If Principles Of Natural Justice Are Violated, Writ Remedy Is Available Despite Statutory Appeal: Delhi High Court

The Bench, consisting of Justices Manmohan and Dinesh Kumar Sharma, held that when there is a violation of the principles of natural justice, the availability of an appellate remedy does not bar the maintainability of a writ petition.

An assessment order was passed against the Assessee Jindal Realty Limited under Section 147 read with Section 144B of the Income Tax Act, 1961. Thereafter, a demand notice and penalty notice were issued to the Assessee. The Assessee filed a writ petition before the Delhi High Court challenging the assessment order, demand notice and the penalty notice issued to the Assessee.

Section 147 of the Income Tax Act provides the Assessing Officer the power to reassess the income of an assessee if the income of the assessee has escaped assessment in the relevant assessment year.

The Assessee Jindal Realty submitted before the Delhi High Court that the revenue department did not issue any draft assessment order and show cause notice before passing the assessment order. The Assessee contended that it was denied a reasonable opportunity of hearing. The revenue department contended that the writ petition filed by the Assessee was not maintainable as the Assesssee had an alternative effective remedy of filing an appeal against the assessment order.

The Delhi High Court noted that Section 144B(1)(xvi)(b) of the Income Tax Act mandatorily provides for issuance of a show cause notice and draft assessment order before issuing a final assessment order.

The Court held that the National Faceless Assessment Centre, Delhi should have carried out the assessment in accordance with the statutory procedure prescribed by it.

The Court ruled that since no show cause notice and draft assessment order had been issued to the Assessee, there was a violation of the principles of natural justice as well as the mandatory procedure prescribed under the "Faceless Assessment Scheme" as stipulated in Section 144B of the Income Tax Act.

The Court added that when there is a violation of the principles of natural justice, the availability of an appellate remedy does not bar the maintainability of a writ petition.

The Court thus quashed the assessment order, demand notice and the penalty proceedings initiated under the Income Tax Act. The Court remanded the matter back to the Assessing Officer (AO) and directed the AO to pass a reasoned order after issuing a show cause notice and draft assessment order to the Assessee.

Case Title: Jindal Realty Limited versus National Faceless Assessment Centre, Delhi

Citation: 2022 LiveLaw (Del) 376

Dated: 20.04.2022 (Delhi High Court)

Counsel for the Petitioner: Mr. Salil Kapoor, with Mr. Sumit Lalchandani, Ms. Ananya Kapoor and Mr. S.K. Gambhir

Counsel for the Respondent: Mr. Ajit Sharma, senior standing counsel

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