Delhi High Court Sets Aside E-Assessment Order

Delhi High Court Sets Aside E-Assessment Order

The Court said that as no Draft Assessment Order was issued, it violated principles of natural justice

The Delhi High Court set aside the Assessment Order passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961 against the Petitioner as it was not preceded by the issuance of a 'Draft Assessment Order'.

A Division Bench of the High Court of Delhi, comprising Justices Navin Chawla and Manmohan, dealt with this matter titled RMSI Private Limited v National E-Assessment Centre, Delhi.

The facts leading up to this writ petition are that an Assessment Order dated 31 March 2021 was passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961 against the Petitioner under the E-Assessment Scheme, 2019 for the Assessment Year 2017-18. The Petitioner – Assessee submitted that the Assessment Order was liable to be set aside as it was not preceded by the issuance of a 'Draft Assessment Order' and further followed by a 'Revised Draft Assessment Order'. The Respondent – National E-Assessment Centre, on the other hand, contended that in absence of a provision similar to Section 144B (9) of the Income Tax Act, 1961, issuance of a Draft Assessment Order could not be held to be mandatory and failure to issue such order could not be treated as fatal.

The bench referred to Clause 5 (1) (viii) and (x) of the E-Assessment Scheme, 2019 and observed the following:

"A reading of the above provision would clearly show that it is mandatory for the National E-Assessment Centre to provide an opportunity to the assessee, by serving a notice calling upon him to show cause as to why the variation proposed in the Draft Assessment Order, which is prejudicial to the interest of the assessee, be not made."

The Court observed that it would clearly be a violation of the principles of natural justice, which would declare this Assessment Order as void in the absence of such notice.

The bench further observed that the absence of a provision similar to Section 144B (9) in the E-Assessment Scheme, 2019 would not make any difference to such legal outcome in as much as a violation of principles of natural justice renders such decision void.

The Court stated that the Income Tax authorities have to remain bound by the Statutory Scheme of assessment.

The Respondent Centre had also raised a preliminary objection on the maintainability of the petition by contending that the Petitioner had already challenged the Assessment Order by way of an appeal. The Court while answering this maintainability issue, referred to a judgment of Delhi High Court titled Gurgaon Realtech Limited v National Faceless Assessment Centre Delhi (earlier National E-Assessment Centre Delhi) – W.P.(C) No. 5849/2021, which was submitted by the Petitioner. The Court confirmed the maintainability of this petition since the Assessment Order was passed without complying with the procedure laid down in the Scheme and in violation of principles of natural justice.

The Court, therefore, set aside the Assessment Order passed under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act, 1961 and provided the Respondent with the liberty to pass a fresh Assessment Order in accordance with law.