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2021 (10) TMI 1317 - HC - Income TaxValidity of E-assessment proceedings - Mandation of providing personal hearing - valuable right - opportunity of hearing through video conferencing could not be afforded to the petitioner on account of failure on the part of the petitioner to submit such request as per the guidelines for personal hearing - HELD THAT - As notice along with the draft assessment order was given to the petitioner on 04.04.2021, the response to the same was given within two days by the petitioner in the mode as prescribed under the Law. It also filed further reply to the said notice on 08.04.2021 as well as on 15.04.2021 in continuation of the first reply of 06.04.2021. It is also a matter of record that there is no reference of the request made on 07.04.2021 in a subsequent reply made in continuity on the part of the petitioner of 08.04.2021 as well as 15.04.2021. However, that would not in any manner question his conduct of requesting for the personal hearing in as much as that aspect is neither disputed nor belied from the material which is available from the eportal of the Income Tax Department. In fact in the affidavit-in-reply itself there is a reference of such a request made by the petitioner which according to the respondent-revenue is impermissible as he has not exercised the option while responding to the notice and the draft assessment order on 06.04.2021. According to the revenue, on 06.04.2021 while responding to the request, there would have been a hyperlink AVAILABLE which he ought to have clicked and which he had missed out and therefore, if he makes any subsequent request for the same, the same is not sustainable. We notice from the clause (xii) of sub-section (7) of Section 144B of the IT Act laying down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centre and the Unit set up in an automated and mechanised environment by the Principal Chief Commissioner or the Principal Director General. There is nothing on the record which insists that on the day on which the reply is given, there is any prohibition to tender the subsequent reply in continuity. It also does not anywhere prohibit making of such a request through the e-portal of the department. Para-11 of E Assessment Scheme, 2019 notified on 12.09.2019 as modified on 13.08.2020 provides that no personal appearance in the Centre or unit would be there but request for personal hearing can be made by the assessee or his authorised representative in Faceless Assessment Scheme. Having noticed that it was a time when this regime of faceless assessment had merely begun and there were many hiccups in absence of the revenue having shown that the link was created at the relevant point of time and in absence of any material on that issue, when it recognises the fact that it had received the request of 07.04.2021, there was no earthly reason for it to have ignored it and not to avail the hearing. As the subsequent Guidelines for personal hearing through the video conferencing recommending dos and don ts cannot be taken into consideration by this Court for the simple reason that the authority which issued and the date from which they have come into practice is missing. Moreover, it is not even known whether this is for the internal circulation as in the public domain these Guidelines have not come, therefore, what presently would guide the case of the petitioner is the FAQs available for seeking the video conferencing and seeking the adjournment of the video conferencing, we hold that there has been a violation when the modified assessment order was to be passed by making an addition of nearly 107 Crore and when a specific request had gone on the 3rd day of issuance of notice from the petitioner and when the time for framing the assessment was not getting barred, non-availment of the opportunity of the personal hearing surely has resulted into the violation of the principle of natural justice and therefore, the indulgence would be necessary. According to us, the right of hearing being a valuable right as held by the Apex Court in case of M/s. Escorts Farms (Ramgarh) Ltd.) vs. Commissioner, Kumaon Division, Nainital, U.P. Ors . . 2004 (2) TMI 683 - SUPREME COURT and denial of such right being a serious breach of statutory procedure prescribed as also being violation of rules of natural justice, this petition merits allowance. Therefore, not only on the ground of serious prejudice for want of opportunity of hearing but also when there is a huge additions of tax by way of a draft assessment order, which eventually become the final assessment order, as framed by the respondent on 21.04.2021, this Court needs to interfere in the impugned assessment order along with interference in the consequential demand of taxes and of penalty and the same are quashed and set aside. The matter is remanded back to the Assessing Officer, who shall grant an opportunity of personal hearing to the petitioner by way of the video conferencing and thereafter pass a reasoned order in accordance with law.
Issues Involved:
1. Challenge to the assessment order under Section 143(3) of the Income Tax Act, 1961. 2. Alleged violation of principles of natural justice due to denial of personal hearing. 3. Examination of the statutory mechanism and guidelines for personal hearing under the Faceless Assessment Scheme. Detailed Analysis: 1. Challenge to the Assessment Order: The petitioner challenged the assessment order dated 21.04.2021, which assessed their income at ?107,42,69,470/- for the Assessment Year 2018-2019. The petitioner contended that the assessment was arbitrary, illegal, and contrary to law, asserting that the additions made were actually advances contingent upon a final decision by the Delhi High Court. 2. Alleged Violation of Principles of Natural Justice: The petitioner argued that the assessment order violated the principles of natural justice because their request for a personal hearing was denied without cogent reasons. Despite requesting a personal hearing on 07.04.2021, the petitioner was not afforded this opportunity, which they claimed led to irreparable loss and hardship. 3. Examination of Statutory Mechanism and Guidelines: The respondent contended that the petitioner had an alternative remedy available through an appeal to the CIT (Appeal) and the Appellate Tribunal. They argued that the petitioner did not follow the proper guidelines for requesting a personal hearing via video conferencing, as stipulated by the National Faceless Assessment Centre (NFAC). Court's Findings: A. Violation of Principles of Natural Justice: The court emphasized that the principles of natural justice were integral to the assessment process under Section 144B of the Income Tax Act. The court noted that the petitioner had requested a personal hearing within a reasonable time after receiving the draft assessment order. The court found that the denial of this request, especially given the substantial addition proposed, constituted a violation of natural justice. B. Statutory Mechanism and Guidelines: The court examined the guidelines and procedures under the Faceless Assessment Scheme. It found that the petitioner’s request for a personal hearing was made in accordance with the scheme's provisions. The court highlighted that the guidelines for personal hearing through video conferencing, issued by the NFAC, were not adequately communicated to the petitioner, and there was no evidence that a hyperlink for requesting a personal hearing was available on the e-filing portal at the relevant time. C. Precedents and Legal Principles: The court referred to decisions from the Delhi High Court and the Bombay High Court, which underscored the importance of granting a personal hearing when requested by the assessee, especially in cases involving substantial variations in assessed income. The court agreed with these precedents, emphasizing that the faceless assessment regime was designed to ensure transparency and accountability, and denying a personal hearing undermined these objectives. Conclusion: The court concluded that the denial of a personal hearing to the petitioner resulted in a violation of the principles of natural justice. Consequently, the impugned assessment order and the consequential demand of taxes and penalties were quashed and set aside. The matter was remanded back to the Assessing Officer, who was directed to grant a personal hearing to the petitioner via video conferencing and then pass a reasoned order in accordance with the law. Final Order: The petition was allowed, and the assessment order dated 21.04.2021 was quashed. The Assessing Officer was directed to provide a personal hearing to the petitioner and pass a new assessment order following the principles of natural justice.
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