High Court Sets Aside Impugned Assessment Order Due to Lack of Personal Hearing

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Case Name:

Krs Home Development Private Limited Vs. National Faceless Assessment Centre New Delhi (High Court of Delhi)

W.P.(C) 7230/2021 & CMA APPL. 22778/2021

Date: 29th July 2021

Key Takeaways:

1. The court found that the failure to grant a personal hearing before passing the assessment order constituted a violation of the principles of natural justice as well as the mandatory procedure prescribed in the Faceless Assessment Scheme and stipulated in Section 144B (of Income Tax Act, 1961).

2. The Assessing Officer was directed to grant an opportunity of hearing to the petitioner by way of Video Conferencing and thereafter pass a reasoned order in accordance with the law.

This is a provided appears to be a judgment from the High Court of Delhi at New Delhi in the case of W.P.(C) 7230/2021 & CMA APPL. 22778/2021, involving KRS HOME DEVELOPERS PRIVATE LIMITED and the National Faceless Assessment Centre, New Delhi.

The judgment was delivered by HON’BLE MR. JUSTICE MANMOHAN and HON’BLE MR. JUSTICE NAVIN CHAWLA on 29th July, 2021. The judgment pertains to a writ petition challenging the Impugned Assessment Order dated 31st May 2021 passed by the Respondents in light of Section 144B(7) (of Income Tax Act, 1961) and Section 144B(9) (of Income Tax Act, 1961), 1961.

The key points from the judgment are as follows:

The petitioner challenged the Impugned Assessment Order dated 31st May 2021, stating that it was passed without providing a personal hearing, despite requests for the same.

The court noted that Section 144B(7) (of Income Tax Act, 1961) provides for an opportunity of personal hearing if requested by the assessee.

The court also highlighted that the use of the word ‘may’ in the relevant section does not absolve the revenue from the obligation to consider the request made for a personal hearing.

The court found that the failure to grant a personal hearing before passing the assessment order constituted a violation of the principles of natural justice as well as the mandatory procedure prescribed in the Faceless Assessment Scheme and stipulated in Section 144B (of Income Tax Act, 1961).

Consequently, the court set aside the impugned assessment order dated 31st May 2021 and all proceedings initiated pursuant thereto, and remanded the matter back to the Assessing Officer. The Assessing Officer was directed to grant an opportunity of hearing to the petitioner by way of Video Conferencing and thereafter pass a reasoned order in accordance with the law.

In conclusion, the court found in favor of the petitioner and set aside the impugned assessment order, directing the Assessing Officer to provide a personal hearing and pass a reasoned order in accordance with the law.

FAQ:

Q1: What was the judgment about?

A1: The judgment was about a writ petition challenging an assessment order passed by the National Faceless Assessment Centre, New Delhi, due to the lack of a personal hearing.

Q2: What was the outcome of the judgment?

A2: The court found in favor of the petitioner, setting aside the assessment order and remanding the matter back to the Assessing Officer for a personal hearing and a reasoned order.

Q3: What were the key reasons for setting aside the assessment order?

A3: The court found that the failure to grant a personal hearing before passing the assessment order constituted a violation of the principles of natural justice and the mandatory procedure prescribed in the Faceless Assessment Scheme and stipulated in Section 144B (of Income Tax Act, 1961).

1. The petition has been heard by way of video conferencing.

2. Present writ petition has been filed challenging the Impugned Assessment Order dated 31st May 2021 passed by the Respondents in light of Section 144B(7) (of Income Tax Act, 1961) and Section 144B(9) (of Income Tax Act, 1961), 1961 [the Act] and all proceedings initiated pursuant thereto.

3. Learned counsel for the Petitioner states that the Show Cause Notice with draft Assessment Order was issued on 19th March 2021 by NFAC giving time to file reply till 23:59 hours of 25th March 2021. He points out that the Petitioner responded to above Show Cause Notice within the short time pleading that the matter requires explanation due to complexity of facts and requested for video conference (VC) hearing. He also states that subsequently, separate requests were made by the Petitioner assessee seeking opportunity of personal hearing however, the Respondents without paying heed to the Petitioner’s requests, issued more notices.

4. He emphasises that the impugned order dated 31st May 2021 was passed without providing personal hearing as was requested in replies dated 25th March 2021 and 13th April 2021 which is a serious violation of the principles of natural justice.

5. Issue notice. Ms. Vibhooti Malhotra, learned senior standing counsel

accepts notice on behalf of respondents. She submits that the expression

used in clause (vii) of sub-Section (7) of Section 144B (of Income Tax Act, 1961) is ‘may’

and not ‘shall’ and, therefore, there is no vested right in the petitioner to claim a personal hearing.

6. Having heard learned counsel for the parties, this Court is of the view

that Section 144B(7) (of Income Tax Act, 1961) provides for an opportunity of personal hearing, if

requested, by the assessee. The relevant portions of Section 144B(7) (of Income Tax Act, 1961) and

Section 144B(9) (of Income Tax Act, 1961) are reproduced here in below: -

“144B. Faceless assessment –

(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 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);

(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: —

(h) circumstances in which personal hearing referred to clause (viii) shall be approved;

(9) Notwithstanding anything contained in any other provision of this Act, assessment made under sub-section (3) of section 143 (of Income Tax Act, 1961) or under section 144 (of Income Tax Act, 1961) 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 learned predecessor Division Bench in Sanjay Aggarwal Vs. National Faceless Assessment Centre, Delhi, W.P.(C) 5741/2021, dated 02nd June, 2021, while interpreting the aforesaid Section has held as under:-

“11.4. A careful perusal of clause (vii) of Section 144B(7) (of Income Tax Act, 1961) 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 this, under sub-clause (h) of Section 144B(7)(xii) (of Income Tax Act, 1961) read with Section 144B(7)(viii) (of Income Tax Act, 1961), 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 that, to the best of their knowledge, no such standards, procedures as also processes have been framed, as yet.

8. Since in the present case no hearing had been granted before passing the impugned assessment order, there is a violation of principles of natural justice as well as mandatory procedure prescribed in “Faceless Assessment

Scheme” and stipulated in Section 144B (of Income Tax Act, 1961).

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.”

9. Consequently, the impugned assessment order dated 31st May 2021 and all proceedings initiated pursuant thereto are set aside and the matter is remanded back to the Assessing Officer, who shall grant an opportunity of

hearing to the petitioner by way of Video Conferencing and thereafter pass a

reasoned order in accordance with law. With the aforesaid directions, the

present writ petition and pending application stand disposed of.

10. The order be uploaded on the website forthwith. Copy of the order be

also forwarded to the learned counsel through e-mail

MANMOHAN, J

NAVIN CHAWLA, J

JULY 29, 2021