ATULBHAI KANTILAL MEHTA V. THE ADDITIONAL /JOINT/ DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX/INCOME-TAX OFFICER

SCA/13158/2021

AI Insights

The case involves Atulbhai Kantilal Mehta, the petitioner, who challenged the assessment order and the consequential proceedings including the imposition of penalty under Section 270A of the Income Tax Act, 1961. The petitioner argued that the final assessment order was passed without adhering to the procedural requirements of Section 144B, which governs faceless assessments. The petitioner had requested a personal hearing via video conference, which was not granted, leading to the challenge in the High Court. The court found that the failure to provide a personal hearing as requested violated the principles of natural justice and the specific provisions of Section 144B, resulting in the quashing of the assessment order.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 679368 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 18-01-2022
• Assessment Year: misc
• Other Referred Cases: Agrawal JMC Joint Venture Vs. Assistant/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, Sanjay Aggarwal vs. National Faceless Assessment Centre, Delhi, M/s. Piramal Enterprises Ltd. vs. Addl. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VARUN PATEL
• Assessee Lawyers: HIREN TRIVEDI
• Keywords: Assessment Order; Faceless assessment; Limited scrutiny; Personal Expenditure; Show cause notice; Unsecured loans; Video-conference hearing
• Section: 142(1); 143(2); 270A; 226; 144B(vii); 144B(xiv); 144B(xii)

Judgement Text

"C/SCA/13158/2021 ORDER DATED: 18/01/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 13158 of 2021 ============================================= ATULBHAI KANTILAL MEHTA Versus THE ADDITIONAL /JOINT/ DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX/INCOME-TAX OFFICER ============================================= Appearance: HIREN J TRIVEDI(8808) for the Petitioner(s) No. 1 for the Respondent(s) No. 2 MR.VARUN K.PATEL(3802) for the Respondent(s) No. 2 NOTICE SERVED BY DS for the Respondent(s) No. 1 ============================================= CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 18/01/2022 ORAL ORDER (PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE) 1. This writ application under Article 226 of the Constitution of India is at the instance of an assessee under the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and the assessee has challenged the assessment order dated 12.08.2021 and has further prayed for direction to quash and set aside all the consequential proceedings including imposition of penalty proposed under Section 270A of the Act. The writ applicant has also prayed for further directions to prohibit the collection of disputed demand raised by the respondent authorities. 2. The case made out by the writ applicant may be summarized thus: 2.1 The writ applicant had filed its return of income on Page 1 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 27.10.2018 thereby declaring his total income of Rs.85,03,090/-. The case of the writ applicant was selected for scrutiny under Computer Assisted Scrutiny Selection (hereinafter referred to as ‘CASS’) in the limited scrutiny category to verify the unsecured loans as well as the personal expenditure made by the applicant during the relevant assessment year. Accordingly, notice under section 143(2) of the Act, came to be served upon the writ applicant on 23.09.2019 followed by notices issued from time to time under Section 142(1) of the Act. 2.2 On 06.04.2021, draft assessment order came to be passed by the respondent authority under Section 144B(xiv) whereby show cause notice was also served as to why the assessment order should not be finalized in terms of draft assessment order. The writ applicant had submitted exhaustive reply against the aforesaid show cause notice on 10.04.2021 thereby raising specific objections that the assessment cannot exceed beyond the scope of limited scrutiny for the purpose of which it has been selected for the assessment. It was further submitted that the writ applicant is only holding 8% share holding in the Chitra Insultec Private Limited, which is below 10% threshold specified under Section 2(22)(e) of the Act. With these objections, the writ applicant further prayed for personal hearing through video conferencing by invoking Section 144B(vii) and clause (xii) sub-clause (h) of the Act. 2.3 The respondent authority further issued intimation dated 23.04.2021 thereby offering the writ applicant an opportunity of hearing through video conference which was scheduled on Page 2 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 26.04.2021. It is the case of the writ applicant that on the date of hearing fixed i.e. 26.04.2021, due to technical issues and glitches, the writ applicant could not activate the video conference option as there was no option available on the web page to activate the video conference link. In such circumstances, the writ applicant could not joined the hearing scheduled on 26.04.2021. 2.4 The writ applicant thereafter, received a show cause notice dated 03.08.2021 whereby the writ applicant was asked to refer to FAQ of video conference hearing and accordingly, follow the procedure envisaged therein. Alternatively, it was stated that if the writ applicant does not opt for video conference as per the FAQ procedure within the compliance date as provided in the show cause notice, it will be presumed that the writ applicant does not want to excercise the option of video conferencing. 2.5 It is the case of the writ applicant that on 09.08.2021, the writ applicant had submitted request to the respondent authorities for video conference thereby requesting to scheduled hearing on 16.08.2021 at 10:00 a.m, however, to the utter shock and surprise of the writ applicant, the respondent authority without paying any hid to the aforesaid request of the writ applicant, proceeded to passed the final order of assessment on 12.08.2021 thereby confirming the draft assessment order dated 06.04.2021. 2.6 In such circumstances, the writ applicant has thus approached this Court, praying for reliefs so sought for. 3. Mr. Hiren Trivedi, the learned advocate appearing for the Page 3 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 writ applicant has submitted that the impugned order of assessment dated 12.08.2021 passed by the respondent authority is illegal and arbitrary as the same is passed in gross violation of Section 144B of the Income Tax Act. It was further submitted that the impugned order is passed without following the due procedure prescribed under Section 144B of the Act, which is famously known as National Faceless Assessment Centre. The learned advocate appearing for the writ applicant has drawn attention of this Court that the impugned order has been passed without providing personal hearing through video conference, more particularly, when the writ applicant vide reply dated 23.04.2021 had specifically requested the respondent authority to provide an opportunity of personal hearing through video conference in terms of Section 144B(7) (vii) and section 144B(7) (xii) sub-clause (h) of the Act. 4. In response to the Notice dated 14.09.2021 issued by this Court, Mr. Varun K. Patel, the learned Standing Counsel has appeared on behalf of the respondent authorities. An affidavit- in-reply affirmed by the Deputy Commissioner of Income Tax, Circle – 1(1)(1), Vadodara has been placed on record. At the outset, the learned Standing Counsel for the department has objected on the maintainability of the writ application more particularly, when the final assessment order has been challenged which is appealable by way of efficacious remedy in the form of statutory appeal provided under Section 246A of the Act. The respondent authority has also responded on the merits of the case and has prayed to not to entertain the reliefs as sought for by the writ applicant. 5. We have heard the learned counsels appearing for the Page 4 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 respective parties and have carefully perused the record as well as the decision of this Court relied upon by the learned counsel appearing for the writ applicant in the case of Agrawal JMC Joint Venture Vs. Assistant/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, dated 11.10.2021 passed in the Special Civil Application No.7477 of 2021. The only question which required to be answered by this Court is that whether the respondent authority have followed the due procedure of law as envisaged under Section 144B(7) (vii) and section 144B(7)(xii) of the Act, while passing the impugned final assessment order dated 12.08.2021. 6. Before going into the aforesaid issue, it would be apt to reproduce Section 144B of the Income Tax Act, which reads as under: “Faceless Assessment. 144B. (1) 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 following procedure, namely:— (i) the National Faceless Assessment Centre shall serve a notice on the assessee under sub-section (2) of section 143; (ii) the assessee may, within fifteen days from the date of receipt of notice referred to in clause (i), file his response to the National Faceless Assessment Centre; (iii) where the assessee— (a) has furnished his return of income under section 139 or in response to a notice issued under sub-section (1) of section 142 under or sub-section (1) of section 148, and a notice under sub- section (2) of section 143 has been issued by the Assessing Officer or the prescribed income-tax authority, as the case may be; or (b) has not furnished his return of income in response to a notice issued under sub-section (1) of section 142 by the Assessing Officer; or (c) has not furnished his return of income under sub-section (1) of section 148 and a notice under sub-section (1) of section 142 has been issued by the Assessing Officer, the National Faceless Assessment Centre shall intimate the Page 5 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section; (iv) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit in any one Regional Faceless Assessment Centre through an automated allocation system; (v) where a case is assigned to the assessment unit, it may make a request to the National Faceless Assessment Centre for- (a) obtaining such further information, documents or evidence from the assessee or any other person, as it may specify; (b) conducting of certain enquiry or verification by verification unit; and (c) seeking technical assistance from the technical unit; (vi) where a request for obtaining further information, documents or evidence from the assessee or any other person has been made by the assessment unit, the National Faceless Assessment Centre shall issue appropriate notice or requisition to the assessee or any other person for obtaining the information, documents or evidence requisitioned by the assessment unit; (vii) the assessee or any other person, as the case may be, shall file his response to the notice referred to in clause (vi), within the time specified therein or such time as may be extended on the basis of an application in this regard, to the National Faceless Assessment Centre; (viii) where a request for conducting of certain enquiry or verification by the verification unit has been made by the assessment unit, the request shall be assigned by the National Faceless Assessment Centre to a verification unit in any one Regional Faceless Assessment Centre through an automated allocation system; (ix) where a request for seeking technical assistance from the technical unit has been made by the assessment unit, the request shall be assigned by the National Faceless Assessment Centre to a technical unit in any one Regional Faceless Assessment Centre through an automated allocation system; (x) the National Faceless Assessment Centre shall send the report received from the verification unit or the technical unit, based on the request referred to in clause (viii) or clause (ix) to the concerned assessment unit; (xi) where the assessee fails to comply with the notice referred to in clause (vi) or notice issued under sub-section (1) of section 142 or with a direction issued under sub-section (2A) of section 142, the National Faceless Assessment Centre shall serve upon such assessee a notice under section 144 giving him an opportunity to show-cause, on a date and time to be specified in the notice, why the assessment in his case should not be completed to the best of its judgment; (xii) the assessee shall, within the time specified in the notice referred to in clause (xi) or such time as may be extended on the basis of an application in this regard, file his response to the National Faceless Assessment Centre; (xiii) where the assessee fails to file response to the notice referred to in clause (xi) within the time specified therein or within the extended Page 6 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit; (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 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— (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; Page 7 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 (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),— (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— (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 Page 8 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 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); (xxvii) where the draft assessment order or final draft assessment order or revised draft assessment order is forwarded to the eligible assessee as per item (A) of sub-clause (a) of clause (xxiii) or item (A) of sub-clause (a) of clause (xxv), such assessee shall, within the period specified in sub-section (2) of section 144C, file his acceptance of the variations to the National Faceless Assessment Centre; (xxviii) the National Faceless Assessment Centre shall,— (a) upon receipt of acceptance as per clause (xxvii); or (b) if no objections are received from the eligible assessee within the period specified in sub-section (2) of section 144C, finalise the assessment within the time allowed under sub- section (4) of section 144C 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; (xxix) where the eligible assessee files his objections with the Dispute Resolution Panel, the National Faceless Assessment Centre shall upon receipt of the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, forward such directions to the concerned assessment unit; (xxx) the assessment unit shall in conformity of the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, prepare a draft assessment order in accordance with sub-section (13) of section 144C and send a copy of such order to the National Faceless Assessment Centre; (xxxi) the National Faceless Assessment Centre shall, upon receipt of draft assessment order referred to in clause (xxx), finalise the assessment within the time allowed under sub-section (13) of section 144C 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; (xxxii) The National Faceless Assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act. (2) The faceless assessment under sub-section (1) shall be made in respect of such territorial area, or persons or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the Board. (3) The Board may, for the purposes of faceless assessment, set up the following Centres and units and specify their respective jurisdiction, namely:— Page 9 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 (i) a National Faceless Assessment Centre to facilitate the conduct of faceless assessment proceedings in a centralised manner, which shall be vested with the jurisdiction to make faceless assessment; (ii) Regional Faceless Assessment Centres, as it may deem necessary, to facilitate the conduct of faceless assessment proceedings in the cadre controlling region of a Principal Chief Commissioner, which shall be vested with the jurisdiction to make faceless assessment; (iii) assessment units, as it may deem necessary to facilitate the conduct of faceless assessment, to perform the function of making assessment, which includes identification of points or issues material for the determination of any liability (including refund) under the Act, seeking information or clarification on points or issues so identified, analysis of the material furnished by the assessee or any other person, and such other functions as may be required for the purposes of making faceless assessment; (iv) verification units, as it may deem necessary to facilitate the conduct of faceless assessment, to perform the function of verification, which includes enquiry, cross verification, examination of books of accounts, examination of witnesses and recording of statements, and such other functions as may be required for the purposes of verification; (v) technical units, as it may deem necessary to facilitate the conduct of faceless assessment, to perform the function of providing technical assistance which includes any assistance or advice on legal, accounting, forensic, information technology, valuation, transfer pricing, data analytics, management or any other technical matter which may be required in a particular case or a class of cases, under this section; and (vi) review units, as it may deem necessary to facilitate the conduct of faceless assessment, to perform the function of review of the draft assessment order, which includes checking whether the relevant and material evidence has been brought on record, whether the relevant points of fact and law have been duly incorporated in the draft order, whether the issues on which addition or disallowance should be made have been discussed in the draft order, whether the applicable judicial decisions have been considered and dealt with in the draft order, checking for arithmetical correctness of variations proposed, if any, and such other functions as may be required for the purposes of review. (4) The assessment unit, verification unit, technical unit and the review unit shall have the following authorities, namely:— (a) Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, as the case may be; (b) Deputy Commissioner or Deputy Director or Assistant Commissioner or Assistant Director, or Income-tax Officer, as the case may be; (c) such other income-tax authority, ministerial staff, executive or consultant, as considered necessary by the Board. (5) All communication among the assessment unit, review unit, Page 10 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 verification unit or technical unit or with the assessee or any other person with respect to the information or documents or evidence or any other details, as may be necessary for the purposes of making a faceless assessment shall be through the National Faceless Assessment Centre. (6) All communications between the National Faceless Assessment Centre and the assessee, or his authorised representative, or any other person shall be exchanged exclusively by electronic mode; and all internal communications between the National Faceless Assessment Centre, Regional Faceless Assessment Centres and various units shall be exchanged exclusively by electronic mode: Provided that the provisions of this sub-section shall not apply to the enquiry or verification conducted by the verification unit in the circumstances referred to in sub-clause (g) of clause (xii) of sub-section (7). (7) For the purposes of faceless assessment— (i) an electronic record shall be authenticated by— (a) the National Faceless Assessment Centre by affixing its digital signature; (b) assessee or any other person, by affixing his digital signature if he is required to furnish his return of income under digital signature, and in any other case, by affixing his digital signature or under electronic verification code in the prescribed manner; (ii) every notice or order or any other electronic communication shall be delivered to the addressee, being the assessee, by way of— (a) placing an authenticated copy thereof in the assessee’s registered account; or (b) sending an authenticated copy thereof to the registered email address of the assessee or his authorised representative; or (c) uploading an authenticated copy on the assessee’s Mobile App, and followed by a real time alert; (iii) every notice or order or any other electronic communication shall be delivered to the addressee, being any other person, by sending an authenticated copy thereof to the registered email address of such person, followed by a real time alert; (iv) the assessee shall file his response to any notice or order or any other electronic communication, through his registered account, and once an acknowledgement is sent by the National Faceless Assessment Centre containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated; (v) the time and place of dispatch and receipt of electronic record shall be determined in accordance with the provisions of section 13 of the Information Technology Act, 2000 (21 of 2000); Page 11 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 (vi) a person shall not be required to appear either personally or through authorised representative in connection with any proceedings before the income-tax authority at the National Faceless Assessment Centre or Regional Faceless Assessment Centre or any unit set up under this sub-section; (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; (x) subject to the proviso to sub-section (6), any examination or recording of the statement of the assessee or any other person (other than statement recorded in the course of survey under section 133A of the Act) shall be conducted by an income-tax authority in any unit, 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; (xi) the Board shall establish suitable facilities for video conferencing or video telephony including telecommunication application software which supports video conferencing or video telephony at such locations as may be necessary, so as to ensure that the assessee, or his authorised representative, or any other person is not denied the benefit of faceless assessment merely on the consideration that such assessee or his authorised representative, or any other person does not have access to video conferencing or video telephony at his end; (xii) the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centres and the unit set up, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:— Page 12 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 (a) service of the notice, order or any other communication; (b) receipt of any information or documents from the person in response to the notice, order or any other communication; (c) issue of acknowledgement of the response furnished by the person; (d) provision of “e-proceeding” facility including login account facility, tracking status of assessment, display of relevant details, and facility of download; (e) accessing, verification and authentication of information and response including documents submitted during the assessment proceedings; (f) receipt, storage and retrieval of information or documents in a centralised manner; (g) circumstances in which proviso to sub-section (6) shall apply; (h) circumstances in which personal hearing referred to clause (viii) shall be approved; (i) general administration and grievance redressal mechanism in the respective Centres and units. (8) Notwithstanding anything contained in sub-section (1) or sub- section (2), the Principal Chief Commissioner or the Principal Director General in charge of National Faceless Assessment Centre may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case, with the prior approval of the Board. (9) Notwithstanding anything contained in any other provision of this Act, assessment made under sub-section (3) of section 143 or under section 144 in the cases referred to in sub-section (2) (other than the cases transferred under sub-section (8), on or after the 1st day of April, 2021), shall be non-est if such assessment is not made in accordance with the procedure laid down under this section.” 7. The Co-ordinate Bench of this Court had an occasion to deal with similar issue. In the case of Agrawal JMC Joint Venture versus Assistant/Joint/Deputy/Assistant Commissioner Income Tax, had looked into the statutory mechanism mandated under section 144B of the act. The relevant observation are as under : “16.5 Clause (vii) of sub-section (7) of Section 144 A provides that where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment Page 13 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 should not be completed as per 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. Such request may be approved for personal hearing, if the Chief Commissioner or the Director General, In-charge of Regional Faceless Assessment Centre is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii), where such request for personal hearing is approved, such hearing is required to be conducted exclusively through video conferencing or through video telephony including by use of any telecommunication software, which support the video conferencing or video telephony in accordance with the procedure laid down by the Court. The Board is required to establish the suitable facility for video conferencing as per clause (xii) of subsection 7 of Section 144B or video telephony including telecommunication application software which supports the video conferencing or video telephony to ensure that the assessee or its authorised representatives or any other person is not denied the benefit of faceless assessment mearly on the consideration that such assessee or its authorised representatives do not have access to the video conferencing or video telephony at a web site. 16.6 Clause (xii) of sub-section 7 of section 144 B provides for the Principal Chief Commissioner or Principal Director General, In-charge of the National Faceless Assessment Scheme Centre with the prior approval of the Board to lay down the standard procedure and process for effective functioning of the National Faceless Assessment Centres, Regional Faceless Assessment Centres and the Unit set up in an automated and mechanised environment for the various services including the service of notice, order or other communication, the receipt of an information or document, etc. One of which is important is sub- clause (h) of clause (xii) which provides for the circumstances in which the personal hearing referred to the clause (viii) needs to be approved. 16.7 Specific mention of sub-section (9) of Section 144 B needs at this stage which starts with Non-obstante clause and declares that the assessment made under sub-section (3) of Section 143 or under Section 144 in the cases referred to in sub- section (2)other than sub-section(8) on or after the 1st day of April, 2021, shall be non est if such assessment is not made in accordance with the procedure laid down under the said section. Principles of natural juristic writs large in this provision and legislature’s instead to avail the opportunity of hearing also is stamped all over. A very strong deterrence issued by the legislature for the revenue to adhere to the detailed requirement of this provision as otherwise the assessment would be non-est. 16.8 In this backdrop, worthwhile would be to refer to the decision of the Delhi High Court rendered in case of Sanjay Aggarwal vs. National Faceless Assessment Centre, Delhi, Page 14 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 reported in (2021) 127 taxmann.com 637 (Delhi) where the High Court was considering the challenge to the assessment order and consequential proceedings. While interpreting the word ‘may’ in section 144 B(vii) according to the Delhi High Court, the provision cannot absolve the revenue from obligation cast upon it to consider the request made for grant of personal hearing. Where the revenue served a show cause notice-cum draft assessment order on assessee proposing to vary the income disclosed by the assessee and thereafter without affording a personal hearing to the assessee when passed the assessment order the same was quashed. 16.9 The relevant paragraphs discussing this aspect deserves reproduction. “11. Having perused the record and heard the learned counsel for the parties, in our view, what has clearly emerged is, as follows: (i) That prior to the issuance of the how cause notice cum-draft assessment order dated 23-4-2021, a show cause notice-cum-draft assessment order was issued on 13-4 2021. In between these two dates, the petitioner had, on two occasions, i.e., 15-4- 2021 and 20-4-2021, asked or personal hearing in the matter. (ii) After the show cause notice-cum-draft assessment order dated 23-4-2021 was issued, via which the petitioner was invited to file his response/objections, the petitioner, once again, while filing his reply, on 24-4-2021, asked for being accorded personal hearing in the matter. 11.1 The sum and substance of the requests made, is that, both before and after the issuance of the show cause notice-cum-draft assessment order dated 23-4- 2021, the petitioner continued to press the respondent/revenue to accord him a personal hearing, before it proceeded to pass the impugned assessment order. As noticed above, according to the petitioner, the request was made as the matter was complex and therefore, required some bit of explanation. 11.2 It has also emerged that [something which is not in dispute], the respondent/revenue made proposals for varying the income, both via the show- cause notice dated 13-4-2021 as well as the show-cause notice-cum-draft assessment order dated 23-4-2021. As noticed above, the declared income was proposed to be, substantially, varied. 11.3 In this context, if one were to look at the relevant provisions, [which, or 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).** (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, 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 Page 15 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 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 (vi) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii); (xii) the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centres and the unit set up, in automated and mechanised environment, including format, mode, procedure and process in respect of the following, namely: (h) circumstances in which personal hearing referred to clause (viii) shall be approved; 11.4 A careful perusal of clause (vi) of Section 144B (7) would show that liberty has been given to the assessee, if his/her income is varied, to seek a personal hearing in the matter. Therefore, the usage of the word 'may', to our minds, cannot absolve the respondent/revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides under sub-clause (h) of Section 144B (7)(xi) read with Section 144B (7) (viii), the respondent/revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua the same. 11.5 In several matters, we have asked the counsels for the revenue as to whether any standards, procedures and processes have been framed for dealing with such requests. The response, which we have got from the standing counsels including Mr.Chandra, is hat, to the best of their knowledge, no such standards, procedures as also processes have been framed, as yet. Conclusion: 12. Therefore, in our view, given the aforesaid facts and circumstances, it was incumbent upon the respondent/revenue to accord a personal hearing to the petitioner As noted above, several requests had been made for personal hearing by the petitioner 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.” 16.10 We entirely agree with the findings of the Delhi High Court on essential requirement of availment of opportunity of personal hearing to the assesse whereby asked for. The need to bring on the statute section 144B for faceless assessment, was essentially for the purpose of bringing transparency and Page 16 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 accountability and also to make it easier for all concerned by Page 46 of 72 Downloaded on employing technological advances as tools. The Court was also of the opinion that without or with such statutory scheme, the system has to be necessarily and essentially both transparent and accountable. 17. The Bombay High Court in case of M/s. Piramal Enterprises Ltd. vs. Addl. Commissioner of Income Tax, reported in (2021) 129 taxmann.com 18 (Bombay) was considering the issue of non availment of opportunity of hearing to hold that whenever the assessee requests for personal hearing so as to make the oral submissions or to represent the case, the same needs to be approved by the authorities referred to in the provision. The request is covered by sub clause (h) of clause (xii) which empowers the authorities with prior approval of the Board to lay down the standards, procedures and processes for effective functioning of National Faceless Assessment Centre. While so doing, it has relied on the decision of the Delhi High Court. The Court accordingly held the assessment order passed as unsustainable, leaving it open to the authorities to carry forward the process in accordance with Section 144B. Relevant paragraphs would need reproduction. “47. Sum and substance of the submissions on behalf of petitioner is that personal hearing in the present matter is essential to properly appreciate the nature and manner in which the transactions are carried out and intricacies of the same can be better explained and brought forth as well as misconstruction by the authorities can be sorted out with proper understanding of the matter. In personal hearing and by oral submissions various aspects, operations/workings which could not be properly appreciated though inscribed under the responses can be resolved. In 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 144B(1), would envince, National Faceless Assessment Centre (NFAC), shall serve a notice on an assessee u/s. 143(2) of IT Act and assessee 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 assessee about that assessment would be completed according to procedure u/s. 144B(1). It is an indication of intention to give prominence to the procedure under section 144B(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 Page 17 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 sub-clause (xiii) wherein the AU is intimated about failure of response from the assessee. 50. Clause (xvi) of section 144B(1) would show that, NFAC on examination of DAO would decide on further course of action to be taken, viz; NFAC may finalise assessment in accord with DAO if there is no variation prejudicial to interest of the assessee is proposed as per sub clause (a) OR in case variation prejudicial to the interest of assessee is proposed, would provide opportunity to the assessee by serving a notice to show cause according to sub-clause (b) OR under sub-clause (c) decide to assign any DAO to a Review Unit (RU), whether prejudicial to interest of assessee or not. If the matter is referred to RU, the process according to clauses (xvii) to (xx) is to take place culminating into, a final draft assessment order (FDAO) by an Assessment Unit. 51. When draft assessment order (DAO) or final draft assessment order (FDAO) is prejudicial to the interest of the assessee, it entails an opportunity to showcause pursuant to sub-clause (b) of clause (xvi), giving option under clause (xxii) to assessee of furnishing response to NFAC. 52. Procedure as contained in clause (xxiii) is to be followed in the cases where DAO or FDAO is prejudicial to the interest of assessee after notice has been served on the assessee. 53. It would be seen that, up to clause (xxii) there is no segregation or distinction in treatment to be given to assessees bifurcating them into two categories viz, 'eligible assessee' and others' (other than eligible assessee). 54. Sub-clause (a) of clause (xxiii) prescribes courses to be adopted by NFAC in the case of non-response to show cause notice by an assessee. Clause (xxiii) purports to treat the assessees according to their categorization under sub-clause (a), items (A) or (B). Clause (xxiii), sub clause (a), item (A) prescribes, in the case DAO or FDAO proposes variation prejudicial to an eligible assessee, to forward DAO or FDAO to the eligible assessee and in the case of others, pursuant item (B) NFAC may finalize DAO or FDAO and serve a copy of assessment order on the assessee. 55. Sub-clause (b) of clause (xxiii), appears to obligate NFAC, irrespective of categorization appearing under sub-clause (a) of clause (xxiii), where response from an assessee is received, to send the same to the AU. 56. If there is response to show-cause notice, sub clause (b) of clause (xxiii) comes into operation pursuant to Page 18 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 which matter goes to the AO and hearing assumes significance and is meaningful and the provision of sub- section (7) clause (vi) 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 treatment mutatis mutandis in accordance with clauses (xxii), (xxiv) and (xv). 58. Sub-section (7) of section 144B for the purpose of faceless assessment under clause (vii) provides that in case where variation is proposed in draft assessment order, an opportunity is to be provided to the assessee by serving a notice to show-cause and the assessee or his representative can request for personal bearing so as to make his oral submissions or to present his case before the income-tax authorities in any unit. Further sub-section (7) provides under clause (ix) for hearing through video conferencing or video telephone including use of any telecommunication application software which support video conferencing or video telephone. 59. Sub section (7), clause (vii) stipulates as under :- \"(7) For the purpose of faceless assessment- (i) to (vi)... (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;\" 60. Plainly reading aforesaid provision would show that whenever assessee requests for personal hearing so as Page 19 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 to make oral submissions or to present case, it is before income-tax authority in any unit. Subsection (7), clause (vii) shows that request for personal hearing is to be approved by the authorities referred to therein upon its opinion that the request is covered by sub-clause clause (xii). Clause (xii) empowers authorities with prior approval of the Board to lay down the standards, procedures and processes for effective functioning of National Faceless Assessment Centre and others, inter alia, circumstances in which personal hearing referred to in clause (vii) shall be approved. 61. Legislature is not unwary of situations arising, requiring personal hearing and oral submissions and thus, has provided for the same under the faceless assessment scheme under section 144B. It emerges that where response is given by the assessee to showcause 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 FNo.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 show- cause 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 etc. It would also emerge from various decisions, referred to above, ordinarily, such a request would not be declined. Judgments cited on behalf of petitioner referred to hereinbefore give exposition on significance and importance of principles of natural justice. 64. Section 144B of the Income-tax Act, 1961 captioned 'Faceless Assessment commences vide its sub-section (1) with a non-obstante clause and compulsively requires assessment u/ss 143(3) and 144 shall be by prescribed procedure contained in subsection (1) of section 144B in the cases referred to in sub-section (2) thereof. 65. Sub-section (9) of section 144B declares that assessment made under section 143(3) or under section 144(4) referable to sub-section (2) other than Page 20 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 sub-section (8) on or after 1st day of April, 2021 shall be non est if such assessment is not made in accordance with the procedure laid down under section 144B. There is a telling/pronounced rigour, to follow the procedure under section 144B, lest the assessment would be non est. Going by the provisions under section 144B, when hearing has been envisioned and incorporated, it is imperative to observe principles of natural justice as stipulated.” 18. In summation, it can be deduced from the provisions, as also the decisions discussed that Section 144B of the IT Act under heading of the Faceless Assessment provides for the assessment under Section 143 (3) and 144 to be carried out as per the procedure contained in Section 144 B of the IT Act. As noted above, Sub-section (9) of Section 144B of the IT Act in no uncertain term provides that after the 1st day of April, 2021, the assessment made under Section 143 (3) or under Section 144(4) of the IT Act shall be non est, when not made in accordance with the procedure detailed in Section 144B of the IT Act. The opportunity of hearing as envisaged under Section 144B of the IT Act also shall need to be scrupulously adhered to as the principles of natural justice are unfailingly ingrained in this provision. ” 8. In light of the aforesaid settled legal position of law vis-a- vis as laid down by the Delhi High Court in the case of Sanjay Agrawal vs. National faceless Assessment centre, Delhi, reported in (2021) 127taxmann.com 637 (Delhi) and of the Bombay High Court in the case of M/s. Parimal Enterprise Ltd. Vs, Addl. Commissioner of Income tax, reported in (2021) 129 taxmann.com 18(Bombay), which has been followed by this Court in the case of Agrawal JMC Joint Venture Vs. Assistant/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, in the Special Civil Application No.7477 of 2021, it is no more res-integra that any order passed in violation of the statutory procedure prescribed under the section 144B of the act, makes order vulnerable as the same is passed in violation of rules of natural justice. So far as Section 144B of the Income Tax Act is concerned, the same has been inserted by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions), Act, 2020 with effect from Page 21 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 01.04.2021 where assessment under sub-section (3) of Section 143 or under Section 144 of the Income Tax Act, has been covered. The said addition is made under the heading “Faceless Regim” and the scheme of the Act reflects that the NFAC is authorized to serve upon the assessee a notice under Section 144 thereby giving him an opportunity to show cause on a date and time to be specified in the notice. Further, Section 144B(9) provides that any breach of the mandatory provisions as envisaged under Section 144B would make the order nonest. 9. On bare perusal of the contents of the letter dated 09.08.2021, it is not in dispute that the assessee very categorically had requested for video conference hearing. We are not in agreement with the submissions made by the learned Standing Counsel appearing for the respondent authorities more particularly, in view of the fact that the specific request was made by the writ applicant vide letter dated 10.04.2021 and thereafter also vide letter dated 09.08.2021 seeking an opportunity for personal hearing through video conference. The relevant paragraph of the said communication dated 09.08.2021 is reproduce as under: “Facts of the case are not properly appreciated and the Judicial precendents relied upon by the assessee are ignored. Therefore, we request your good self to grant us an opportunity to explain the facts through video conferencing on 16th August, 2021 at 10:00 a.m.” 10. In fact, it transpires from the record that on earlier occassion pursuant to the detail submissions made on 10.04.2021, the Assessing Officer had given option vide notice dated 23.04.2021 for video conference hearing. Further, it transpires that because of technical glitches, the video Page 22 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 conference hearing as scheduled could not be conducted and it was thereafter that the Assessing Officer had once again addressed notice dated 04.06.2021 thereby offering opportunity to the writ applicant/assessee to activate the video conference request. Even in the affidavit-in-reply filed by the Deputy Commissioner of Income Tax, Circle – 1(1)(1), Vadodara, the stand of the respondent authority is that the assessee was requested to respond for video conference activation by 09.08.2021 and has further confirmed that the writ applicant had activated the video conference on 09.08.2021 and had requested for hearing on 16.08.2021. 11. Thus, we have no hesitation in holding that inspite of specific request for personal hearing being requested by the writ applicant, the respondent authority without adhering to such request having proceeded to pass final assessment order, is in clear violation of the aforesaid statutory scheme and is therefore, held to be null and void and is hereby quash and set aside. 12. In the result, the writ application succeeds. The matter is remanded back to the Assessing Officer and the Assessing Officer is hereby directed to grant an opportunity of personal hearing to the writ applicant by way of video conference. It is expected of the authority to serve advance notice giving 15 days time to the writ applicant while fixing date of personal hearing and thereafter, will be at liberty to pass a final assessment order in accordance with law. The assessment proceedings shall be completed within 3 months from the date of receipt of this order or from the date on which the order is uploaded, whichever is earlier. Page 23 of 24 C/SCA/13158/2021 ORDER DATED: 18/01/2022 13. The writ application stands disposed of accordingly in aforesaid terms. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) NEHA Page 24 of 24 "