The court held that failure to provide a personal hearing as mandated by Section 144B of the Income Tax Act renders the assessment order invalid, violating principles of natural justice.

JUDGMENT :

Advait M. Sethna, J.

1. Rule, made returnable forthwith. Respondents waive service. By consent of the parties, heard finally.

2. This petition is filed by the petitioner under Article 226 of the Constitution of India, assailing the following :- (i) the assessment order dated 9 September 2022, passed under Section 143(3) of the Income Tax Act, 1961 (“IT Act” for short)(“impugned final assessment order” fort short); (ii) the notice of demand dated 9 September 2022, issued under Section 156 of the IT Act ("impugned demand notice" for short); and (iii) two show cause notices dated 9 September 2022, proposing the initiation of penalty proceedings under Section 274 read with Section 270A and Section 271AA(1) of the IT Act ("impugned show cause notices" for short). The substantive prayers are reproduced below:-

“(a) that this Hon’ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, Order or direction, calling for the records of the Petitioner’s case and after going into the legality and propriety thereof, to quash and set aside the impugned assessment order passed under section 143(3) read with section 144B dated 09.09.2022 (Exhibit 'E1') and the impugned notice of demand issued under section 156 dated 09.09.2022 (Exhibit 'E2'), show Cause Notices dated 09.09.2022 for initiating penalty proceedings under section 270A (Exhibit 'E3') and under section 271AA(1) ('Exhibit 'E4'), as null and void.

(b) This Hon'ble Court be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, Order or direction, directing the Respondents, its servants, subordinates, agents and successors in office to:

i) quash the impugned assessment order passed under section 143(3) read with section 144B dated 09.09.2022 (Exhibit 'E1') and the impugned notice of demand issued under section 156 dated 09.09.2022 (Exhibit 'E2'), show Cause Notices dated 09.09.2022 for initiating penalty proceedings under section 270A (Exhibit 'E3') and under section 271AA(1) (Exhibit 'E4'), as null and void.

ii) to forthwith forbear from taking any steps whatsoever, including recovery of the impugned demand pursuant to in implementation of the impugned assessment order passed under section 143(3) read with section 144B dated 09.09.2022 (Exhibit 'E1')and the impugned notice of demand issued under section 156 dated 09.09.2022 (Exhibit 'E2'), show Cause Notices dated 09.09.2022 for initiating penalty proceedings under section 270A (Exhibit 'E3') and under section 271AA(1)('Exhibit 'E4').”

A) Issue before the Court :

3. Whether the final impugned assessment order is rendered a nullity in law, and non est in light of non-compliance of the principles of natural justice, which is a jurisdictional requirement intrinsic under Section 144B of the IT Act. Consequently, if the very foundation, i.e., the said impugned final assessment order is ex-facie without jurisdiction, whether such illegality can be allowed to perpetuate in the form of subsequent impugned demand notice issued under Section 156 of the IT Act read with the impugned show cause notices dated 9 September 2022 invoking penalty issued under Section 274, 270A read with Section 271AA(1) of the IT Act.

B) Factual Matrix :

The relevant facts necessary for adjudication of the present proceedings are:

4. The petitioner is the partnership firm engaged in trading/investment activity in capital market. The petitioner filed its NIL return of income dated 29 December 2020 for the Assessme