SARDAR CO-OP. CREDIT SOCIETY LTD. V. ADDITIONAL / JOINT / DEPUTY / ASSISTANT COMMISSIONER OF INCOME TAX

SCA/7541/2021

AI Insights

The case involves Sardar Co-op. Credit Society Ltd., which challenged an assessment order passed by the Income Tax Department. The Society, engaged in providing credit facilities and collecting deposits, was assessed as an 'Association of Persons' and had filed a return claiming deductions under Section 80P of the Income Tax Act. The Assessing Officer disallowed these deductions without issuing a show cause notice or a draft assessment order, leading to the Society's petition under Article 226 of the Constitution. The court found that the assessment was made in violation of the mandatory provisions of Section 144B, which require a show cause notice and a draft assessment order before finalizing the assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 767847 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 10-01-2022
• Assessment Year: misc
• Other Referred Cases: YCD Industries Vs. NFAC, Gurgaon Realtech Ltd. Vs. NFAC, Globe Capital Foundation Vs. National E-Assessment Centre, Raja Builders Vs. NFAC, Royal Lake City Vs. National E-Assessment Centre, Jai Ma Hiral Enterprise Vs. National E-Assessment Centre, Devgiri Exports Vs. ITO (Raj HC)
• Laws Referred To: Income Tax Act, Gujarat State Cooperative Societies Act, 1960
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VARUN PATEL
• Assessee Lawyers: JAIMIN GANDHI
• Keywords: Assessment Order; Deduction under section 80P; Extraordinary Writ Jurisdiction; Violation of Principles of Natural Justice; Mandatory provisions of law
• Section: 142(1); 143(2); 80P; 270A; 144B; 156

Judgement Text

"C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 7541 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ? YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ========================================================== SARDAR CO-OP. CREDIT SOCIETY LTD. Versus ADDITIONAL / JOINT / DEPUTY / ASSISTANT COMMISSIONER OF INCOME TAX ========================================================== Appearance: JAIMIN A GANDHI(8065) for the Petitioner(s) No. 1 MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1,2 ========================================================== CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 10/01/2022 ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE NISHA M. THAKORE) 1. The writ applicant has invoked extraordinary writ jurisdiction of this Court under Article 226 of the Constitution of India and has thereby prayed for the following reliefs: Page 1 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 “7(A)The Hon’ble Court may be pleased to quash and set aside the impugned assessment order dated 07.04.2021 and consequent proceedings / notices; (B)Pending the hearing and final disposal of this application, this Hon’ble Court be pleased to stay the implementation of assessment order dated 07.04.2021; (C)This Hon’ble Court may be pleased to grant any further or other relief as this Hon’ble Court deems just and proper in the interest of justice; (D)The Hon’ble Court may be pleased to quash and set aside demand notice u/s. 156 and initiation of penalty proceedings u/s. 270A, consequent to assessment order dated 07/04/2021.” 2. The facts in brief giving rise to this writ application are summarized as under: 2.1 The writ applicant is a Cooperative Society registered under the Gujarat State Cooperative Societies Act, 1960. The writ applicant Society is engaged in the business of providing Credit facility to its members and collecting deposit from its members for the purpose of lending finance. The writ applicant society also make investments in Scheduled Bank and other Cooperative Bank. 2.2 The writ applicant Society is thus assessed as ‘Association of Persons’ and claimed to have filed return of income accordingly. The writ applicant had filed its return of income for annual A.Y. 2018-19 on 09.09.2018 declaring total income of Rs.44,79,940/-. The assessee had claimed refund of Rs.2,62,830/- in the return of of income. 2.3 The respondent had selected the case of the writ applicant Page 2 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 for limited scrutiny vide notice dated 22.09.2019 under Section 143(2) of the Act. Thereafter, the respondent had issued further notice under Section 142(1) of the Act on 13.11.2020 calling for various information and clarifications, more particularly, with regard to the deduction under Section 80P of the Income Tax Act. 2.4 It is the case of the writ applicant that the respondent had not issued any show cause notice seeking clarifications as regards the claim of deduction under Section 80P(2)(a)(i) of Rs.2,08,05,240/- to be disallowed and further to be treated as income from other source. 2.5 In absence of such opportunity and without providing draft assessment order, the respondent Authority straightway passed the assessment order on 07.04.2021, whereby the Assessing Officer disallowed the claim of deduction under Section 80P(2)(a) (i) and had treated an amount of Rs.2,08,05,240/- as an income from other source. 2.6 In such circumstances, the writ applicant being aggrieved has approached this Court seeking relief as prayed for. 3. The principal ground pressed by the writ applicant is with regard to non-compliance of provisions, more particularly, Section 144B(xiv), Section 144B(xvi)(b) and Section 144B(xxii) of the Act. The assessment order impugned is passed without issuing notice cum draft assessment order upon the writ applicant. 4. Mr. Jaimin Gandhi, learned advocate appearing for the writ applicant has taken us through the impugned assessment order Page 3 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 and has emphasized on the aforesaid provisions. Mr. Gandhi has drawn attention of this Court to the notice dated 22.09.2019 issued under Section 143(2) of the Act read with Rule 12E of Rules framed thereunder and has submitted that the Assessing Officer mainly raised three issues which include deduction under Section 80P. He further drew attention of this Court to the fact that no clarification was sought for regarding disallowance of deduction under Section 80P(2)(a)(i) of the Act. He further relied upon contents of notice dated 13.11.2020 issued under Section 142(1) of the Act whereby the writ applicant was called upon to submit response by 27.01.2020. He submitted that necessary details were furnished along with explanation by way of reply dated 25.11.2020 which was uploaded on portal in response to such notice. Thereafter, no further clarification as regards Section 80P(2)(a)(i) of the Act was sought for and suddenly after a period of five months the impugned order of assessment came to be passed on 07.04.2021. Thus, the Assessing Officer has completely overlooked the reply filed by the assessee and without following mandatory provisions of the Act, more particularly, Section 144B (1) (xiv) (xvi) (b) has proceeded to make variation by way of dis allowance to the prejudice of the writ applicant. He submitted that such action of respondent Authority is in gross violation of principles of natural justice as well as mandatory provisions of law and is required to be quashed and set aside. It is, therefore, submitted that the assessment order passed in violation of the mandatory provisions is nonest and is required to be quashed and set aside. 5. Mr. Gandhi, Learned advocate for the writ applicant in support of his submissions has relied upon following decisions: Page 4 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 Sr. No. Cases 1. 127 Taxmann.com 606 YCD Industries Vs. NFAC 2. 127 Taxmann.com 726, Gurgaon Realtech Ltd. Vs. NFAC 3. 127 Taxmann.com 365, Globe Capital Foundation Vs. National E- Assessment Centre 4. 127 Taxmann.com 339 Raja Builders Vs. NFAC 5. SCA No.6215 of 2021, Royal Lake City Vs. National E- Assessment Centre. 6. SCA No.6042 of 2021, Jai Ma Hiral Enterprise Vs. National E- Assessment Centre. 7. SB Civil Writ Petition NO.6047 of 2021, Devgiri Exports Vs. ITO (Raj HC) 6. On the other hand, Mr. Varun K. Patel, learned advocate appearing on behalf of the Department has drawn attention of this Court to the affidavit-in-reply filed by the respondent No.2. In the reply, stance taken by the Revenue is that due opportunity of hearing was given to the writ applicant, during the course of the assessment proceeding, however, there is lapse on the part of the Revenue in non-compliance of the provisions of issuance of show cause notice and draft assessment order, which may be condoned. Mr. Patel has also raised objection as regards entertaining writ petition against final order of assessment being passed, as efficacious alternative remedy of appeal is available to the writ applicant. It is therefore urged by the revenue to not to entertain the writ petition. 7. We have heard learned counsel of the parties and have Page 5 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 perused the materials on record. The only short question which falls for our consideration is whether the impugned assessment order dated 07.04.2021 and the consequential demand notice is valid and sustainable in law. 8. At this stage, it would be apt to reproduce Section 144B of the Income Tax Act, 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:— (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 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; Page 6 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 (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 Page 7 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 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 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 Page 8 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 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; (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 9 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 (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— (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; Page 10 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 (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 Page 11 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 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:— (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 Page 12 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 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, 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: Page 13 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 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); (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 Page 14 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 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 Page 15 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 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:— (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 Page 16 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 be non-est if such assessment is not made in accordance with the procedure laid down under this section. Explanation.—In this section, unless the context otherwise requires— (a) “addressee” shall have the same meaning as assigned to it in clause (b) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000); (b) “authorised representative” shall have the same meaning as assigned to it in sub-section (2) of section 288; (c) “automated allocation system” means an algorithm for randomised allocation of cases, by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources; (d) “automated examination tool” means an algorithm for standardised examination of draft orders, by using suitable technological tools, including artificial intelligence and machine learning, with a view to reduce the scope of discretion; (e) “computer resource” shall have the same meaning as assigned to it in clause (k) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000); (f) “computer system” shall have the same meaning as assigned to it in clause (l) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000); (g) “computer resource of assessee” shall include assessee’s registered account in designated portal of the Income-tax Department, the Mobile App linked to the registered mobile number of the assessee, or the registered e-mail address of the assessee with his e- mail service provider; (h) “digital signature” shall have the same meaning as assigned to it in clause (p) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000); (i) “designated portal” means the web portal designated as such by the Principal Chief Commissioner or Principal Director General, in charge of the National Faceless Assessment Centre; (j) “Dispute Resolution Panel” shall have the same meaning as assigned to it in clause (a) of sub-section (15) of section 144C; Page 17 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 (k) “faceless assessment” means the assessment proceedings conducted electronically in ‘e-Proceeding’ facility through assessee’s registered account in designated portal; (l) “electronic record” shall have the same meaning as assigned to it in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000); (m) “eligible assessee” shall have the same meaning as assigned to in clause (b) of sub-section (15) of section 144C; (n) “e-mail” or “electronic mail” and “electronic mail message” means a message or information created or transmitted or received on a computer, computer system, computer resource or communication device including attachments in text, image, audio, video and any other electronic record, which may be transmitted with the message; (o) “hash function” and “hash result” shall have the same meaning as assigned to them in the Explanation to sub- section (2) of section 3 of the Information Technology Act, 2000 (21 of 2000); (p) “Mobile app” shall mean the application software of the Income-tax Department developed for mobile devices which is downloaded and installed on the registered mobile number of the assessee; (q) “originator” shall have the same meaning as assigned to it in clause (za) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000); (r) “real time alert” means any communication sent to the assessee, by way of Short Messaging Service on his registered mobile number, or by way of update on his Mobile App, or by way of an e-mail at his registered e- mail address, so as to alert him regarding delivery of an electronic communication; (s) “registered account” of the assessee means the electronic filing account registered by the assessee in designated portal; (t) “registered e-mail address” means the e-mail address at which an electronic communication may be delivered or transmitted to the addressee, including— (i) the e-mail address available in the electronic filing account of the addressee registered in designated portal; or (ii) the e-mail address available in the last income-tax Page 18 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 return furnished by the addressee; or (iii) the e-mail address available in the Permanent Account Number database relating to the addressee; or (iv) in the case of addressee being an individual who possesses the Aadhaar number, the e-mail address of addressee available in the database of Unique Identification Authority of India; or (v) in the case of addressee being a company, the e- mail address of the company as available on the official website of Ministry of Corporate Affairs; or (vi) any e-mail address made available by the addressee to the income-tax authority or any person authorised by such authority. (u) “registered mobile number” of the assessee means the mobile number of the assessee, or his authorised representative, appearing in the user profile of the electronic filing account registered by the assessee in designated portal; (v) “video conferencing or video telephony” means the technological solutions for the reception and transmission of audio-video signals by users at different locations, for communication between people in real-time.” 8. In light of aforesaid provision, we note that the Faceless Scheme, 2019 was modified by Notification No.60/2020 dated 13.08.2020 wherein it had prescribed procedure for making Faceless Assessment. In fact, the intention of Legislation as regards principle of natural justice is embodied in section itself. Thus, after 1st April, 2021, mandatory procedure in the form of aforesaid provision has to be strictly adhered while doing assessment. The whole object of Legislation to introduce Faceless Assessment Scheme is to imparting greater efficiency, transparency and accountability and at the same time duty is cast upon Assessing Officer to comply with mandatory provision to pass objective, fair and just orders. 9. It is clear from bare reading of Section 144B of the act that Page 19 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 the assessee is required to be given an opportunity, in case variation is proposed in the draft assessment order upon its examination by NFAC and is prejudicial to the interest of assessee. The obligation is on the assessing officer to serve a show cause notice calling upon him to show cause as to why the proposed variation should not be made, failing which would make the assessment nonest. This Court agrees with the submission of the learned advocate for writ applicant that the issue on hand is no more res integra. We get support from the decision of this Court in the case of Gandhi Reality ( India) (p.)(ltd.) Vs. Assistant, reported in (2021) 133 taxmann.com 83 ( Gujarat), wherein it is held that breach of mandatory statutory provision itself is fatal to the assessment order. 10. In the facts of the present case, nothing has been brought on record by the respondent to suggest that the show cause notice along with draft assessment order was served upon the writ applicant. We find from the impugned assessment order that there are variations from the return filed by the writ applicant as regards disallowance. The final assessment order is not made in accordance with the procedure envisaged under section 144 (xvi) (b) of the act as inspite of the variation being prejudicial to the assessee, no opportunity has been given to the assessee by serving show cause notice along with draft assessment order calling upon him to show cause as to why the proposed variation should not be made. Thus, we have no doubt in holding that the impugned order of assessment dated 07.04.2021 is invalid and nonest, passed in gross violation of principles of natural justice as well as mandatory provision in the form of section 144B of the act. In such circumstances referred to above, we are left with no other option but to quash the assessment order and remit the matter to Page 20 of 21 C/SCA/7541/2021 JUDGMENT DATED: 10/01/2022 the Assessing Officer. 11. In the result, the impugned assessment order dated 07.04.2021 is hereby quashed and set aside. We further quashed and set aside the consequential action including demand notice and remit the matter to the Assessing officer from the stage of issuance of draft assessment order along with show cause notice. The Assessing Officer shall pass a draft assessment order and thereafter forward the same to the assessee along with the show cause notice in accordance with the provisions of section 144B of the Act. 12. In view of the aforesaid, this petition stands allowed and disposed of accordingly. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Y.N. VYAS Page 21 of 21 "