Court finds procedural fairness lacking in tax assessment; orders fresh proceedings with right to reply and personal hearing.
In a significant decision, the Delhi High Court has set aside an assessment order against Puneet Kanodia issued by the National Faceless Assessment Centre, New Delhi, citing procedural lapses. The court, while addressing the writ petition filed by Kanodia, emphasized the need for fair opportunity to be given to the assessee to present their case.
The bench, comprising Justices Dinesh Mehta and Vinod Kumar, was approached by Kanodia, who alleged that the assessment order dated March 20, 2026, was issued without considering his reply and a requested adjournment. The petitioner was represented by advocates Mr. Sumit Lalchandani and Ms. Ananya Kapoor. The respondent's counsel, Mr. Apoorv Agarwal, argued that the petitioner was granted sufficient opportunity to file a reply before the deadline of March 11, 2026.
The court observed that while the principles of natural justice were not violated, the assessment process did not consider the petitioner's request for adjournment and his subsequent reply, which could have influenced the assessment decision. The court noted that the addition of Rs. 2,85,00,000 under Section 69C of the Income Tax Act was based on an erroneous assumption that the entire investment source was unexplained in Kanodia's hands, disregarding the shared ownership with his wife.
Highlighting the importance of procedural fairness, the court set aside the impugned order and directed the National Faceless Assessment Center to issue a fresh notice to Kanodia, allowing him to file a reply by April 30, 2026. The court also provided Kanodia the option for a personal hearing via video conferencing. The assessment proceedings are to be completed in accordance with the law after considering the petitioner's submissions.
The court clarified that this decision was made based on the unique facts of the case and should not be regarded as a precedent for future cases. The petition was allowed, and all pending applications were disposed of.
Bottom Line:
Principles of natural justice - Assessment order under Income Tax Act, 1961 - Violation alleged due to denial of adjournment and non-consideration of reply - Assessment order set aside not on the grounds of natural justice violation but to serve the ends of justice, allowing petitioner to file reply and enabling reassessment.
Statutory provision(s):
Sections 143(3), 144B, and 69C of the Income Tax Act, 1961
