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2024 (5) TMI 786 - HC - Income TaxEx parte assessment order u/s 143(3) r.w.s. 144B - AO passed the impugned assessment order without allowing for any real opportunity of hearing to the petitioner to participate in the assessment proceedings - HELD THAT - Under the general Scheme of the Act, assessment orders are to be passed after giving opportunity to the assessee to present his case. To that extent, the revenue does not dispute the contention of the assessee and it does not claim a right to frame ex parte assessment orders. It contends, the opportunity for personal hearing is not inherent in the right to participate in the assessment proceedings. The assessee may participate in the assessment proceedings by furnishing his written reply. If however he seeks to avail opportunity of personal hearing, he may necessarily make a specific request, in that regard. That may never be accepted. Assessment proceedings by very nature, often involve disputed question of facts and law. By merely submitting written explanations, facts and law may not become clear, on their own. Both with respect to computation of taxable receipts as also with respect to expenditure incurred and allowances and exemptions claimed, facts and explanations thereto are not only required to be pleaded and noted but are necessary to be discussed. It is not uncommon that in the course of a judicial or quasi judicial proceeding the written document may be read in more than one way. That is also true of all explanations and replies. Also, language and writing are a mode of communication. They vary from person to person. Often same or similar thoughts are expressed differently by different persons depending upon their own skill and preferred use of expressions and method of writing. Therefore, what may be intended to be communicated by an assessee by submitting his written reply, may be received differently by the Assessing Officer on a simple ex parte reading of the same. Therefore, for the purpose of an effective discussion to arise and a reasoned conclusion to be drawn thereafter by the Assessing Officer, oral hearing remains an important and near about mandatory requirement to be fulfilled to ensure both, the requirement to pass a just and proper judicial or quasi judicial order and also to preserve the faith in the adjudicatory authorities. The word request used u/s 144B(6) (vii) and (viii) only imply, where an assessee may furnish his written reply to the show-cause notice but not opt to avail opportunity of personal hearing, it may not be mandatory for the Assessing Officer to grant such opportunity of personal hearing if he intends to accept the explanation furnished. He may pass appropriate ex parte order accepting the explanation furnished by the assessee. If however, on reading the explanation furnished, the AO maintains his tentative opinion to pass the assessment order as proposed, that may be adverse to the assessee, he would necessarily fix a date for personal hearing and communicate the same to the assessee, through electronic mode (as provided under the Act). Thereafter, it would be for the assessee to avail that opportunity. If the assessee fails to avail that opportunity, the Assessing Officer may proceed in accordance with law. Accordingly, the order dated 23.03.2024 is set aside. The petitioner may treat that order as final show-cause notice and submit its reply thereto within a period of one week and not later. Thus, written reply, if any, may be filed by the petitioner by 04.05.2024. If the AO is inclined to accept the explanation furnished by the assessee, in entirety, he may pass the consequential order without fixing any further date for hearing as the petitioner has not requested for the same. If however, he proposes to reject the explanation furnished by the petitioner, he would necessarily fix a date for hearing with at least 15 days prior notice. It may be communicated through prescribed mode.
Issues:
Challenge to ex parte assessment order under Income Tax Act for A.Y. 2022-23 without proper opportunity of hearing. Analysis: 1. Existence of Statutory Alternative Remedy of Appeal: - The petitioner challenged an ex parte assessment order dated 23.03.2024 under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for A.Y. 2022-23. - The petitioner argued that the assessment order was passed without providing a reasonable opportunity of hearing, as the Assessing Officer did not allow sufficient time for response and scheduled the final hearing on a Sunday. - The revenue contended that the petitioner did not cooperate towards the end of the assessment proceedings, leading to the finalization of the assessment order. - The court emphasized that Section 144B mandates an opportunity of hearing to be given to the assessee, especially if a request for personal hearing is made, and this opportunity should not be discretionary but a rule to be followed by the Assessing Officer. 2. Opportunity of Personal Hearing: - The court highlighted that assessment proceedings often involve disputed questions of facts and law, which may not be adequately addressed through written replies alone. - It was noted that oral hearing is essential to ensure a just and proper judicial or quasi-judicial order and to maintain faith in the adjudicatory authorities. - The court emphasized that if an assessee is to be taxed at a higher rate than reported, they deserve to know the reasons for such a decision, which should be recorded in the assessment order to allow informed decision-making and potential appeal. 3. Impact of First Appeal Authority's Powers: - The judgment discussed the impact of an earlier amendment to Section 251 of the Act, which limited the first appeal authority's power to set aside a defective assessment order and remit the matter to the Assessing Officer. - The court expressed concerns that without the power to remit, the first appeal authority would be forced to address all merit issues, potentially restricting the appeal process and burdening the appellate authority with the Assessing Officer's duties. 4. Conclusion and Directions: - The court set aside the ex parte assessment order dated 23.03.2024 and directed the petitioner to treat it as a final show-cause notice, allowing one week to submit a written reply. - If the Assessing Officer intends to accept the explanation without a personal hearing, a consequential order may be passed promptly. - However, if the explanation is rejected, a date for a hearing must be fixed with sufficient notice, and the petitioner must appear as prescribed. - The judgment emphasized the importance of natural justice and ensuring proper opportunity for hearing in assessment proceedings to maintain fairness and transparency. 5. Final Decision: - The court allowed the petition, setting aside the assessment order and providing clear directions for further proceedings, emphasizing the importance of procedural fairness and adherence to statutory requirements for opportunity of hearing in tax assessments.
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