HIRABEN PRAGIBHAI TALA V. ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX/INCOME TAX OFFICER

SCA/18132/2021

AI Insights

The case revolves around a dispute concerning the assessment order issued to Hiraben Pragibhai Tala by the Income Tax Department. The petitioner challenged the assessment order and the subsequent demand notice, arguing that the procedures outlined in Section 144B of the Income Tax Act, 1961 were not adhered to, particularly the lack of a draft assessment order and an opportunity for a personal hearing. The Income Tax Department, represented by Mrs. Kalpana Raval, opposed the petition, asserting that the order was passed after considering the petitioner's explanations. The court's decision emphasized the importance of following procedural safeguards to ensure fairness in the assessment process.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 747533 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 14-06-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: KALPANA RAVAL
• Assessee Lawyers: PARAM SHAH
• Keywords: Draft Assessment Order; Faceless assessment; Natural Justice; Personal hearing; Show cause notice
• Section: 143(3); 142(1); 254; 144B; 156

Judgement Text

"C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 18132 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE A.J.DESAI 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 ? ========================================================== HIRABEN PRAGIBHAI TALA Versus ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX/INCOME TAX OFFICER ========================================================== Appearance: PARAM V SHAH(9473) for the Petitioner(s) No. 1 MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 2 NOTICE SERVED for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE A.J.DESAI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 14/06/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE A.J.DESAI) Page 1 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 1. Rule returnable forthwith. Learned advocate Mrs. Kalpana Raval waives service of notice of Rule on behalf of the respondent No.2. 2. With the consent of learned advocates appearing for the respective parties, present petition is taken up for final hearing today. 3. By way of present petition under Article 226 of the Constitution of India, the petitioner has prayed as under: “A. This Hon’ble Court be pleased to allow this petition and to call for the records of the proceedings, look into them and be pleased to issue a writ of certiorari or any other appropriate writ, order or direction quashing the assessment order passed by the Respondent No.1 u/s.143(3) r.w.s. 254 read with section 144B dated 20.09.2021 (ANNEXURE-A) and demand Notice dated 20.09.2021 issued u/s.156 (ANNEXURE- B); B. This Hon’ble Court be pleased to call for the records of the proceedings, look into them and be pleased to issue a writ of mandamus or any other appropriate writ, order or direction directing the respondents to grant complete stay of demand arising out of assessment order passed u/s.143(3) r.w.s. 254 read with section 144B dated 20.09.2021; C. Pending the hearing and final disposal of this application, this Hon’ble Court be pleased to stay operation and implementation of the assessment order Page 2 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 passed u/s.143(3) r.w.s. 254 read with section 144B dated 20.09.2021 and further stay the recovery of demand in pursuance of the notice issued u/s. 156 dated 20.09.2021;” 4. In response to the notice issued by this Court, the respondent No.2 has appeared through learned advocate Mrs. Kalpana Raval and has filed the affidavit in reply. 5. Brief facts of the case are as under : 5.1 The petitioner is earning agricultural income as well as having rental income from a hall and is being assessed at PAN No.ABJPT4267C under the Income Tax Act, 1961 (hereinafter referred to as 'the Act, 1961'). The petitioner filed her return of income for the assessment year 2006-2007 on 26.06.2006, declaring net taxable income of Rs.1,13,020/- whereby the income from business and profession was of Rs. (-)1,22,707/- (loss) and Long Term Capital Gain was of Rs.2,35,727/-. 5.2 The petitioner filed revised return of income on 28.03.2007 declaring the same income except the change in opening and closing balance of the capital. 5.3 The case of the petitioner was selected for scrutiny assessment and the Assessing Officer vide order dated 8.12.2008 framed final Page 3 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 assessment under Section 143(3) of the Act, 1961 assessing total income of Rs.30,01,806/-. 5.4 The assessee being aggrieved by the order of Assessing Officer, filed appeal before Commissioner of Income Tax (Appeals)-II, which was dismissed on 18.03.2014. 5.5 The assessee therefore, preferred an appeal before the Income Tax Appellate Tribunal (For short ‘the Tribunal’) on 15.05.2014. The Tribunal partly allowed the said appeal vide order dated 13.09.2019 by confirming only LTCG of Rs.3,14,052/- and referred the case back to the Assessing Officer for fresh adjudication of other assessed income. 5.6 The petitioner thereafter filed her written submissions on 11.12.2019 before the respondent No.2, requesting to give effect to the order dated 13.09.2019 passed by the Tribunal. It is the case of the petitioner that the submissions given by the petitioner were neither considered nor mentioned by the respondent No.2 in any further communications. Thereafter, due to COVID-19 pandemic, the proceedings remained standstill. 5.7 Thereafter notice dated 11.03.2021 under section 142(1) of the Act, 1961 was issued by the respondent authorities to the petitioner Page 4 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 directing the petitioner to furnish the balance sheet and Profit & Loss Account with closing and opening balance on or before 17.03.2021. It is the case of the petitioner that the said notice was furnished online and it was never communicated to the petitioner and the petitioner came to know about the said notice only in the month of August and the petitioner thereafter, immediately filed her detailed reply before the respondent No.2 on 11.08.2021. 5.8 It is the case of the petitioner that the petitioner subsequently came to know that all the replies to the notice are to be filed on-line at e-portal of the respondent authorities and hence, the petitioner immediately filed the reply on e-portal on the same day i.e. 11.08.2021 and some additional documents were filed two days later i.e. on 13.08.2021. 5.9 The respondent No.1 issued another notice dated 30.08.2021 under Section 142(1) of the Act, 1961 on e-portal asking the petitioner to furnish accounts and certain documents on or before 06.09.2021 by 6.12 p.m. It is the case of the petitioner that the respondent No.1 without verifying the details furnished by the assessee issued a show-cause notice dated 06.09.2021 on e-portal proposing addition of Rs.25,74,734/- and asked the petitioner to submit the details Page 5 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 on or before 09.09.2021. It is further the case of the petitioner that in a short span of just 3 days, it was not possible for the petitioner to submit response to the said show-cause notice and therefore, the petitioner sought adjournment till 23.09.2021. 5.10 On 16.09.2021, the petitioner submitted her written submission alongwith supportive evidences on e-portal of the respondent No.1. 5.11 It is the case of the petitioner that the respondent no.1 passed impugned order on 20.09.2021 and raised demand Notice under Section 156 of the Act, 1961 without granting any opportunity or personal hearing to the petitioner. It is also the case of the petitioner that the date of demand was raised back on 15.09.2021 which is before the assessment order dated 20.09.2021. Hence, the present petition. 6. Learned advocate Mr. Param Shah appearing for the petitioner would submit that there is a breach of mandatory provision of section 144B(1) (xvi) of the Act, 1961. He would submit that without serving any draft assessment order as prescribed under the Act, 1961, the impugned order has been passed. He, therefore, would submit that only on this ground alone the impugned order is required to be quashed and set Page 6 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 aside. 7. On the other hand, learned advocate Mrs. Kalpana Raval appearing for the respondent No.2 has vehemently opposed the present petition and submitted that after examining the explanations of the petitioner, the impugned order has been passed by the respondents and, therefore, no interference is required by this Court and the present petition may be dismissed. 8. We have heard learned advocates appearing for the respective parties and perused the impugned order as well as gone through 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 which reads as under : “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:— 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 Page 7 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 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; xxx Page 8 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 (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; xxx 144B(7) For the purposes of faceless assessment- 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; (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 Page 9 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 supports video conferencing or video telephony, in accordance with the procedure laid down by the Board;” 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 clause of section 144B(1) and 144B(7) deals with the procedure to be adopted by the National Faceless Assessment Centre on receipt of draft order from the assessment unit who has prepared the draft after providing opportunity to the assessee 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, such personal hearing in era of Faceless assessment is to be provided through video conferencing. 11. It is not in dispute that in facts of the case Page 10 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 no draft assessment along with show cause notice as required under section 144B(1) and section 144B(7) is given to the petitioner so as to enable the petitioner to give explanation for proposed addition during the hearing before the National Faceless Assessment Centre. 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 considering the response of the assessee and send it to the National Faceless Assessment Centre. As per the provisions of section 144B(7) in case of variation prejudicial to the assessee as proposed in the 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. 12. In view of above, it can be safely be said that the impugned order was passed by the respondent in violation of principles of natural justice without affording an opportunity of personal hearing by not following the prescribed procedure laid down as per the provisions of Page 11 of 12 C/SCA/18132/2021 JUDGMENT DATED: 14/06/2022 section 144B of the Act, 1961 for Faceless assessment. 13. In the result, this petition succeeds and is accordingly allowed. The impugned order of assessment passed by the respondent under section 143(3) read with section 254 read with section 144B dated 20.09.2021 at Annexure-A and demand notice under section 156 of the even date at Annexure-B are quashed and set aside. The respondent/Revenue will be at liberty to proceed with assessment under the provisions of section 144B of the Act, 1961 as permissible under the law after issuance of show cause notice-cum- draft assessment order so as to provide an opportunity of hearing to the petitioner. The petitioner shall be given an opportunity of hearing as per the provisions of section 144B of the Act, 1961. Such exercise shall be completed within 12 weeks from the date of receipt of copy of this order. Rule is made absolute to the aforesaid extent. Direct service is permitted. It is made clear that we have not examined the merits of the case. (A.J.DESAI, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 12 of 12 "