2022 (4) TMI 1287 - HC - Income Tax

Validity of assessment orders passed u/s 147 read with Section 144B - penalty notices issued under Section 274 - petitioner states that the impugned orders have been passed without following the principle of natural justice and in violation of Section 144B of the Act as no opportunity of hearing was granted to the petitioner despite a specific request having been made under Section 144B(vii) - HELD THAT - This Court is of the view that the issue involved in the present writ petitions are no longer res integra. This Court in Bharat Aluminium Company Ltd. vs. Union of India Ors 2022 (1) TMI 658 - DELHI HIGH COURT has held that the use of the expression may in Section 144B(7)(vii) is not decisive. Where a discretion is conferred upon a quasi-judicial authority whose decision has civil consequences, the word may which denotes discretion should be construed to mean a command. Consequently, requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory. It was further held that the classification made by the Respondent between the matters involving disputed questions of fact and questions of law by way of the Circular dated 23rd November, 2020 is not legally sustainable. Accordingly, the impugned assessment orders passed under Section 147 read with Section 144B of the Act for the Assessment Years 2014-15, 2015-16, 2016-17 and 2017-18 are violative of principle of natural justice and Section 144B(7)(vii) of the Act. It is settled law that when there is a violation of principle of natural justice, the availability of an appellate remedy does not operate as a bar to the maintainability of the writ petition. Consequently, the impugned Assessment orders, Demand notices and Penalty notices are quashed and the matters are remanded back to the Respondents for passing fresh orders in accordance with law after giving an opportunity of personal hearing to the petitioner.

Summary

Issues:
Challenging assessment orders under Income Tax Act, violation of natural justice, maintainability of writ petitions due to alternative remedy, interpretation of Section 144B(7)(vii) regarding personal hearing requirement.

Analysis:
The petitioner filed writ petitions challenging assessment orders and penalty notices under the Income Tax Act for the Assessment Years 2014-15 to 2017-18, alleging a lack of natural justice and violation of Section 144B. The petitioner contended that no opportunity of hearing was granted despite a specific request under Section 144B(vii). The court noted the reliance on previous decisions like Sanjay Aggarwal vs. National Faceless Assessment Centre and Bharat Aluminum Company Ltd v. Union of India, emphasizing the importance of natural justice in such matters.

The respondents argued that the writ petitions were not maintainable as the petitioner had an alternative remedy through appeal. However, the court, after hearing both parties, held that the issue was no longer res integra. Referring to the case of Bharat Aluminium Company Ltd. vs. Union of India, the court clarified that the discretion under Section 144B(7)(vii) should be construed as a command when civil consequences are involved. The court emphasized the mandatory nature of providing a reasonable opportunity for a personal hearing to the assessee.

Consequently, the court found the assessment orders to be violative of natural justice and Section 144B(7)(vii) of the Act. The court reiterated the principle that the availability of an appellate remedy does not bar the maintainability of a writ petition in cases of natural justice violations. Therefore, the court quashed the assessment orders, demand notices, and penalty notices, remanding the matters back to the Respondents for fresh orders in compliance with the law, ensuring a personal hearing for the petitioner.

In conclusion, the court disposed of the writ petitions and applications, leaving the rights and contentions of all parties open for further proceedings. The judgment highlighted the significance of natural justice and the mandatory nature of providing a personal hearing to the assessee in assessment proceedings under the Income Tax Act.