2022 (6) TMI 804 - HC - Income Tax

Validity of Faceless Assessment - application for extension of time - Violation of natural justice - on receipt of the proposal for completing the assessment based upon the draft assessment order, petitioner sought for a breathing time to respond and requested for a further four days time - HELD THAT - The statutes contemplates an application for extension of time and even the grant of extended time to furnish a response. Thus when the petitioner sought for a further four days time to respond, citing the reason to gather necessary materials from different sources, the assessing officer was bound to give a response, intimating either the rejection or its acceptance of request for time. Such a response is part of the basic requirements of the principles of natural justice. When there was a lack of response, it is only probable that the petitioner would have expected his request for adjournment having been accepted. Therefore, the assessing officer ought not to have proceeded with the assessment on 24.04.2021, as originally mentioned. In view of the above, there is a clear evidence of violation of principles of natural justice and hence, Ext.P8 is liable to be set aside on this count alone. Notwithstanding the setting aside of Ext.P8, the respondents must be granted an opportunity to pass fresh orders of assessment and accordingly, there will be a direction to the respondents to accept objections to Ext.P6 show cause notice, if any filed by the petitioner within a period of thirty days from the date on which the respondents open up a link for filing objections, since, presently, the Faceless Assessment regime is in place. If such an objection is filed by the petitioner within the time stipulated above, respondents shall, necessarily, consider the same and pass appropriate orders, after granting an opportunity of hearing to the petitioner, as expeditiously as possible, at any rate, within a period of two months from the date of opening of the link to file the objections as mentioned.

Summary

Issues: Allegation of assessment order issued without natural justice principles compliance.

The petitioner alleged that an assessment order issued against them lacked compliance with the principles of natural justice. The petitioner declared a net loss for the assessment year 2018-19, and their return was selected for scrutiny under the Faceless Assessment Scheme. The petitioner responded promptly to notices and was served with a show cause notice under Section 144B(xvi) of the Income Tax Act, 1961, granting them seven days to respond. When the petitioner requested a further four days to gather material from multiple sources, the assessing officer did not respond and proceeded to issue the assessment order on 24.04.2021, without granting the requested time. The petitioner argued that this violated the provisions of Section 144B(1)(vii) and Section 144B(1)(xxii) of the Income Tax Act, 1961, which require a response to requests for extension of time, thus breaching the principles of natural justice.

The Faceless Assessment Scheme aims to enhance transparency and eliminate physical interaction between the assessee and the tax officer while ensuring a reasonable opportunity for the assessee to respond to notices. The relevant sections 144B(1)(vii) and 144B(1)(xxii) of the Income Tax Act, 1961, allow for the filing of responses within specified times or extended periods upon application to the National Faceless Assessment Centre. The statute contemplates the granting of extended time to furnish a response, and when the petitioner requested additional time citing the need to gather materials, the assessing officer was obligated to respond to the request. The lack of response violated the principles of natural justice, as the petitioner could have reasonably expected their request for adjournment to be accepted before the assessment was completed.

The judgment concluded that the assessment order (Ext.P8) was set aside due to a clear violation of the principles of natural justice. The respondents were directed to accept any objections to the show cause notice within thirty days from opening a link for filing objections under the Faceless Assessment regime. If objections were filed within the stipulated time, the respondents were instructed to consider them and pass appropriate orders after granting a hearing to the petitioner within two months from the date of filing objections. The writ petition was allowed in favor of the petitioner.