2023 (1) TMI 535 - HC - Income Tax

Validity of Assessment u/s 144B - not giving a personal hearing in violation of Section 144B(6)(vii) and (viii) and the principle of natural justice - scope of Expression may in Section 144B(7)(viii) - HELD THAT - This Court is of the view that the issue involved in the present writ petition is no longer res integra. This Court in the case of Bharat Aluminium Company Ltd. vs. Union of India Ors; Ors. 2022 (1) TMI 658 - DELHI HIGH COURT has held that the use of the expression may in Section 144B(7)(viii) is not decisive. Where 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, the 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. In any event, the statutory amendment in Section 144B puts the controversy beyond doubt. Consequently, this Court is of the opinion that an assessee has a vested right to personal hearing and the same has to be given, if an assessee asks for it. Accordingly, the impugned assessment order passed by the Respondent No.1 under Section 143(3) read with Section 144B of the Act for the assessment year 2020-21 and the consequential proceedings are set aside and the matter is remanded back to the Assessing Officer for a fresh decision.

Summary

Issues:
Challenge to assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for the assessment year 2020-21, violation of natural justice in faceless assessment, request for personal hearing, classification of disputed questions of fact and law, mandatory nature of personal hearing.

Analysis:

1. The petitioner filed a writ petition challenging the assessment order passed by Respondent No.1 under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for the assessment year 2020-21. The petitioner contended that the assessment was conducted without a personal hearing, which was a violation of Section 144B(6)(vii) and (viii) of the Act and the principles of natural justice.

2. The petitioner's counsel argued that despite repeated requests for a personal hearing and submission of revised returns/documents, the Respondent No.1 did not grant the opportunity for a personal hearing, which was essential for a fair assessment process.

3. The court noted that the issue of providing a reasonable opportunity for a personal hearing in faceless assessments was settled in a previous case, Bharat Aluminium Company Ltd. vs. Union of India & Ors, where it was held that the discretion to grant a personal hearing should be construed as a command when civil consequences are involved. The court emphasized that an assessee has a vested right to a personal hearing, and this right must be granted upon request.

4. Consequently, the court set aside the assessment order dated 24th September, 2022 and remanded the matter back to the Assessing Officer for a fresh decision within twelve weeks. The Assessing Officer was directed to provide the petitioner with a personal hearing and consider the revised returns/documents before making a new decision in accordance with the law.

5. The court's decision reaffirmed the mandatory nature of providing a personal hearing to an assessee in faceless assessments, emphasizing the importance of natural justice and fair procedure in the assessment process. The judgment serves as a significant precedent for ensuring due process and protecting the rights of taxpayers in the face of evolving assessment procedures under the Income Tax Act, 1961.