2024 (7) TMI 1190 - HC - Income Tax

Validity of assessment order passed u/s 143(3) r.w.s. 144B - no opportunity of hearing was provided to the petitioner - allegation of lack of opportunity for personal hearing and violation of principles of natural justice - shorter period to respond - DR submits that the petitioner was given an option to request for personal hearing. The request can only be made by clicking the Seek Video Conferencing button available against the show cause notice in the e-proceeding tab on e-filing portal, but petitioner did not click such button HELD THAT - The time provided to the petitioner was adequate enough, at least, for the purpose of clicking Seek Video Conferencing button, if the petitioner was at all interested to seek personal hearing. The request made by the petitioner for personal hearing in the response dated 14th November, 2023, could not have mandated the respondent no.2 to give personal hearing to the petitioner without the petitioner applying for personal hearing in the manner prescribed on the portal. As correctly pointed out by respondent no.2 had duly afforded an opportunity of hearing to the petitioner. If the petitioner has failed to take such opportunity, the respondent no. 2 cannot be made responsible therefor. The same conclusion may not be drawn while considering whether appropriate opportunity of hearing was given to the petitioner to respond to the show cause notice dated 15th March, 2024, which proposed the variations. The show-cause notice is dated 15th March, 2024 and from the stamp on it and the digital signature it would appear that the same was signed on 15th March, 2024 at 16.46.43 hrs., which was a Friday. The petitioner was required to respond to the said show cause notice within 11 a.m. of 19th March, 2024. Therefore, the petitioner had hardly one working day s time to respond to the same. From the Standard Operating Procedure (SOP) circulated by the Commissioner of Income Tax vide letter dated 3rd August, 2022, it would transpire that in terms of paragraph N.1.3, Faceless Assessment Unit is required to afford response time of 7 days from the date of issuance of show cause notice. It would also appear from the aforesaid SOP that 7 days time may be curtailed keeping in view the limitation date for completing the assessment. In this case, it may be noticed that the limitation period would end on 31st March, 2025. As such, there being no urgency find that the respondent no.2 had acted in derogation of the SOP. The opportunity to respond also does not appear to be adequate. The aforesaid, in my view, constitutes violation of principles of natural justice, inasmuch as, the petitioner was prevented from appropriately responding to the show cause. It is true that the respondent no.2 had passed the order beyond the period of 7 days from the date of issuance of such notice, but there was nothing on record to demonstrate that any notice was given to the petitioner intimating that the order shall not be passed prior to the expiry of 7 days from the date of issuance of show-cause, for the petitioner to respond to the same. The order passed by the respondent no.2 dated 26th March, 2024 for the assessment year 2022-23 stands vitiated by reasons of violation of principles of natural justice. For reasons indicated morefully hereinabove, I set aside the order dated 26th March, 2024 and remand the matter back to the respondent no.2. Since, the petitioner has already received the show cause notice, the petitioner shall be at liberty to file her response to the said show cause notice within a period of 15 days from the date of receipt of the server copy of this order. The respondent no.2 is directed to forthwith activate the portal for the petitioner to submit her response and to express her option of personal hearing, if she so chooses

Summary

Issues:
Challenge to show cause notice and assessment order under Income Tax Act, failure to provide adequate opportunity for response, violation of principles of natural justice, statutory infraction, obligation to afford personal hearing, validity of assessment order, alternative remedy of appeal, sufficiency of response time, violation of Standard Operating Procedure, remand of the matter, liberty to file response, direction to activate portal for response submission, setting aside demand and penalty proceedings.

Analysis:
The petitioner challenged a show cause notice and an assessment order issued under the Income Tax Act, alleging a lack of opportunity to respond adequately. The petitioner's advocate argued that the respondent failed to provide a proper chance for the petitioner to respond to the notice, violating principles of natural justice and statutory obligations. The petitioner was given a short time frame of one working day to respond, contrary to the requirement of affording a personal hearing as per Section 144B(6)(vii) of the Act.

The respondent contended that the petitioner had the option to request a personal hearing by clicking a specific button on the e-filing portal, which was not utilized by the petitioner. It was argued that the petitioner was given reasonable opportunity to respond, and the assessment order was passed after seven working days from the notice issuance, indicating no violation of natural justice. The respondent highlighted the availability of an appeal as an alternative remedy, suggesting that the petition should not be entertained.

The court found that despite the petitioner's request for a personal hearing in a previous response, the respondent was not obligated to provide a hearing without a formal application as per portal guidelines. The court noted that the respondent did not notify the petitioner about the 7-day response time as per the Standard Operating Procedure, leading to a violation of natural justice. Consequently, the assessment order was set aside, and the matter was remanded back to the respondent for proper handling.

The court directed the petitioner to file a response within 15 days of receiving the order, with the respondent activating the portal for submission and personal hearing selection. Failure to respond within the specified time would allow the respondent to proceed with the matter. Additionally, the demand and penalty proceedings were set aside. The judgment emphasized the importance of adhering to procedural fairness and providing adequate opportunities for taxpayers to respond in income tax proceedings.