The absence of a show cause notice in tax assessments violates natural justice, requiring annulment of any adverse variations to taxable income.

JUDGMENT

Rajiv Shakdher, J. (ORAL):

[Court hearing convened via video-conferencing on account of COVID-19]

1. This writ petition is directed against the assessment order dated 15.04.2021, passed under Section 143(3) read with Section 144B of the Income Tax Act 1961 (in short "the Act"), concerning assessment year (AY) 2018-2019.

1.1. Besides this, the assessee has also assailed the notice of demand, issued under Section 156 of the Act and the notice issued for initiating penalty proceedings, under Section 270A of the Act, dated 15.04.2021.

2. Notice in this writ petition was issued on 28.05.2021, when operation of the impugned assessment order, dated 15.04.2021, was stayed.

2.1. The principal grievance, which is articulated before us, on behalf of the petitioner, is that, although, the impugned assessment order has varied the taxable income to the detriment of the petitioner, no show cause notice- cum-draft assessment order was issued, as was required under the legislative/statutory scheme, which is prevalent in that behalf.

2.2. The respondents (hereafter referred to as "revenue") have failed to file a counter-affidavit in the matter, though an opportunity was granted, in that behalf, on 28.05.2021. Counsel for the revenue has chosen to argue the matter based on the record presently available with the Court.

2.3. As is evident upon a bare perusal of the impugned assessment order dated 15.04.2021, the assessment was carried out in this case under the E- assessment Scheme, 2019 [renamed, Faceless Assessment Scheme, 2019, hereafter referred to as `2019 Scheme`], as amended by the Faceless Assessment (1st Amendment) Scheme, 2021 [hereafter referred as `2021 Scheme`]. The 2019 Scheme was framed and notified by the Central Government in exercise of its powers under Section 143(3A) of the Act. Subsection 3A to subsection 3C were inserted in Section 143 of the Act via Finance Act, 2018, with effect from, 01.04.2018. However, with the enactment of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [in short "2020 Act"], subsection 3D was inserted in Section 143, whereby, it was provided that "Nothing contained in sub-section (3A) and sub-section (3B) shall apply to the assessment made under sub-section (3) or under section 144, as the case may be, on or after the 1st day of April, 2021". The provisions of Section 143(3D), thus, kicked in on 01.04.2021. Almost simultaneously, the Central Board of Direct Taxes, vide Order F. NO. 187/3/2020-ITA-I dated 31.03.2021, provided "that all Orders, Circulars, Instructions, Guidelines and Communications issued in order to implement the Scheme shall henceforth mutatis mutandis be applicable to the Faceless Assessment under section 144B of the Act, except those specifically modified by issue of fresh Orders/Circulars etc." The said Order shows that the 2019 Scheme, as amended, was incorporated in the 2020 Act.

2.4. Given this backdrop, it would be relevant to note that, the provisions contained in sub-clauses (b) and (c) of clause (xvi) of Section 5(1) of the 2019 Scheme as also the Central Board of Direct Tax (CBDT) Instruction No. 20/2015, dated 29.12.2015, required the revenue to grant an opportunity to the assessee to respond, in case, additions or disallowances were proposed vis-a-vis the assessee`s taxable income.

2.5. For the sake of convenience, the relevant provisions contained in Section 5(1) of the 2019 Scheme, which are referred to hereinabove, as also paragraph 4 of the aforementioned instructions issued by CBDT are extracted hereinafter: -

"(xvi) the National e-Assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including b