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TMI Blog2022 (4) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... accountability in the system if are not observed as contemplated under the law, it will become imperative for the Court to intervene. A detailed study on the subject of faceless assessment regime in India in comparison of the other foreign countries is brought on record by learned Senior Advocate Mr. Soparkar. The study eulogizes that It is a revolutionary move by the Indian Government to improve the tax transparency by way of disconnecting the taxpayer and the tax authorities. The electronic correspondence, personal hearing through video conference and central point of contract aim to ease the representation process for the taxpayers and tax authorities while maintaining objectivity and anonymity. The comparative study has been taken taken while comparing with the six countries i.e. Australia, UK, USA, Canada, Netherlands and Singapore. The author summed up saying that some of the aspects newly introduced in India are nearly similar to the procedure prevailing in other countries. On video conference, it says that personal hearing in India is through video conference and not in person whereas in all other countries, there is no restriction to the number of hearings and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing the income of the petitioner for the year 2018-19 and raising the demand of tax and penalty thereby vide order date 17.09.2021. 2. The brief facts leading to the present petition are as follows:- 2.1. The petitioner is a trust. The trusties and the beneficiaries are individuals and citizens of India. It is a public trust carrying on charitable activities under the Bombay Public Trust Act, 1950 registered on 19.01.2002. 2.2. The petitioner filed return of income for the assessment year 2018-19 on 26.10.2018 offering Nil income. The same was offered on 10.05.2019 under Section 143(1) of the Act. The case of the petitioner was selected under CASS for Complete Scrutiny to verify some issues. Various correspondences took place between the parties for the purpose of framing of the assessment and the same eventually resulted into the issuance of show cause notice on 21.04.2021 reproducing the draft assessment order therein. 2.3. In response to the show cause notice, the petitioner uploaded reply on 26.04.2021 and also requested for personal hearing through video conferencing. The proposed time on the part of the petitioner was from 4:00 pm. to 6:00 pm. on any working day. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2021, however, it had started late due to technical glitch at the end of the respondent. The petitioner could not hear anything from the other side and while the petitioner made partial submissions and it was making further submissions, the video conference got abruptly terminated. The petitioner requested to provide personal hearing through video conference to complete the submissions vide letter dated 14.09.2021. 2.7. It is averred by the petitioner that it was shocking not to receive any further communication regarding the video conference and instead to receive the impugned assessment order dated 17.09.2021 without availing any opportunity of personal hearing through video conference and in the said assessment order, it has been mentioned surprisingly that video conference was conducted although it was not properly conducted, as emphatically averred and the petitioner was not allowed to make the fullest submissions. There is no reference of the request of second personal hearing due to sudden disconnection. 2.8. The demand notice to pay ₹ 6,33,50,88,520/- within 30 days of the service of notice as well as the notice of penalty under Section 274 read with Section 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along is that the matter does not deserve any consideration. 4. The affidavit-in-rejoinder is also filed where seriously the question is raised as to what amounts to the giving of opportunity as required under the law. It is also reiterated emphatically by the petitioner that the so called opportunity was of namesake and at every stage, the faceless assessment was in fact ear-less assessment. 5. We have since noticed the reiterative submission of technical glitch which resulted into abrupt disconnection and reiterative emphasis on the same, we passed the following order on 12.10.2021 which deserves reproduction:- We have heard today learned counsels on both the sides. During the course of hearing an issue that had cropped up is in relation to the making available the copy of the Video Conferencing which had been recorded on the date on which the hearing had taken place. We are supplied with the FAQs for seeking VC and seeking VC adjournment where one of the questions is as follows : Would department provide the copy of the recording of video conferencing ? If yes, how to obtain the same ? Ans Yes, after video conferencing is successfully conducted. VC record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten matters. 7. Direct Service is permitted today. 5.1. As the receipt of the instructions and the availability of the video conference was taking a while and the demand of penalty under Section 274 read with Section 278(A) required the payment within 30 days, this Court deemed it appropriate to pass the following order on 14.10.2021:- 1. Pursuant to the order passed by this Court on 12.10.2021, both the sides have been heard today. 2. Learned Senior Advocate Mr. Bhatt has urged that necessary instructions which have been sought by him have not come. The request has been made to the National Faceless Centre. He is expecting the instructions in relation to the availability of the Video Conference recording of dated 14.09.2021 by next week. The time therefore till 25.10.2021 is afforded for the same to be received. 3. In the meantime, as the request has come from the petitioner that notice of penalty under Section 274 read with Section 278(A) dated 17.09.2021 requires the payment to be done within 30 days, and the time is expiring on 17.10.2021, according to the assessee, there will be serious consequences which will be difficult for them to meet with. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,00,00,000 31,75,59,697 3. AM/7609704 23-APR 2019 36 Months 23-APR 2022 8.30% 25,00,00,000 31,75,59,697 8. Learned Senior Advocate, Mr. Soparkar has additionally, on instructions, submitted that till the further order of the Court, these FDRs shall not be withdrawn. An undertaking to that effect shall be also filed by the petitioner on or before 21.10.2021. 9. For now, the matter is being posted on 25.10.2021, accepting the version of learned Senior Advocate with a direction to the concerned bank to be sent through the registry the undertaking given by the petitioner through the learned Senior Advocate for it not to permit the release of FDRs till further order of the Court. 10. There shall be stay of demand of addition made in the assessment order impugned and the demand of penalty till the next adjourned date. 11. Other and further order with regard to the additional security for protecting the interest of the Revenue shall be passed on 25.10.2021 after hearing both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian decisions, of course in the context of that case, In our view the principle of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed. The non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary. 7.1. Watching of the video itself is a reason for us to hold in no uncertain terms that not only there is a violation of the need of availing opportunity of hearing but, there is surely a requirement of also paying heed to such complaints, often made and correct the system wherever needed. Why we say so, we hereby give the following reasons. 8. It is a matter of record that the show cause notice dated 21.04.2021 was responded to on 26.04.2021. The hearing through video conference was requested for between 4:00 pm. to 6:00 pm. on any working day, however, the show cause notice was received on 25.05.2021 in response to the said request on 21.04.2021. This communication admits that due to technical glitch, the request for video conference could not be provided. It is further directed that for availing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18:26 We posted a message through chat box - we are waiting 21:26 Reply from other side received through chat box - Meeting on 22:11 Learned Senior Advocate for the petitioner again asked that whether he should start his submissions. 22:12 Reply through chat box received - you are audible please speak 22:32 Hearing started. 23:35 Learned Senior Advocate for the petitioner requests the other side to enable him to put the submission on the screen which, he is referring to, Permission of the other side is sought to upload the submissions. He informs to the otherside that he is in the process of uploading the submissions. 26:02 The other side says in chat box reply Yes . But no facility is provided through which we could share the submissions on the screen. Further there is no response from the other side to this request of Learned Senior Advocate for the petitioner except the word Yes . 26:02 to 40:51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsonal hearing. Non-providing of the same is in violation of the principles of natural justice. The petitioner though has been provided the video conferencing, one would notice that the technical glitch at couple of times and the opportunity which has been presently given is surely insufficient and incomplete. This surely is not in consonance with the objective with which the legislature has brought this faceless assessment regime. It needs to be understood that till the system in place is robust and this happens over a period of time, then there is a scope to move forward and strengthen the same. 9.3. We could also notice that the material which has been already shared has not been in any manner reflected in the final order. After the supply of draft assessment order, the reason for providing the opportunity is to ensure that the other and further material and the submissions made on the part of the petitioner also are given due regard. If availing an opportunity after once the draft assessment order is preferred, is a mere formality, the importance of that stage possibly has not recognized by the department. 10. We would like to refer to the Circular F No. PR. CCIT/NeAC/SOP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the request made on the receipt of the draft assessment order is mere a formality. Not only the time granted is of less than 24 hours, the non-response initially and disruption which eventually resulted into sudden snap of the link, never was thereafter responded to, even when request was made on the part of the petitioner for permitting the hearing which had remained unconcluded. 12. The decision of High Court of Orissa in case of Elite Education Society vs. Chairman, Central Board of Direct Taxes, Ministry of Finance, Department of Revenue and Others [W.P. (C) No. 18472 of 2021] shall be necessary to be referred to at this stage where the Court has held that the requirement for providing the hearing in terms of Section 144(B)(7)(vii) is not merely directory but mandatory one. 5. The requirement for providing such hearing in terms of Section 144 B (7) (vii) of the Income Tax Act, 1961 ('Act') is not merely directory, but a mandatory one. It reads as under:- 144-B (7) For the purposes of faceless assessment - (vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporated, it is imperative to observe the principles of natural justice as stipulated. 12.2. The High Court of Delhi in case of Sanjay Aggarwal vs. National Faceless Assessment Centre, Delhi [[2021] 127 taxmann.com 637 (Delhi)] held and observed thus:- 11.3. In this context, if one were to look at the relevant provisions, [which, for the sake of convenience are extracted hereafter], then, one would get a sense as to why the legislature has provided a personal hearing in the matter: 144B. Faceless assessment - (1) xxx xxx xxx (7) For the purposes of faceless assessment-- xxx xxx xxx (vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show-cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority in any unit; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner, none of which were dealt with by the respondent/revenue. 12.1. The net impact of this infraction would be that, the impugned orders will have to be set aside. It is ordered accordingly. 13. We would, therefore, hold that the provisions which have been envisioned to bring transparency and accountability in the system if are not observed as contemplated under the law, it will become imperative for the Court to intervene. 13.1. A detailed study on the subject of faceless assessment regime in India in comparison of the other foreign countries is brought on record by learned Senior Advocate Mr. Soparkar. The study eulogizes that It is a revolutionary move by the Indian Government to improve the tax transparency by way of disconnecting the taxpayer and the tax authorities. The electronic correspondence, personal hearing through video conference and central point of contract aim to ease the representation process for the taxpayers and tax authorities while maintaining objectivity and anonymity. The comparative study has been taken taken while comparing with the six countries i.e. Australia, UK, USA, Canada, Netherlands and Singapore. The author summed up saying that som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of public is given benefit, it cannot be said that it is not a trust for charitable purpose in the interest of public. It is not necessary that the public at large must get the benefit. Considering the object of general public utility, the matter needs to be decided. 14.1. According to this Court, this is an argument on merit as on the ground of nonobservance of principles of natural justice the Court is choosing to relegate the matters to the concerned authority, it would prefer not to enter into this arena of merit. The same shall be reserved to be agitated before the Income Tax Authorities and thereafter, if eventuality arises in future. The other two decisions are along the line and therefore are not required to be diluted being along the very line. 15. With the aforesaid reasons, we are of the firm opinion that this is a matter where the order needs to be quashed and the petitioner needs to be availed an opportunity afresh by the respondent from the stage where it was left. Accordingly, the petition is Allowed. The order dated 17.09.2021 is quashed and set aside with all its consequences. Notice issued of penalty under Sections 274 and 278(A) dated 17.09.2021 also sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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