On December 16, a division bench of the Gujarat High Court composed of Justice N.V. Anjaria and Justice Bhargav D. Karia quashed the National Faceless Assessment Center's assessment order of Rs. 101 crores on the grounds of a violation of the principle of natural justice. 

The division bench has observed that the respondent/department will be free to proceed with assessment under the provisions of Section 144B of the Income Tax Act, 1961, as permitted by law, following the issuance of a show cause notice and draught assessment order to provide the petitioner with an opportunity to be heard.

The petitioner/assessee refines and trades various types of edible oil derived from crude and raw cotton wash oil. The petitioner's case was reviewed and assessed under the E-assessment Scheme, 2019, and a notice under Section 143(2) was issued. Section 142(1) notices, as well as detailed questionnaires, were also issued. In response to notices, the petitioner and assessee submitted responses on a regular basis. 

The department issued the final assessment order, making significant changes without giving the petitioner an opportunity to respond on the basis of new material that was never mentioned in the draught assessment order or any of the previous notices.

The assessee contended that, despite the petitioner providing all of the information required by the assessor, the assessor issued the assessment order without giving the petitioner an opportunity to be heard, thereby violating natural justice principles.

The assessee argued that no material or information from any inquiry conducted after the draught assessment order was made available to assess at any time prior to the receipt of the final assessment order, which is a clear violation of Section 144B. The draught assessment order and the final assessment order are not the same things. The main reason for making additions is the inquiry conducted after the draught assessment order, which was never made available to the assessee even though the express provisions of Section 144B required it.

According to Section 144B(7), if a variation prejudicial to the assessee is proposed in the draught assessment order, the assessee has the right to request a personal hearing, which the authority may provide if the assessee's case is covered by the circumstances provided therein in the exercise of powers under Sub Clause (h) of Clause (xii) of Section 144B(7) of the Act, 1961. 

The court quashed the respondent's assessment order under Section 143(3) read with Section 144B and issued a notice under Section 156.

Case Title: Map Refoils India Ltd. Versus National Faceless E-Assessment Center
Citation: R/Special Civil Application No. 16261 of 2021