The failure to provide a personal hearing in faceless assessments under the Income Tax Act constitutes a violation of the principles of natural justice, rendering the assessment order invalid.

JUDGMENT

The present writ petition, filed under Article 226 of the Constitution of India, seeks the following reliefs:

“i) To declare that the Faceless Assessment Scheme, section 144B of the Income Tax Act and the procedures adopted for completing the Faceless assessment is ultravires the constitution and against the principles of natural justice;

ii) To call for the records leading to the issuance of Exhibit P-15 assessment order passed by the 4th respondent for the AY 2017-18 and to quash the same by issuing a writ of certiorari;

iii) To issue a writ of mandamus directing the respondents not to enforce Exhibit P-15 assessment order passed by the 4th respondent for the AY 2017-18; And

iv) To issue such other appropriate writ, order or directions as this Hon'ble Court may deem just and proper to issue in the facts and circumstances of the case.”

2. The petitioner is a partner in a partnership firm by name “Muscat Jewellery”, which was engaged in the retail trade of gold ornaments. The said firm discontinued its business operations from the Financial Year (FY) 2019–20 due to continuous losses.

3. The present matter arises under the Income Tax Act , 1961 (for short, “the Act”), and pertains to the Assessment Year (AY) 2017–18. For the said AY, the petitioner filed the return of income on 14.07.2021 pursuant to the notice dated 30.03.2021 issued under Section 148 of the Act by the fifth respondent.

3.1 Subsequently, the fifth respondent issued a notice dated 08.07.2021 under Section 142 (1) of the Act calling upon the petitioner to furnish, inter alia, details relating to the bank accounts held by the petitioner during FY 2016–17 relevant to AY 2017–18, along with statements of accounts, the source of cash deposits, and details of immovable property sold during the said period, together with a copy of the sale deed and the computation of capital gains.

3.2 The petitioner e-filed his reply on 18.08.2021 informing about the filing of the return and furnishing the details as called for. Thereafter, the fourth respondent from the Faceless Assessment Centre issued a further notice dated 08.12.2021 under Section 142 (1) of the Act, referring to the earlier notices issued by the respondents. The fourth respondent, inter alia, stated that it had been noticed from the database that five additional current accounts were mapped to the PAN of the petitioner and that cash deposits amounting to Rs. 1,52,10,000/- had been made in those accounts during FY 2016–17 relevant to AY 2017–18. The petitioner was therefore called upon to explain the source of the said cash deposits with supporting evidence.

3.3 The petitioner was unable to furnish the details immediately. Consequently, a further notice dated 24.12.2021 under Section 142 (1) of the Act was issued by the fourth respondent, calling upon the petitioner to provide the details sought vide notice dated 08.12.2021.

3.4 Thereafter, the petitioner e-filed a reply on 05.01.2022, specifically stating that he did not maintain any current account in his individual capacity and that the five current accounts referred to in the notices belonged to the partnership firm, “Muscat Jewellery”. It was explained that, since the partners were joint signatories to the firm’s accounts, the petitioner’s personal PAN had also been noted by the bank. The petitioner further explained the cash withdrawals from the firm’s accounts. Details relating to job work undertaken by the firm, as well as the sale of immovable property and the cost of improvement claimed, were also furnished, and the relevant supporting documents were uploaded.

3.5 However, without considering the repl