2024 (10) TMI 708 - HC - Income Tax

Assessment order u/s 147 r.w.s. 144B - It is case of the assessee that despite virtual hearing was sought for, without resorting to the same, an order of assessment u/s 147 r/w Section 144B was passed and demand notice and notice of penalty was also served upon assessee - HELD THAT - In this case, from the facts, it can be noticed that time was granted to give response to the show cause notice to which, assessee responded and, therefore, since the assessee failed to request for video conferencing on or before the time allowed in show cause notice, it is not a case of breach of principles of natural justice. His request was rightly not considered and not forming part of the assessment order. He, thus submitted that there being no error in the assessment order dated 29.03.2022 for the A.Y.2013-2014, the petition may be rejected. Having considered the submissions and the decision relied upon, it is noticed that the final show cause notice was issued to the assessee on 26.03.2022 by granting him time of two days to file his response on or before 23 59 hours of 28.03.2022. It is not in disputes that the reply dated 28.03.2022, was filed despite there being Saturday and Sunday. From the details provided by the assessee it is noticed that on 29.03.2022, the assessee requested for video conferencing hearing where the status of the portal was shown as open. From the above fact, the two undisputed facts are noticed by this Court that, only two days time was given to the assessee to file response and despite sough for, no opportunity of hearing through video conferencing was provided. In the decision relied upon by learned advocate for the petitioner in M/S ADVANCE REALTY DEVELOPERS VERSUS NATIONAL E - ASSESSMENT CENTRE DELHI 2021 (12) TMI 1455 - GUJARAT HIGH COURT , this Court has observed that when there is breach in following the procedure under the provisions of the Act, the assessment framed under the provisions of the sections would be non-est. Further, once the statute provided an opportunity to be availed by the assessee in cases of huge variation, a request for hearing needs to be responded to. Thus it is clear that time granted was too short as also no response was given on the request of hearing through video conferencing, thus violating the principles of natural justice. In view of the above fact, we deem it appropriate to quash and set aside the assessment order u/s 147 r.w.s.144B - Consequentially, the demand notice and penalty notice do not survive and hence stand also quashed and set aside. Writ petition thus stands allowed to the aforesaid extent. Rule is made absolute

Summary

Issues:
1. Compliance with principles of natural justice in passing the assessment order.
2. Validity of the assessment order dated 29.03.2022 under Section 147 read with Section 144B of the Income Tax Act, 1961.
3. Request for virtual hearing and breach of principles of natural justice.
4. Interpretation of Section 144B (6) and Section 144B (7) (vii) of the Act.

Detailed Analysis:
Issue 1: The petition sought to quash the assessment order, demand notice, and penalty notice dated 29.03.2022, under Section 147 read with Section 144B of the Income Tax Act, 1961, on the grounds of non-compliance with the principles of natural justice.

Issue 2: The assessee, a private limited company, had its case reopened for Assessment Year 2013-2014. The respondent issued a show cause notice proposing additions, to which the assessee responded. Despite requesting a virtual hearing, the assessment order was passed without considering the request. The petitioner argued that the order and consequential notices were illegal due to a breach of natural justice.

Issue 3: The petitioner contended that granting only two days for response, especially over a weekend, and not considering the request for a virtual hearing amounted to a violation of natural justice. The respondent argued that the procedure followed was correct and no interference was warranted.

Issue 4: The court analyzed Section 144B (6) and Section 144B (7) (vii) of the Act. It noted that the time given for response was short, and the request for a video conferencing hearing was not addressed. Referring to a previous decision, the court emphasized the importance of following procedural requirements and providing opportunities for hearings in cases of significant variations.

Final Decision: The court found that the time given for response was inadequate, and the failure to respond to the request for a video conferencing hearing violated natural justice principles. Consequently, the assessment order, demand notice, and penalty notice were quashed and set aside. The matter was remanded to the Assessing Officer for a de novo assessment after providing the assessee with a hearing opportunity. The court did not delve into the merits of the case, leaving the Assessing Officer to pass a fresh order in accordance with the law.