procedure.

Pardesi Developers Private Limited Vs National Faceless Assessment Centre (Delhi High Court)

W.P.(C) 7785/2021 & Cm Appl. 24273-74/2021

Date of Judgement/Order: 05/08/2021

The Respondent passed the impugned Assessment Order without issuing any show-cause notice and draft assessment order as stipulated in the Faceless Assessment Scheme. The writ petition has been filed challenging the Assessment order, notice of demand and notice for initiation of Penalty proceeding all dated 13th February 2021 passed by the National Faceless Assessment Centre, Delhi under Section 143(3) read with Sections 143(3A) & 143(3B), Section 156 and Section 270A of the Income Tax Act, 1961.

This Court is of the view that the Faceless Assessment Scheme mandatorily provides for issuance of a prior show cause notice and draft assessment order before issuing the final assessment order.

It is settled law that the Government is bound to follow the rules and standards they themselves had set on their pain of their action being invalidated [See: Amarjit Singh Ahluwalia Vs. State of Punjab & Ors.; 1975 (3) SCR 82 and Ramana Dayaram Shetty Vs. International Airport Authority of India & Ors.; (1979) 3 SCC 489

Since in the present case no prior show cause notice, as well as draft assessment order, had been issued, there is a violation of principles of natural justice as well as the mandatory procedure prescribed under “Faceless Assessment Scheme”. Keeping in view the aforesaid facts, the impugned Assessment order, notice of demand and notice for initiation of Penalty proceeding are set aside and the matter is remanded back to the Assessing Officer, who shall issue a draft assessment order and thereafter pass a reasoned order in accordance with the law.

Source: Summary taken from the Judgement