KMG Wires Private Limited Vs National Faceless Assessment Centre (Bombay High Court)
KMG Wires Private Limited vs NFAC (Bombay High Court): Assessment Order Quashed for Violation of Natural Justice
The Bombay High Court, in KMG Wires Private Limited vs National Faceless Assessment Centre (Writ Petition, decided on 27 March 2025), quashed an assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for the Assessment Year 2023–24. The order had increased the petitioner’s assessed income from ₹3.09 crore to ₹27.91 crore. The Court found that the assessment was passed in gross breach of natural justice principles, involving non-consideration of crucial evidence and reliance on non-existent judicial precedents.
Background and Petitioner’s Contentions
The petitioner, KMG Wires Pvt. Ltd., challenged two major additions made by the Assessing Officer (AO):
1. Disallowance of purchases worth ₹2.15 crore from Dhanlaxmi Metal Industries, allegedly because the supplier did not respond to a notice under Section 133(6).
2. Addition of unsecured loans of ₹22.66 crore from directors, based on a “peak balance” computation that also included opening balances.
The petitioner argued that the first addition was factually incorrect since Dhanlaxmi Metal Industries had, in fact, responded on 8 March 2025, confirming the transactions and submitting supporting documents such as invoices, e-way bills, and GST returns. However, the AO failed to consider this reply before finalizing the assessment.
