2022 (8) TMI 1448 - HC - Income Tax

Validity of faceless assessment - Denial of natural justice - non providing an opportunity of hearing to the assessee so as to enable him to give explanation for proposed addition - HELD THAT - There is a mandatory provision to provide an opportunity of hearing to the assess by issuing a show-cause notice along with the draft assessment order, which in the facts of the case was issued on 18thSeptember, 2021 calling upon the assessee to furnish the reply before 23.59 hours of 21st September, 2021. Though the assessee prayed for adjournment on 18thSeptember, 2021, without considering the same, the impugned assessment order was passed on 21st September, 2021. Thus, there is clear violation of principles of natural justice by the respondent authority contrary to the provisions of Section 144B. Section 144B(1)(xii) provides that on receipt of show-cause notice, the assessee may furnish his response to the National Faceless Assessment Centre and as per clause (xiv), the assessment unit shall make a revised draft assessment order after considering the response of the assessee and send it to the National Faceless Assessment Centre. However, the respondent authority without giving any opportunity of hearing to the petitioner by not considering the request for adjournment, passed the impugned assessment order. Thus it can safely be said that the impugned order was passed by the respondent in violation of principles of natural justice without affording an opportunity of personal hearing by not following the prescribed procedure laid down as per the provisions of section 144B for Faceless assessment. Appeal of assessee allowed.

Summary

Issues:
Challenge to Assessment Order under Section 147 read with Section 144B of the Income Tax Act, 1961 for Assessment Year 2013-14 on grounds of violation of principles of natural justice.

Analysis:
1. The petitioner challenged the Assessment Order dated 21st September, 2021, alleging it was passed in violation of principles of natural justice. The petitioner, a company, filed its return for the Assessment Year 2013-14 on 28th September, 2013, declaring total income of Rs.2,72,98,894. The Assessing Officer re-opened the assessment under Section 148 of the Act and issued various notices under different sections, culminating in the impugned Assessment Order.

2. The petitioner contended that they were not given sufficient time to respond to the show-cause notice proposing a significant addition to their income. Despite requesting an adjournment on 18th September, 2021, the Assessment Order was passed on 21st September, 2021. The petitioner argued that the Assessing Officer failed to consider their earlier submission and did not provide a proper opportunity for a hearing as required under the Faceless Assessment Scheme.

3. The respondent, on the other hand, claimed that no adjournment request was made by the petitioner, as per the case noting history and e-proceedings. They argued that the assessment order was based on the petitioner's submissions during the assessment proceedings and no interference was warranted.

4. The Court noted that the petitioner did request an adjournment on 18th September, 2021, seeking time until 5th October, 2021, to gather necessary material. The Assessment Order, however, was passed on 21st September, 2021, without considering this adjournment request, leading to a clear violation of natural justice principles.

5. Section 144B of the Act mandates providing an opportunity for a personal hearing and responding to a show-cause notice in Faceless Assessments. The Court found that the Assessing Officer did not adhere to these provisions, specifically failing to grant a hearing or consider the adjournment request, resulting in a breach of natural justice.

6. Relying on precedents from the Bombay High Court and the same Court, the petitioner's arguments were upheld. The Court allowed the petition, quashed the Assessment Order dated 21st September, 2021, and directed the Assessing Officer to proceed with the assessment under Section 144B, ensuring a proper opportunity for a hearing within 12 weeks.

7. The Court clarified that the decision was based on the breach of natural justice and did not delve into the merits of the case. The petition was allowed, and no costs were imposed.

8. The judgment serves as a reminder of the importance of following due process and principles of natural justice in assessments, especially under the Faceless Assessment Scheme, to ensure fairness and transparency in tax proceedings.