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TMI Blog2021 (8) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2021, 7th and 8th April, 2021, prescribed procedure has been followed. The petitioner appears to be losing out on an opportunity as would be available to it under clause (xxiii)(b) read with sub section (7) sub-clause (vii). When an assessee approaches with response to show cause notice, the request made by an assessee, as referred to in clause (vii) of sub section 7 of section 144B, would have to be taken into account and it would not be proper, looking at the prescribed procedure with strong undercurrent to have hearing on a request after notice, to say that petitioner would have opportunity pursuant to section 144C in the present matter, would intercept operation of the scheme contained under section 144B. Foregoing discussion leads to that impugned draft assessment order dated 22.04.2021 is unsustainable. The petition is allowed in terms of prayer clause (a) leaving it open to the authorities to carry forward the process in accordance with section 144B - WRIT PETITION (L) NO.11040 OF 2021 - - - Dated:- 30-7-2021 - SUNIL P. DESHMUKH ABHAY AHUJA, JJ. Mr. Percy Pardiwala, Senior Advocate a/w Mr. Madhur Agarwal i/b Ms. Priyanka Bore for Petitioner. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared in the profit and loss account or the return of income. Since the return of income comprises fixed line items, the petitioner had to make the disclosures as aforesaid in particular form which practice it has been following from the beginning of filing of return of income electronically. The petitioner discloses all types of inventories (closing stocks) as is disclosed in annual accounts, in the balance-sheet. 7. It is referred to, it is considered that there is substantial difference between the value of receipts from services in the service tax return received from CBEC and the values disclosed in income-tax return. It is contended that while the petitioner had sought material to understand the basis of respondent no.1 coming to such consideration, the respondent no.1 had not furnished any material / information and arbitrarily addition was made. 8. It is stated petitioner had also filed along with return transfer pricing audit report in Form 3-CEB showing international transactions entered into and their arm s length price. It is submitted that the transactions of granting corporate guarantee in respect of borrowing of Associate Enterprises ( AE ), the petitioner ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted a letter seeking hearing through virtual conferencing in the assessment proceedings for AY 2017-18. The petitioner refers to that it filed responses to notice on 07/04/2021 and 08/04/2021 giving explanation, particulars and details with respect to the issues. 14. The petitioner received a draft assessment order dated 22/04/2021 under section 144C(1) read with 143(3) of the IT Act disallowing sum of ₹ 167.57 crore under section 14A of the Act, adding ₹ 362.72 crore to income rejecting submissions of the petitioner stating that burden was on petitioner to reconcile the data with the service tax returns holding that request of the petitioner for further time for reconciliation is not justifiable, adding a sum of ₹ 343.10 crore on account of closing stock, with addition of ₹ 810.33 crore on account of opening stock and transfer pricing addition of ₹ 23.62 crore. 15. The petitioner is, thus, before the court contending that impugned draft assessment order dated 22/04/2021 by respondent no. 1 for assessment year 2017-18 is ex-facie illegal, untenable, unsustainable, unreasonable and contrary to the provisions of the IT Act and infringes petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jections, if any, as per the provisions of section 144C(2). Draft assessment order passed on 22.04.2021 is valid and in accordance with law. 20. It is contended that assessee will be given principles of natural justice before passing final assessment order after filing objection to variations in total income under section 144C(2) of the Income Tax Act. 21. Mr. Percy Pardiwala, learned senior advocate for petitioner, submits that impugned order is passed in contravention in principles of natural justice and contends that opportunity of personal hearing is an essential requisite before passing an order prejudicing interest of the assessee. He submits that petitioner had requested for personal hearing in response to the notice dated 25/03/2021, inter alia, through video conferencing. He submits that despite requests, on many occasions for hearing, physical as well as through video conferencing, the same have not been heeded and / or attended to and directly order detrimental to the interest of the petitioner has been passed. 22. Mr. Pardiwala submits that respondent no.1 has failed to appreciate the response to the show-cause notice-cum-draft assessment order dated 25/03/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroversy would be the provisions from section 144B(1)(xvi) whereunder National Faceless Assessment Centre ( NFAC ) shall, if the draft assessment order prejudicial to the interest of the assessee is proposed, issue a show-cause notice as to why proposed variation should not be made giving an option to the assessee to ask for personal hearing according to sub-clause (b) of clause (xiv) of sub-clause(1) of section 144B. 28. He submits, after receipt of show-cause notice, assessee is supposed to furnish response as referred to in sub clause (xxii) within specified time, inter alia, requesting opportunity for personal hearing. In case, no response is furnished, the NFAC can proceed with the draft assessment order / final draft assessment order as referred to in clause (xxiii)(a)[A], [B]. However, if response is furnished and request for hearing is made, NFAC, under clause 144B(1)(xxiii)(b) has to assign responsibility to the Assessment Unit. After considering the response and after giving opportunity of being heard, Assessment Unit shall send revised draft assessment order to NFAC. He submits that after receipt of the revised draft assessment order, NFAC shall, in case of variatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ye of law, the writ petition would be a proper remedy. See observations of the Supreme Court in the case of State of U.P. v. Mohd. Nooh AIR 1958 SC 86 and Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Ors. (1988) 8 SCC 1. 7.3 Keeping in mind the test as enunciated by the Supreme Court in the case of Mohinder Singh Gill (supra) and State of Orissa v. Dr. (Miss) Binapani Dei (supra), we have no doubt in our minds that the provisions of Sub-section (3) of Section 92CA cast a duty in no uncertain terms on the TPO to afford an opportunity of an oral hearing. This is clearly so in view of the fact that as courts have carved out this important safeguard in favour of the aggrieved parties even where the statute is silent, unless there is exclusion of such a right by way of an explicit provision or by necessary implication. In the present case, however, given the words of the statute, we have no doubt that the grant of oral hearing by the TPO is mandatory. The reason for coming to such conclusion, apart from the clear wordings of Sub-section (3) of Section 92CA, is that, apart from the civil consequences, that, the determination of ALP would have on the assessee, any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eafter the petitioner had responded to making several requests for personal hearing which were not heeded and the notice culminated into a draft assessment order notice dated 22/04/2021 and the petitioner contended that impugned order had been passed without affording personal hearing to the petitioner. (b) In Lemon Tree Hotels Limited Vs. National Faceless Assessment Centre, Delhi Anr in W.P.(C ) 5427/2021 (Delhi High Court), petitioner s case was that upon show-cause notice-cum-draft assessment order dated 13/03/2021, several replies were furnished and having regard to the complexity in the matter, a request for personal hearing was also made. It is observed in paragraph 7 of the decision, after taking into account section 144B(7)(vii) and clause (xii) sub-clause (h), prima facie once an assessee requests for a personal hearing, the officer in-charge, under the provisions of clause (viii) of section 144B(7), would have to ordinarily grant personal hearing. (c) In the case of Satia Industries Limited Vs. National Faceless Assessment Centre, Delhi in W.P.(C ) 5587/2021 CM APPL. 17382/2021 (Delhi High Court), it has been considered that since an adverse view was ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on judgment of the Supreme Court of India in the case of Sahara India (Firm) Vs. Commissioner of Income-tax, Central-I, reported in [2008] 169 Taxman 328 (SC) with a view to bring under focus necessity and importance of having opportunity of pre-decisional hearing to an assessee even in the absence of any express provision and requirement of following principles of natural justice and their reading into the provisions. The decision has been rendered by three judge bench of Supreme Court, in view of order passed by a two judge bench of said court where the division bench had found it necessary, since it could not align itself with another two judge bench decision in the case of Rajesh Kumar Vs. Dy. CIT reported in [2006] 157 Taxman 168. Rajesh Kumar (supra), ruled that an assessee should have an opportunity of pre-decisional hearing before issuing directions under section 142(2A) of the Income Tax Act. The three judge bench, in paragraphs 12 and 19, has observed, thus :- 12. In Swadeshi Cotton Mills v. Union of India [1981] 1 SCC 664, R.S. Sarkaria, J., speaking for the majority in a threeJudge Bench, lucidly explained the meaning and scope of the concept of natura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold on an agreement to sell, an opportunity of being heard before such an order could be passed should be given or not. Relying on the decision of this Court in Union of India v. Col. J.N. Sinha case (supra) and Olga Tellis (supra) it was held that : Although Chapter XX-C does not contain any express provision for the affected parties being given an opportunity to be heard before an order for purchase is made under Section 269UD, not to read the requirement of such an opportunity would be to give too literal and strict an interpretation to the provisions of Chapter XX-C and in the words of Judge Learned Hand of the United States of America to make a fortress out of the dictionary. Again, there is no express provision in Chapter XX-C barring the giving of a show cause notice or reasonable opportunity to show cause nor is there anything in the language of Chapter XX-C which could lead to such an implication. The observance of principles of natural justice is the pragmatic requirement of fair play in action. In our view, therefore, the requirement of an opportunity to show cause being given before an order for purchase by the Central Government is made by an appropriate au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38. He submits that although there have been written responses and submissions explaining situation, the impugned draft assessment order does not take the same into account in proper perspective and does not give reasons for disagreement with the response. 39. He submits that the impugned order is completely contrary to the principles of natural justice and contrary to law and urges to set aside impugned notices and the impugned order and that there is no equally efficacious remedy against the impugned notices and the impugned order. 40. He, therefore, submits that the writ petition be allowed, the order be set aside and the matter be sent back to the position as had been obtaining before 22/04/2021 and to pass an appropriate draft assessment order after hearing the petitioner. 41. Mr. Sham Walve, learned Counsel appearing for the revenue defending the impugned order, reiterates the submissions in the reply and strenuously contends that there is substantial difference between the values of gross receipts from services shown in service tax return received from CBEC and values disclosed in income tax return which are significantly less in income tax return. While assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many a case, it would be possible to appreciate unrealised aspects during hearing and can be effectively explained. According to petitioner, this is precisely the reason as to why personal hearing is included. 48. Perusal of provisions of section 144-B(1), would envince, National Faceless Assessment Centre (NFAC), shall serve a notice on an assessee u/s. 143(2) of IT Act and asessee may file response within a period of fifteen days to NFAC and in the events referred to in clause (iii) (a), (b) or (c), NFAC is to intimate the assesee about that assessment would be completed according to procedure u/s.144-B(1). It is an indication of intention to give prominence to the procedure under section 144-B(1). 49. Under sub-section (1) of section 144B, it appears to be prescribed that upon completion of process from clauses (i) to (xiii), the Assessment Unit (AU) is supposed to make a draft assessment order (DAO), after taking into account all relevant material available on record or to the best judgment in case of the matter falling under sub-clause (xiii) wherein the AU is intimated about failure of response from the assessee. 50. Clause (xvi) of section 144-B(1) would show that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is meaningful and the provision of sub-section (7) clause (vii) would come into play. In case of response after show-cause notice, the matter would go back to the AU and pursuant to clause (xxiv) the AU is supposed to take into account response of the assessee and then a revised DAO (RDAO) emerges for further treatment in accordance with clause (xxv). 57. It appears that under clause (xv) sub-clause (a) item (A) contemplates similar treatment to an eligible assessee as in item (A) under clause (a) of clause (xxiii) and the matter has to be forwarded to the assessee in case variations proposed in the case of eligible assessee are not prejudicial to the interest in comparison to DAO or FDAO and in case of other assessees under item (B) of sub-clause (a) of clause (xxv), similar treatment as accorded under item (B) of sub-clause (a) of clause (xxiii) is given if the RDAO is not prejudicial in comparison to DAO or FDAO. However, in case of variations irrespective of whether assessee is eligible assessee or other, are prejudicial to the interest of assessee in comparison to DAO or FDAO, there is a further provision for opportunity to the assessee by serving notice, to receive treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It emerges that where response is given by the assessee to show-cause notice, the process under sub-section (7) would follow. 62. Learned senior counsel Mr. Pardiwala, during the course of hearing, had drawn attention to Standard Operating Procedure (SOP) for Assessment Unit under Faceless Assessment Scheme, 2019 under Circular F.No. PR. CCIT/SOP/2020-21 dated 19.11.2020 providing for, under its clause T, that reasonable time is to be given to an assessee to comply with principles of natural justice. He had also referred to Circular F. No. PR. CCIT/NCAC/SOP/2020-21 dated 23.11.2020 to contend that personal hearing is to be allowed when there is response to DAO. 63. Principles of natural justice firmly run through fabric of section 144B(1) of the Income Tax Act, 1961. Whenever DAO, FDAO is prejudicial to the interest of assessee or RDAO is prejudicial to the interest of assessee in comparison to DAO or FDAO, upon a response to showcause notice, personal hearing for oral submissions or to present its case before income tax authority is strongly entwined in the provisions on a request from an assessee unless it is absurd, strategised and/or intended to protract assessment et ..... X X X X Extracts X X X X X X X X Extracts X X X X
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