The Bombay High Court, in a significant ruling, held that the Income Tax Department acted in violation of the Standard Operating Procedure (SOP) under Section 144B of the Income Tax Act, 1961. The failure to follow due procedure and provide a fair hearing rendered the assessment order invalid.
Case Title:
Madhuri Sameer Gokhale vs. Addl./Joint/Deputy/ACIT/ITO: Section 144B violation
Court: Bombay High Court
Date of Order: 29 March 2022
Legal Context:
The Bombay High Court, in a significant ruling, held that the Income Tax Department acted in violation of the Standard Operating Procedure (SOP) under Section 144B of the Income Tax Act, 1961. The failure to follow due procedure and provide a fair hearing rendered the assessment order invalid.
Case Background:
The petitioner, Madhuri Sameer Gokhale, filed a writ petition under Article 226 of the Constitution of India challenging the assessment order dated 29 March 2022 issued under Section 147 read with Sections 144 and 144B of the Income Tax Act. Alongside, a demand notice dated 30 March 2022 was also contested, which was issued under Section 156 of the Act.
The petitioner alleged that the assessment proceedings were conducted in gross violation of the mandatory procedural safeguards provided under the unamended provisions of Section 144B, thus depriving her of a fair hearing.
Key Issue:
Whether the assessment order passed under Section 147, read with Section 144B, without granting proper opportunity of hearing, and in disregard of procedural SOPs, is legally valid?
Observations by the High Court:
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The petitioner had submitted a request for adjournment on 14 March 2022, citing bonafide reasons due to the ongoing COVID-19 pandemic.
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This request was uploaded on the Income Tax portal, but no response was provided by the tax authorities.
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The authorities also failed to issue a fresh notice of hearing or supply relevant documents, thereby denying the petitioner the opportunity to respond to the assessment proceedings.
Judgment:
The Bombay High Court noted that the mandatory procedural requirements under Section 144B, which govern faceless assessment, had been breached by the respondents. The Court held that such non-compliance amounts to a violation of the principles of natural justice, causing serious prejudice to the petitioner.
Final Verdict:
The Court declared the assessment order dated 29 March 2022 and the demand notice dated 30 March 2022 null and void, stating they were passed without jurisdiction and were legally unsustainable.
Legal Takeaway:
This judgment reinforces the legal position that procedural compliance is not a mere formality. Under the faceless assessment framework, the Income Tax Department must strictly adhere to the mandated SOPs to ensure transparency, fairness, and adherence to natural justice.
Taxpayers who are subjected to reassessment proceedings must be given a proper opportunity to respond, and authorities must acknowledge and address their representations.
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