2025 (1) TMI 508 - HC - Income Tax

Validity of assessment order and the consequential demand notice - relegating the petitioner to avail of the alternate remedy - petitioner request for personal hearing through video conference rejected - HELD THAT - As it is apparent that no personal hearing was granted to the petitioner, and this denial was not due to any reasons attributable to the petitioner. The impugned order and the consequential notices must be set aside on this short ground. The petitioner had digitally uploaded 21 annexures. The 21st annexure was, in fact, the reply to the show cause notice. The impugned order, however, records that the Assessing Officer could not see the annexures. Surprisingly, the assessing officer took cognisance of the 21st annexure, i.e., the reply to the show-cause notice. Again, for reasons not attributable to the petitioner, its documents/annexures were not seen or considered by the Assessing Officer. This also amounts to a violation of the principles of natural justice and fair play. Although the petitioner has raised or attempted to raise other grounds, without going into all such grounds and based on the failure of natural justice, we set aside the impugned assessment order dated 28 March 2023 and consequential notices issued based upon the impugned order. We remand the matter to the National Faceless Assessment Centre i.e. respondent No.1, for disposing of the show cause notice following the law with liberty to pass a fresh assessment order within 4 months from the date of uploading of this order on the website of the Court.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the principles of natural justice were violated by the respondents in failing to provide a personal hearing to the petitioner.
Whether the technical issues that prevented the Assessing Officer from viewing the annexures submitted by the petitioner constituted a breach of natural justice.
Whether the petitioner should be required to pursue an alternate remedy of appeal, given the alleged procedural lapses.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice

Relevant Legal Framework and Precedents: Section 144B(6)(viii) of the Income Tax Act mandates that an opportunity for a personal hearing must be provided if requested by the assessee. This provision ensures adherence to the principles of natural justice.
Court's Interpretation and Reasoning: The court highlighted that the petitioner had requested a personal hearing multiple times, which was not granted by the respondents. The court found this omission to be a clear breach of the principles of natural justice.
Key Evidence and Findings: The respondents admitted in their affidavit that no personal hearing was granted, despite the petitioner's requests. The court found this admission sufficient to establish a breach of natural justice.
Application of Law to Facts: The court applied Section 144B(6)(viii) to the facts, concluding that the failure to provide a personal hearing was unjustifiable and warranted setting aside the impugned order.
Treatment of Competing Arguments: The respondents argued that the petitioner's contention lacked merit due to a technical glitch. However, the court determined that this did not absolve the respondents of their duty to provide a personal hearing.
Conclusions: The court concluded that the denial of a personal hearing constituted a breach of natural justice, justifying the setting aside of the impugned order and notices.

Issue 2: Technical Issues and Breach of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that all relevant materials submitted by a party be duly considered by the adjudicating authority.
Court's Interpretation and Reasoning: The court noted that the petitioner had uploaded 21 annexures, which the Assessing Officer failed to consider due to a technical glitch. This omission was deemed a violation of natural justice.
Key Evidence and Findings: The respondents acknowledged the technical glitch in their affidavit, which prevented the viewing of annexures. The court found this acknowledgment crucial in determining the breach.
Application of Law to Facts: The court applied the principles of natural justice, finding that the failure to consider the annexures was a significant procedural lapse.
Treatment of Competing Arguments: The respondents' argument regarding the technical glitch was not accepted as a valid excuse for the breach of natural justice.
Conclusions: The court concluded that the technical issues led to a failure in considering the petitioner's submissions, further justifying the setting aside of the impugned order.

Issue 3: Requirement to Pursue Alternate Remedy

Relevant Legal Framework and Precedents: Generally, courts may require parties to exhaust alternate remedies before seeking judicial intervention, unless there is a clear breach of procedural fairness.
Court's Interpretation and Reasoning: The court reasoned that the breach of natural justice was so significant that it would be unjust to require the petitioner to pursue an alternate remedy.
Key Evidence and Findings: The court's determination of a breach of natural justice was pivotal in deciding against relegating the petitioner to an alternate remedy.
Application of Law to Facts: Given the procedural breaches, the court found it appropriate to intervene directly rather than requiring the petitioner to appeal the assessment order.
Treatment of Competing Arguments: The petitioner's argument against pursuing an alternate remedy was accepted, given the procedural lapses identified.
Conclusions: The court decided not to require the petitioner to pursue an alternate remedy due to the procedural breaches.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "We are satisfied that the principles of natural justice were wholly breached in this case."
Core Principles Established: The court reinforced the necessity of adhering to procedural fairness, particularly the requirement to provide a personal hearing when requested and to consider all submitted materials.
Final Determinations on Each Issue: The court set aside the impugned assessment order and consequential notices, remanding the matter for reconsideration with specific instructions to adhere to procedural fairness.

The judgment underscores the importance of procedural fairness in administrative proceedings, particularly in ensuring that parties are given a fair opportunity to present their case and that all submitted materials are duly considered. The court's decision to set aside the impugned order reflects a commitment to upholding these principles.

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