Asian Granito India Limited V. The National E-Assessment Centre, Govt. of India

SCA/14343/2021

AI Insights

Asian Granito India Limited filed a petition under Article 226 of the Constitution of India challenging the assessment order and demand notice issued by the National E-Assessment Centre, Government of India, for the Assessment Year 2018-19. The petitioner argued that the final assessment order was passed without considering their submissions and without providing a personal hearing through video conference, as requested. The respondent contended that the assessment was made after considering the petitioner's explanations and that the petitioner had an alternative remedy to appeal before the CIT(Appeals). The court examined the provisions of section 144B of the Income Tax Act, 1961, which governs faceless assessments, and found that the respondent had not followed the prescribed procedure, leading to a breach of natural justice.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 798208 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 30-08-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MANISH BHATT; KARAN SANGHANI
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Assessment Order; Demand notice; Faceless assessment; Natural Justice; Video Conference
• Section: 143(3); 144B; 156

Judgement Text

"C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14343 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== ASIAN GRANITO INDIA LIMITED Versus THE NATIONAL E-ASSESSMENT CENTRE, GOVT. OF INDIA ========================================================== Appearance: MR TUSHAR HEMANI, SENIOR ADVOCATE FOR MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MR MANISH BHATT, SENIOR COUNSEL WITH MR KARAN SANGHANI FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 30/08/2022 ORAL JUDGMENT Page 1 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. With request and consent of learned advocates for the parties, the petition was taken up for final consideration today. 2. Rule, returnable forthwith. Learned advocate Mr.Karan Sanghani for M.R.Bhatt & Co. waives service of Rule. 3. Heard learned Senior Advocate Mr.Tushar Hemani assisted by learned advocate Ms. Vaibhavi Parikh for the petitioner and learned Senior Advocate Mr. M.R. Bhatt assisted by learned advocate Mr.Karan Sanghani for M.R. Bhatt & Co. for the respondents. 4. By this petition under Article 226 of the Constitution of India, the petitioner has prayed to quash and set aside the assessment order dated 18.05.2021 passed under Section 143(3) read with Page 2 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 Section 144B of the Income Tax Act, 1961 (hereinafter mentioned as “the Act,1961”) and has also challenged the demand notice of even date issued under section 156 of the Act,1961 for the Assessment Year 2018-19. 5. Brief facts of the case are that the petitioner is a ceramic manufacturing company incorporated under the Companies Act, 1956. The petitioner-assessee filed its return of income for the Assessment Year 2018-2019 on 30.03.2019 declaring total income at Rs.37,52,24,600/-. 5.1) Case of the petitioner was selected for scrutiny assessment under section 143(3) of the Act. The Faceless assessment proceedings were carried out electronically. The respondent prepared a Draft Assessment order determining the total taxable income of the petitioner at Rs. 43,81,90,486/- and issued show cause notice dated 19.04.2021 calling upon the petitioner to show Page 3 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 cause as to why the assessment should not be finalised as per the Draft Assessment order. 5.2) The petitioner on 22.04.2021 requested for adjournment till 28.04.2021. The petitioner thereafter vide letter dated 6.5.2021 furnished detailed submissions in respect of all the issues stated in the Draft Assessment order. The petitioner also requested for a zoom video conference for providing personal hearing. 5.3) The respondent however, passed the final assessment order dated 18.05.2021 under section 143(3) read with section 144B of the Act,1961 determining the assessed income at Rs.43,81,90,486/- and issued demand notice under section 156 of the Act, 1961 of even date for Rs.3,10,28,606/-. Being aggrieved by such action of the respondent, the petitioner has preferred the present petition. Page 4 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 6. Learned Senior Advocate Mr. Tushar Hemani assisted by learned advocate Ms. Vaibhavi Parikh for the petitioner submitted that the respondent has neither acceded to the request of the petitioner for personal hearing through video conference nor considered the submissions of the petitioner in response to the show cause notice while framing the assessment. 6.1) It was submitted that instead of considering the request of the petitioner to provide personal hearing through video conference, the respondent straightaway passed the impugned assessment order and therefore, there is a clear breach of principles of natural justice at the hands of the respondent authority. 6.2) Learned Senior Advocate further submitted that the impugned order passed under section 143(3) read with section 144B of the Act, 1961 is in violation of mandatory provisions Page 5 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 of clauses (xiv), (xvi) and (xxii)and (xxv) of sub-section (1) of section 144B of the Act, 1961. 6.3) It was submitted that as per the Scheme of Faceless Assessment as provided under section 144B of the Act, 1961, revised draft assessment order is to be provided to the assessee for the proposed addition and also to give an opportunity of hearing before passing final assessment order. 6.4) It was submitted that the respondent authority has not provided the opportunity of hearing through video conference as envisaged under section 144B (7) (vii), (viii) and (ix) of the Act, 1961 and therefore, the impugned order is bad in law due to violation of the principles of natural justice. 7. On the other hand, learned Senior Advocate Mr. M.R. Bhatt assisted by learned advocate Mr. Karan Sanghani for M. R. Bhatt & Co. for the respondent has opposed this petition and would Page 6 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 submit that after examining the explanation tendered by the petitioner, the impugned assessment order has been passed by the respondent and, therefore, no interference is required by this Court. It was submitted that the petitioner has an alternative remedy to prefer an appeal before the CIT(Appeals). He, therefore, would submit that the present petition be dismissed. 8. Having considered submissions of learned advocates appearing for the respective parties and having perused the impugned order as well as relevant provisions of law, in order to adjudicate the issue involved with regard to providing opportunity of hearing, it would be germane to refer to the relevant provisions of section 144B of the Act, 1961, as applicable for the year 2021-22, which reads as under : “144B. (1) Notwithstanding anything to the contrary contained in any other provisions of this Act, the assessment Page 7 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 under sub-section (3) of section 143 or under section 144, in the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely: — xxx (xiv) the assessment unit shall, after taking into account all the relevant material available on the record make in writing, a draft assessment order or, in a case where intimation referred to in clause (xiii) is received from the National Faceless Assessment Centre, make in writing, a draft assessment order to the best of its judgment, either accepting the income or sum payable by, or sum refundable to, the assessee as per his return or making variation to the said income or sum, and send a copy of such order to the National Faceless Assessment Centre; (xv) the assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any; (xvi) the National Faceless Assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to— (a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, as per the draft assessment order and serve a copy of Page 8 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or (b) provide an opportunity to the assessee, in case any variation prejudicial to the interest of assessee is proposed, by serving a notice calling upon him to show cause as to why the proposed variation should not be made; or (c) assign the draft assessment order to a review unit in any one Regional Faceless Assessment Centre, through an automated allocation system, for conducting review of such order; (xvii) the review unit shall conduct review of the draft assessment order referred to it by the National Faceless Assessment Centre whereupon it may decide to— (a) concur with the draft assessment order and intimate the National Faceless Assessment Centre about such concurrence; or (b) suggest such variation, as it may deem fit, in the draft assessment order and send its suggestions to the National Faceless Assessment Centre; (xviii) the National Faceless Assessment Centre shall, upon receiving concurrence of the review unit, follow the procedure laid down in— Page 9 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 (a) sub-clause (a) of clause (xvi); or (b) sub-clause (b) of clause (xvi); (xix) the National Faceless Assessment Centre shall, upon receiving suggestions for variation from the review unit, assign the case to an assessment unit, other than the assessment unit which has made the draft assessment order, through an automated allocation system; (xx) the assessment unit shall, after considering the variations suggested by the review unit, send the final draft assessment order to the National Faceless Assessment Centre; (xxi) the National Faceless Assessment Centre shall, upon receiving final draft assessment order follow the procedure laid down in— (a) sub-clause (a) of clause (xvi); or (b) sub-clause (b) of clause (xvi); (xxii) the assessee may, in a case where show-cause notice has been served upon him as per the procedure laid down in sub-clause (b) of clause (xvi), furnish his response to the National Faceless Assessment Centre on or before the date and time specified in the notice or within the extended time, if any; (xxiii) the National Faceless Assessment Centre shall,— (a) where no response to the show- cause notice is received as per clause (xxii),— Page 10 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 (A) in a case where the draft assessment order or the final draft assessment order is in respect of an eligible assessee and proposes to make any variation which is prejudicial to the interest of said assessee, forward the draft assessment order or final draft assessment order to such assessee; or (B) in any other case, finalise the assessment as per the draft assessment order or the final draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; (b) in any other case, send the response received from the assessee to the assessment unit; (xxiv) the assessment unit shall, after taking into account the response furnished by the assessee, make a revised draft assessment order and send it to the National Faceless Assessment Centre; (xxv) the National Faceless Assessment Centre shall, upon receiving the revised draft assessment order,— (a) in case the variations proposed in the revised draft assessment order are not prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order, and— Page 11 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 (A) in case the revised draft assessment order is in respect of an eligible assessee and there is any variation prejudicial to the interest of the assessee proposed in draft assessment order or the final draft assessment order, forward the said revised draft assessment order to such assessee; (B) in any other case, finalise the assessment as per the revised draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; (b) in case the variations proposed in the revised draft assessment order are prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order, provide an opportunity to the assessee, by serving a notice calling upon him to show-cause as to why the proposed variation should not be made; (xxvi) the procedure laid down in clauses (xxiii), (xxiv) and (xxv) shall apply mutatis mutandis to the notice referred to in sub-clause (b) of clause (xxv); xxx 144B(7) For the purposes of faceless assessment- xxx Page 12 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 (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; (viii) the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up, may approve the request for personal hearing referred to in clause (vii) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii); (ix) where the request for personal hearing has been approved by the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, such hearing shall be conducted exclusively through video conferencing or video telephony, including use of any telecommunication application software which supports video conferencing or video telephony, in accordance with the procedure laid down by the Board;” Page 13 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 9. Section 144B of the Act, 1961 provides detailed procedure for Faceless Assessment introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 with effect from 1st April, 2021. Section 144B(1) starts with a non-obstante clause i.e. “Notwithstanding anything to the contrary contained in any other provisions of this Act, the assessment under sub-section (3) of section 143 or under section 144, in the cases referred to in sub-section (2), shall be made in a faceless manner...” as per the procedure prescribed therein. 10. The above-referred clauses of section 144B(1) and 144B(7) deals with the mandatory procedure to be adopted by the National Faceless Assessment Centre on receipt of revised draft order from the assessment unit who has prepared the revised draft after providing opportunity to the assessee Page 14 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 by serving a notice upon him to show cause as to why the assessment should not be completed as per such draft or final draft or revised draft assessment order. Therefore, personal hearing in era of Faceless assessment is to be provided through video conference. 11. It is not in dispute that in the facts of the case no revised draft assessment order along with show cause notice as required under section 144B(1)(xxv)(a)(A),(b),(xxvi) and section 144B(7) (vii),(viii) and (ix) of the Act.1961 is sent to the petitioner so as to enable the petitioner to give explanation for proposed addition after providing opportunity of hearing. 12. Section 144B(1)(xii) provides that on receipt of show cause notice, assessee may furnish his response to the National Faceless Assessment Centre and as per clause (xiv), assessment unit shall make a revised draft assessment order after Page 15 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 considering the response of the assessee and send it to the National Faceless Assessment Centre. As per the provisions of section 144B(1)(xxv)(a) (A) and (b) and 144B(7)(vii),(viii) and (ix) of the Act,1961 in case of variation prejudicial to the assessee as proposed in the revised draft assessment order, the assessee is entitled to request for personal hearing and upon such request, the personal hearing may be provided by the authority, if the case of the assessee is covered by circumstances provided therein in exercise of powers under sub-clause (h) of clause (xii) of section 144B(7) of the Act, 1961. However, in the facts of the case , neither revised draft assessment order with show cause notice as required by section 144B(1)(xxv)(b) is served upon the petitioner, nor any opportunity of personal hearing through video conference is provided. 13. In view of above, it can safely be said that Page 16 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 the impugned order was passed by the respondent contrary to the mandatory provisions of Faceless Assessment procedure prescribed as per section 144B of the Act,1961 as well as in violation of principles of natural justice without affording an opportunity of personal hearing. 14. In the result, this petition succeeds and is accordingly allowed. The impugned assessment order dated 18.05.2021 passed by the respondent under section 143(3) read with section 144B of the Act, 1961 and demand notice under section 156 of the Act, 1961 of even date at Annexure-A collectively are hereby quashed and set aside. The respondent/Revenue will be at liberty to proceed to complete Faceless assessment under the provisions of section 144B of the Act, 1961 as permissible under the law after issuance of show cause notice-cum-revised draft assessment order after providing an opportunity of hearing to the petitioner. Such exercise shall be Page 17 of 18 C/SCA/14343/2021 JUDGMENT DATED: 30/08/2022 completed within 12 weeks from the date of receipt of copy of this order. 15. Rule is made absolute to the aforesaid extent. Direct service is permitted. 16. It is made clear that we have not examined the merits of the case. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 18 of 18 "