Shri Mudar Sudheer V. UNION OF INDIA

WP/25113/2021

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The case revolves around a writ petition challenging the final assessment order issued under Section 143(3) of the Income Tax Act, 1961, by the 2nd respondent. The petitioner, assessed under PAN No.ACAPM9587E, contested the assessment order on grounds of violation of natural justice, as he was not granted a personal hearing through video conferencing despite his specific request. The court examined the provisions of Section 144B of the Income Tax Act, which mandates a personal hearing through video conferencing if requested by the assessee and approved by the Chief Commissioner or Director General. The court found that the 2nd respondent failed to comply with these mandatory provisions, leading to the setting aside of the assessment order.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 724513 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 28-02-2022
• Assessment Year: misc
• Other Referred Cases: Bharat Aluminium Company Ltd. v. Union of India, Sanjay Aggarwal v. National Faceless Assessment Centre, Piramal Enterprises Limited v. Additional/Joint/ Deputy Assistant Commissioner of Income-Tax/Income Tax Officer & others, Swadeshi Cotton Mills v. Union of India
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Keywords: Assessment Order; Faceless assessment; Natural Justice; Personal hearing; Video conferencing
• Section: 143(3); 142(1); 263; 144B

Judgement Text

"HONOURABLE SRI JUSTICE C. PRAVEEN KUMAR And HONOURABLE SMT. JUSTICE V. SUJATHA Writ Petition No.25113 of 2021 ORDER: (Per Hon‟ble Smt. Justice V. Sujatha) Challenging the action of the 2nd respondent in passing the impugned final assessment order in DIN: ITBA/AST/S/ 143(3)/2021-22/1036001622(1) dated 29.09.2021 issued under Section 143 (3) of the Income Tax Act, 1961, the present writ petition is filed. 2. The case of the petitioner, in brief, is that the petitioner is assessed to tax vide PAN No.ACAPM9587E under the jurisdiction of the 2nd respondent. For the Assessment Year 2015-16, the petitioner filed his returns on 29.09.2015 declaring the total income at Rs.3,94,84,810/-, after claiming exemption of Rs.1,22,34,821/- under Section 10AA of the Income Tax Act, 1961. Thereafter, the petitioner filed his revised returns on 31.10.2015 declaring the total income at Rs.3,94,84,810/-. The assessment under Section 143 (3) of the Act was completed on 21.04.2017 determining the assessed income at Rs.3,99,40,410/-. Thereafter, the said assessment order dated 21.04.2017 was set aside by the Principal Commissioner of Income Tax, Tirupathi vide his orders F.No.263/Pr.CIT/TPT/2019-20, dated 13.03.2020 directing the Assessment Officer to re-assess the assessment de novo in accordance with law after making necessary CPK, J & VS, J W.P.No.25113 of 2021 2 examination and verification with regard to the issue. Pursuant to the said directions, a notice under Section 142(1) of the Act along with a questionnaire was issued to the petitioner on 08.02.2021 calling for his explanation. In response thereto, the petitioner has submitted a detailed reply on 18.02.2021. Thereafter, the petitioner was issued a show cause notice as to why the assessment should not be completed as per the assessment order dated 26.09.2021 and directing him to file his objections, if any, on or before 27.09.2021. It is the further case of the petitioner that though he specifically requested for personal hearing through video conferencing, the impugned order of assessment dated 29.09.2021 came to be passed under Section 143 (3) read with Section 263 read with Section 144B of the Income Tax Act, 1961 without affording any opportunity of being heard through video conferencing. The same is challenged in this writ petition as illegal, arbitrary and violative of principles of natural justice. 3. The 2nd respondent filed his counter admitting that the petitioner was not given opportunity of personal hearing through video conferencing as sought by him, but, however, contended that he was given sufficient opportunities in accordance with the principles of natural justice, which were not availed of by the petitioner. The petitioner has not made CPK, J & VS, J W.P.No.25113 of 2021 3 out any, prima facie, case seeking interference of this court, and as such sought for dismissal of the writ petition. 4. Before proceeding further, it would be appropriate to refer to Section 144B (7) (vii) and (ix) of the Act, which reads as under: “144B Faceless Assessment: (7) For the purposes of faceless assessment- (i) xxxxx (ii) xxxxx (iii) xxxxx (vi) xxxxx (v) xxxxx (vi) xxxxx (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) xxxxxx (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; A reading of the above provision makes it clear that in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, an opportunity would be 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 CPK, J & VS, J W.P.No.25113 of 2021 4 such draft or final draft or revised draft assessment order. The assessee or his authorised officer may request for personal hearing so as to make his oral submissions. It further makes it clear that if a request for personal hearing is provided 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, in accordance with the procedure laid down by the Board. In the case on hand, the counter of the 2nd respondent clearly indicates that though a request is made by the petitioner for being heard personally through video conferencing, the same was not granted to him, but, however, it is contended that the petitioner was given sufficient opportunity in accordance with the principles of natural justice. It does not anywhere indicate that the petitioner was given an opportunity of being heard through video conference in accordance with the provisions of Section 144B (7) of the Act. It is a settled principle of law that no man should be condemned unheard and it is incumbent upon the Department to accord a personal hearing to the assessee where such a request is made under Section 144B (7) and failure to do so would amount to violation of principles of CPK, J & VS, J W.P.No.25113 of 2021 5 natural justice and also the mandatory procedure prescribed in the Faceless Assessment Scheme under Section 144B of the Act. A quasi judicial body must normally grant a personal hearing as no assessee or litigant should get a feeling that he was never given opportunity or deprived of an opportunity to clarify the doubts of the Assessing Officer or decision maker. In support of his contention, the learned counsel for the petitioner relied upon a judgment in Bharat Aluminium Company Ltd., v. Union of India (W.P.(C) No.14528 of 2021 and CM APPL.45702 of 2021, rendered by the High Court of Delhi at New Delhi), where in similar circumstances the High Court of Delhi, while holding that an assessee has a vested right to personal hearing, if an assessee asks for it, set aside the impugned final assessment order and remitted the matter back to the Assessing Officer for passing a reasoned order after affording a reasonable opportunity of hearing. In Sanjay Aggarwal v. National Faceless Assessment Centre (2021 (6) TMI 336), the Delhi High Court held that as no standards, procedures and process in terms of sub- clause (h) of Section 144B (7)(xii) read with Section 144B (7) (viii) of the Act had been framed, it was incumbent upon Revenue to accord personal hearing to the petitioner. The Court emphasised that the aforesaid finding given by this court was due to Revenue counsel not producing the standard procedure and process framed by the Revenue. It CPK, J & VS, J W.P.No.25113 of 2021 6 was further held that the Standard Operating Procedure for personal hearing through video conference under the Faceless Assessment Scheme, 2019 was issued by CBDT vide Circular F.No.Pr.CCIT/NeAC/SOP/2020-21, dated 23.11.2020 and that CBDT vide order F.No.187/3/2020-ITA-1, dated 31.03.2021 extended the Circulars/notifications issued under Faceless Assessment Scheme to the Faceless Assessment under Section 144B of the Act and therefore, the SOP contained in the circular dated 23.11.2020 was equally applicable to the proceedings under Section 144B of the Act also. In Piramal Enterprises Limited v. Additional/Joint/ Deputy Assistant Commissioner of Income-Tax/Income Tax Officer & others (2021 SCC Online Bombay 1534), the High Court of Bomay, while interpreting Section 144B and the principles of natural justice, categorically held that when hearing has been envisioned and incorporated, it is imperative to observe principles of natural justice as stipulated. It is further held that when an assessee approaches with response to a show cause notice, the request made by an assessee, as referred to in clause (vii) of sub- section 7 of Section 144B, would have to be taken into account and it would not be proper, looking at the prescribed procedure with strong undercurrent to have hearing on a request after notice, to say that petitioner would have CPK, J & VS, J W.P.No.25113 of 2021 7 opportunity pursuant to Section 144C, which would intercept the operation of the scheme contained under Section 144B. In Swadeshi Cotton Mills v. Union of India1, the Supreme Court held that where there has been non- compliance with the implied requirement of the audi alteram partem rule of natural justice at the pre-decisional stage, the impugned order could be struck down as invalid on that score alone. But in view of the commitment/concession that a hearing would be afforded to the Company, the case is remitted to the concerned authority to give a full, fair and effective hearing. The Supreme Court held as follows: “…….the phrase „natural justice‟ is not capable of a static and precise definition. It cannot be imprisoned in the straight-jacket of a cast-iron formula. Rules of natural justice are not embodied of such rules. It was held that two fundamental maxims of natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind as pre-eminently necessary to ensure that the law is applied impartially objectively and fairly. These twin principles are (i) audi alteram partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power. Its reach should not be narrowed and its applicability circumscribed…...” In Bharat Aluminium Company Ltd., v. Union of India and others (stated supra), the High Court of Delhi held as follows: “The non-obstante clause and the use of expression „shall be made‟ in Section 144B (1) creates a mandatory obligation upon the respondent/Revenue to follow the prescribed procedure. This Court is also of the view that the use of the expression “may” in 1 1981 AIR 818 (SC) CPK, J & VS, J W.P.No.25113 of 2021 8 Section 144B (7)(viii) is not decisive. It is settled law that having regard to the context, the expression “may” used in a statute has varying significance. In some context, it is purely permissive, whereas in others, it may make it obligatory upon the person invested with the power to exercise it. The word “may” is capable of meaning “must” or “shall” in the light of the context. In fact, where a discretion is conferred upon a quasi judicial authority whose decision has civil consequences, the word “may” which denotes discretion should be construed to mean a command. “…….This Court is further of the view that a quasi judicial body must normally grant a personal hearing as no assessee or litigant should get a feeling that he never got an opportunity or was deprived of an opportunity to clarify the doubts of the assessing officer/decision maker. After all confidence and faith of the public in the justness of the decision making process which has serious civil consequences is very important and that too in an authority/forum that is the first point of contact between the assessee and the Income Tax Department. The identity of the assessing officer can be hidden/protected while granting personal hearing by either creating a blank screen or by decreasing the pixel/density/resolution. Consequently, this Court is of the view that the word “may” in Section 144B(viii) should be read as “must” or “shall” and requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory. Having regard to the facts and circumstances of the case and considering the submissions made by the counsel, this court is of the view that the 2nd respondent passed the impugned assessment order in terms of Sections 143 (3) read with 263 read with 144B of the Income Tax, without affording an opportunity of hearing through video conferencing to the petitioner, though a specific request was made by the CPK, J & VS, J W.P.No.25113 of 2021 9 petitioner for personal hearing through video conferencing in terms of Section 144B (7) (vii) (ix), which is not only in violation of principles of natural justice, but also in violation of the mandatory provisions as contemplated under Section 144B (7) (vii) (ix) of the Act. Hence, the impugned assessment order is not sustainable in law and the same is liable to be set aside. Accordingly, the writ petition is allowed setting aside the Assessment Order dated 29.09.2021 passed by the 2nd respondent and the matter is remitted back to the Assessing Officer for a fresh assessment after duly affording a reasonable opportunity of hearing the petitioner and then pass appropriate orders in accordance with law as expeditiously as possible. As a sequel thereto, miscellaneous petitions, if any, shall stand closed. _________________________ C. PRAVEEN KUMAR, J ________________ V. SUJATHA, J Date: 28.02.2022 Ksn "