Faceless Assessment Set Aside by Bom HC – Reliance on Non-Existent Case Laws and Ignoring Reply Violates Natural Justice:
KMG Wires Pvt. Ltd. v. NFAC, Delhi & Others
Bombay High Court (O.O.C.J.) – Writ Petition (L) No. 24366 of 2025
Facts:
1. AO disallowed ₹2,15,89,932 from Dhanlaxmi Metal Industries on the ground that the party did not respond to the notice under Section 133(6).
2. An addition was also made of ₹22,66,06,740, being the peak balance (including opening balance).
3. The petitioner contended that the purchases addition was made without considering the supplier’s reply dated 8 March 2025 to the Section 133(6) notice, which confirmed transactions and included voluminous evidences (invoices, e-way bills, transport receipts, GST returns, etc.).
4. The peak balance addition was made without any show cause notice or working of computation and by incorrectly including opening balances and by relying on non-existent judicial precedents.
Hon Bombay HC held as below:
1. Respondent No.1, while computing the peak balance, has relied upon three judicial decisions which, on scrutiny, do not exist. This invocation of non-existent authorities is a serious procedural defect.
2. In the present era AI-assisted research tools may produce spurious or erroneous results; however, a quasi-judicial authority exercising powers under the Income-tax Act must not blindly rely on such outputs.
3. Matter remanded to the Assessing Officer with directions to issue a fresh show cause notice with clear reasons for proposed additions, provide reasonable opportunity of hearing and allow time for response, grant personal hearing before passing the order.
The copy of the order is as under:
