2023 (1) TMI 870 - HC - Income Tax

Assessment u/s 143(3) read with 144B - Penalty u/s 271AAC imposed - Denial of personal hearing was sought by the assessee - denial of principles of natural justice - HELD THAT - In response to the notice dated 25.8.2022, the assessee filed its detailed reply on 2.9.2022 and also made a request of video conference hearing with reason that the matter requires explanation due to complexity of the facts. The screen shot of web portal indicates the video conference hearing sought for by the assessee. However, the record shows that the same was not acceded to, by the respondent and no opportunity of video conference hearing was provided to the assessee. The reply affidavit dated 22.12.2022 does not dispute the above factual aspect. In view of above facts, the order of assessment under section 143(3) read with 144B deserves to be quashed and set aside and hereby quashed and set aside. The demand notice under Section 156 dated 20.9.2022 and penalty notice under Section 274 read with Section 271AAC(1) is also quashed and set aside. The assessment proceedings are restored to the file of the authority from the stage of providing personal hearing to the assessee as sought for. Once the personal hearing has been given to the assessee, the assessee is expected to cooperate and assessing officer is at liberty to pass an order in accordance with law as expeditiously as possible but not later than ten weeks from the date of receipt of the order.

Summary

Issues:
Challenging an order under the Income Tax Act for assessment year 2020-2021; Failure to provide opportunity for personal hearing before passing the order; Violation of principles of natural justice.

Analysis:
The petitioner, a private limited company involved in real estate projects, challenged an order dated 21.9.2022 under Section 143(3) and Section 144B of the Income Tax Act for assessment year 2020-2021. The petitioner declared income at Rs.218,99,04,610/-, but the assessment by the respondent assessed the income at Rs.290,21,61,734/-. The petitioner sought personal hearing multiple times, including through video conference, due to the complexity of facts. However, the order was passed without granting the requested personal hearing, leading to the petitioner filing the present petition.

The petitioner argued that the failure to provide the opportunity for personal hearing was against the principles of natural justice and contrary to the provisions of the Act. The procedure under Section 144B(6) mandates providing the assessee with a chance for personal hearing, especially when requested. Despite the petitioner's repeated requests, the income tax authority did not allow the personal hearing, rendering the assessment order invalid as per the petitioner's contentions.

On the other hand, the respondent contended that the petitioner had an alternative remedy of appeal against the order and that the due procedure was followed during the assessment process. The respondent highlighted that detailed replies were considered before passing the assessment order, and there was no illegality in the procedure followed. The respondent argued against interference at that stage.

After hearing both parties, the Court noted that the petitioner had responded to the notice dated 25.8.2022 with a detailed reply and a request for a video conference hearing, which was not granted by the respondent. The Court found that the failure to provide the requested personal hearing breached the principles of natural justice. Consequently, the Court quashed the assessment order dated 21.9.2022, along with the demand notice and penalty notice issued. The assessment proceedings were directed to be restored to provide the petitioner with the opportunity for a personal hearing as requested.

The Court clarified that the decision to quash the order was solely based on the breach of natural justice principles and did not delve into the merits of the case. The petition was allowed, the rule was made absolute, and no costs were imposed.