2022 (5) TMI 1068 - HC - Income Tax

Validity of Faceless Assessment Order passed u/s 144B - variation as proposed in the draft assessment order or final draft assessment order or revised draft assessment order - a request for personal hearing through video conference denied - HELD THAT - In the case on hand, a perusal of the material on record would show that even though the petitioner made a request for personal hearing through video conference on 26.03.2022, though belatedly made, the impugned draft assessment order was passed on 30.03.2022 even without considering such request by showing the status/action of the request as open . The said draft assessment order was passed even without closing the e-portal status. As no standard, procedures and processes have been framed in terms of clause (xii) of Section 144B (7) of the Income Tax Act, 1961 and these standards, procedures and processes are required to be framed to guide the assessing officer as to whether or not personal hearing, in a given matter, should be granted and that since the statute itself makes the provision for grant of personal hearing, the respondents cannot veer away from the same. Hence, this court is of the view that since the assessee has a vested right to personal hearing and the same has to be given, if such a request is made and that the right to personal hearing cannot depend upon the facts of each case. Admittedly, the impugned draft assessment order was passed without considering the request for personal hearing through video conference, though made belatedly on 26.03.2022, even without closing the said request and keeping the status as open . Therefore, since no personal hearing had been granted before passing the impugned assessment order, there is a violation of principles of natural justice as well as mandatory procedure prescribed in Faceless Assessment Scheme as stipulated in Section 144B of the Income Tax Act. The impugned draft assessment order is liable to be set aside and also the demand notice and the proceedings initiated pursuant thereto for the Assessment Year 2016-2017 are also liable to be set aside. WP allowed.

Summary

Issues Involved:
1. Legality of the Assessment Order dated 30.03.2022.
2. Compliance with Section 144B (7)(vii) of the Income Tax Act, 1961.
3. Violation of principles of natural justice.

Issue-Wise Detailed Analysis:

1. Legality of the Assessment Order dated 30.03.2022:
The petitioner challenged the Assessment Order dated 30.03.2022 for the Assessment Year 2016-2017, passed under Section 147 read with Section 144B of the Income Tax Act, 1961. The petitioner contended that the order was passed without considering the request for a personal hearing, which was made on 26.03.2022. The petitioner argued that the order was illegal, arbitrary, and violative of the principles of natural justice. The court found that the request for personal hearing was still shown as "open" in the e-portal when the assessment order was passed, indicating that the request was not addressed.

2. Compliance with Section 144B (7)(vii) of the Income Tax Act, 1961:
Section 144B (7)(vii) of the Income Tax Act, 1961, states that if a variation is proposed in the draft assessment order, the assessee may request a personal hearing to make oral submissions. The court noted that the petitioner made a request for personal hearing through video conference on 26.03.2022, but the request was not considered, and the assessment order was passed on 30.03.2022. The court referred to the Standard Operating Procedure (SOP) for personal hearing through Video Conference under the Faceless Assessment Scheme, 2019, which allows personal hearing if requested by the assessee. The court held that the failure to consider the request for personal hearing was a violation of the mandatory procedure prescribed in Section 144B.

3. Violation of principles of natural justice:
The court emphasized the importance of the principles of natural justice, particularly the audi alteram partem rule, which requires that a party be given an opportunity to be heard before a decision is made. The court cited several judgments, including Bharat Aluminium Company Ltd. v. Union of India and Sanjay Agarwal v. National Faceless Assessment Centre, to support the view that an assessee has a vested right to personal hearing if such a request is made. The court concluded that the impugned assessment order was passed without granting a personal hearing, thereby violating the principles of natural justice.

Conclusion:
The court allowed the writ petition, setting aside the Assessment Order dated 30.03.2022, the consequential Demand Notice, and the Penalty Notice. The matter was remitted back to the Assessing Officer for a fresh assessment after affording a reasonable opportunity of hearing to the petitioner. The court directed that the new assessment should be conducted in accordance with the law and as expeditiously as possible.