2022 (3) TMI 781 - HC - Income Tax

Validity of Assessment u/s 144B - As argued assessment order has been passed without considering the reply furnished by the Petitioner and without affording an opportunity of Personal Hearing' through virtual mode to the Petitioner - HELD THAT - Having heard learned counsel for the parties, this Court is of the view that the issue involved in the present writ petition is no longer res integra. This Court in the case of Bharat Aluminium Company Ltd. vs. Union of India Ors 2022 (1) TMI 658 - DELHI HIGH COURT has held that the use of the expression may in Section 144B(7)(viii) is not decisive. Where a discretion is conferred upon a quasi judicial authority whose decision has civil consequences, the word may which denotes discretion should be construed to mean a command. Consequently, the requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory. It was further held that the classification made by the Respondent between the matters involving disputed questions of fact and law by way of the Circular dated 23rd November, 2020 is not legally sustainable. Accordingly, the impugned assessment order dated 22nd April, 2021 passed under Sections 143(3) and 144B of the Income Tax Act, 1961 as well as notices for demand and penalty for the assessment year 2018-19 are quashed and the matter is remanded back to the Respondent No. 2 for a fresh decision after giving an opportunity of hearing, in accordance with law.

Summary

Issues:
Challenge to assessment order under Income Tax Act, 1961 for the assessment year 2018-19 based on lack of personal hearing and violation of faceless scheme under Section 144B of the Act.

Analysis:
The petitioner challenged the assessment order dated 22nd April, 2021, under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for the assessment year 2018-19. The petitioner contended that the assessment order was passed without considering the reply furnished on 09th March, 2021, and without providing an opportunity of personal hearing through virtual mode, despite the petitioner's request for the same. The petitioner argued that this action violated the faceless scheme outlined in Section 144B of the Act and the principles of natural justice, making the assessment non-est as per Section 144B(9) of the Act.

The petitioner further pointed out that the respondent, without granting a personal hearing as mandated by Section 144B(7)(vii) of the Act, issued the impugned assessment order making significant additions to the returned income. On the other hand, the respondent's counsel argued that since the petitioner was given an opportunity to submit a reply and documents, a personal hearing was not necessary.

Upon considering the arguments, the Court referred to a previous judgment in the case of Bharat Aluminium Company Ltd. vs. Union of India & Ors., where it was held that the use of the term "may" in Section 144B(7)(viii) should be construed as mandatory when it comes to providing a reasonable opportunity of personal hearing to the assessee. The Court also deemed the classification made by the respondent between matters involving disputed questions of fact and law as legally unsustainable, based on a circular issued on 23rd November, 2020.

Consequently, the Court quashed the impugned assessment order dated 22nd April, 2021, along with the notices for demand and penalty for the assessment year 2018-19. The matter was remanded back to the respondent for a fresh decision after affording the petitioner an opportunity of hearing in compliance with the law. The Court disposed of the writ petition and application with these directions, leaving the rights and contentions of all parties open.