2022 (3) TMI 532 - HC - Income Tax

Assessment u/s 144B - Addition u/s 68 - whether the Assessing Officer committed any error in passing the impugned assessment order? - HELD THAT - The assessee in his own way has disclosed the source of this particular amount. He is said to have borrowed the amount from the various individuals over a period of time. The source includes the HUF of the assessee s father loan from his mother loan from his wife loan from his friends and relatives loan from his company etc. In the impugned assessment order also the Assessing Officer has observed that the assessees seems to have taken unsecured loan from various persons. We do not find anything in the assessment order as to on what basis the Assessing Officer has doubted all such transactions of loan. We are saying so because prima facie it appears that no inquiry has been undertaken by the Assessing Officer to verify the genuineness of the source. If an inquiry would have been undertaken and if the lenders would have been confronted about such loan transactions then probably the picture would have been more clear. Over and above the aforesaid infirmity in the impugned assessment order there is one another good ground on which we are inclined to quash the impugned assessment order. Once a request is made by the assessee before the Assessing Officer to give him an opportunity of hearing having regard to the fact that the assessment is high-pitch assessment then ordinarily such an opportunity should be given so that the assessee may not get a chance to redress the grievance before the higher forum that he was not given adequate opportunity of hearing. It would all depend on the nature of the issues involved in the matter. It is not necessary that in each and every case the Assessing Officer has to provide personal hearing. Ultimately it is the discretion of the Assessing Officer that should be exercised judiciously. In the over all view of the matter we have reached to the conclusion that we should quash the impugned assessment order so as to give one opportunity to the writ applicant to put forward his case before the authority concerned in a proper manner and to his satisfaction.

Issues:
1. Violation of principles of natural justice in passing the assessment order.
2. Lack of proper application of mind in the assessment order.
3. Source of unexplained amount treated as income under Section 68 of the Income Tax Act.
4. Request for personal hearing and its significance in high-pitch assessments.

Issue 1: Violation of Principles of Natural Justice:
The writ applicant contended that the assessment order passed by the Assessing Officer violated the principles of natural justice by not providing an opportunity for a personal hearing despite a specific request. The applicant argued that this failure to grant a personal hearing was a gross violation of natural justice, impacting the fairness of the assessment process.

Issue 2: Lack of Proper Application of Mind:
The writ applicant further argued that the assessment order seemed to be a verbatim reproduction of the draft assessment order/show cause notice, indicating a lack of proper application of mind by the Assessing Officer. The applicant emphasized that the assessment order should reflect a thorough consideration of all aspects raised by the assessee in response to the show cause notice.

Issue 3: Source of Unexplained Amount as Income:
The case involved an unexplained amount of ?2,80,70,000 treated as income under Section 68 of the Income Tax Act. The applicant, engaged in real estate business, claimed to have borrowed this amount from various individuals, including family members and friends. The Assessing Officer added this amount to the total income without sufficient verification of the genuineness of the sources, raising concerns about the justification for doubting the transactions.

Issue 4: Request for Personal Hearing in High-Pitch Assessments:
The significance of a request for personal hearing in high-pitch assessments was highlighted. The court emphasized that providing an opportunity for personal hearing, especially in complex cases, was crucial to ensure a fair assessment process. The discretion to grant a personal hearing rested with the Assessing Officer, who should exercise it judiciously based on the nature of the issues involved.

The High Court, after considering the arguments presented by both parties, concluded that the impugned assessment order should be quashed. The court found infirmities in the assessment process, including the lack of proper verification of the sources of income and the failure to provide a requested personal hearing. The court emphasized the importance of ensuring a fair and thorough assessment process to prevent unnecessary litigation. The matter was remitted to the respondent for a fresh assessment order, with specific instructions to provide an opportunity for online hearing and allow the applicant to submit a further reply to the show cause notice. Additionally, the court urged the revenue to be more diligent in conducting assessments to minimize the need for judicial intervention and emphasized the importance of addressing all aspects raised by the assessee in the assessment order to avoid future disputes.

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