6 Sanjay Aggarwal vs. National Faceless Assessment Centre, Delhi [(2021) Writ Petition (C) 5741/2021, Date of order: 2nd June, 2021 (Delhi High Court)]
Faceless Assessment u/s 144B – Personal hearing demanded by assessee on receipt of show cause notice-cum-draft assessment order – No personal hearing granted – Final assessment order passed – Liable to be set aside
The petitioner, via a writ petition, challenged the assessment order dated 28th April, 2021 for the A.Y. 2018-19 and consequential proceedings. The grievance of the petitioner is that although a personal hearing was sought, on account of the fact that the matter was complex and required explanation, the respondent / Revenue chose not to accord the same. Thus, the respondent / Revenue had committed an infraction of the statutory scheme encapsulated in section 144B.
The petitioner claimed that in respect of the A.Y 2018-19 the return was filed on 27th October, 2018, declaring its income at Rs. 33,43,690.
On 22nd September, 2019, a notice was issued u/s 143(2) read with Rule 12E of the Income-tax Rules, 1962, whereby the petitioner’s return was selected for scrutiny. Two issues were flagged by the A.O.; first, deductions made under the head ‘income from other sources’, and second, the aspect concerning unsecured loans.
A notice u/s 142(1) was served on the petitioner on 6th December, 2020 which was followed by various communications issued by the respondent / Revenue and replied by the petitioner.
The respondent / Revenue served a show cause notice-cum-draft assessment order dated 13th April, 2021 on the petitioner, proposed for a disallowance of Rs. 1,00,26,692 u/s 57. Consequently, a proposal was made to vary the income, resulting in the enhancement of the declared income to Rs. 1,33,70,380. The petitioner contended that, thereafter, several requests were made to the respondent / Revenue for grant of personal hearing. However, the respondent / Revenue did not pay heed to the requests and proceeded to issue a second show cause notice along with a draft assessment order dated 23rd April, 2021. Furthermore, the petitioner was directed to file its response / objections by 23:59 hours of 25th April, 2021.
According to the petitioner, although the time frame for filing the response / objections to the aforementioned show cause notice-cum-draft assessment order was very short, he filed the response / objections on 24th April, 2021. The respondent / Revenue, without according a personal hearing to the petitioner, passed the impugned assessment order dated 28th April, 2021. The petitioner submitted that the impugned assessment order, passed u/s 143(3) read with section 144B, is contrary to the statutory scheme incorporated u/s 144B. It is also contended that such assessment proceedings are non est in the eyes of the law.
The Revenue contended that the expression used in clause (vii) of sub-section (7) of section 144B is ‘may’ and not ‘shall’, and therefore there is no vested right in the petitioner to claim a personal hearing. Thus, according to the Revenue, failure to grant personal hearing to the petitioner did not render the proceedings non est as the same was not mandatory.
The High Court observed the following facts:
• That prior to the issuance of the show cause notice-cum-draft assessment order dated 23rd April, 2021, a show cause notice-cum-draft assessment order was issued on 13th April, 2021. Between these two dates, the petitioner had, on two occasions, asked for personal hearing in the matter.
• After the show cause notice-cum draft assessment order dated 23rd April, 2021 was issued, via which the petitioner was invited to file his response / objections, the petitioner, once again, while filing his reply, asked for being accorded personal hearing in the matter.
Thus, in sum and substance of the requests made, the petitioner continued to press the respondent / Revenue to accord him a personal hearing, before it proceeded to pass the impugned assessment order. According to the petitioner, the request was made as the matter was complex and therefore required some explanation.
The Court also observed that the respondent / Revenue made proposals for varying the income, both via the show cause notice dated 13th April, 2021 as well as the show cause notice-cum-draft assessment order dated 23rd April, 2021. As noticed above, the declared income was proposed to be substantially varied.
The Court referred to the provision of section 144B as to why the Legislature had 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 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 setup, 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 in clause(viii) shall be approved;
[Emphasis]
The Court observed that a perusal of clause (vii) 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’ 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) read with section144B(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. The Department counsel informed the court that there are no such standards, procedures and processes framed yet.
Therefore, in the facts and circumstances of the case, it was held that it was incumbent upon the respondent / Revenue to accord a personal hearing to the petitioner. The impugned order was set aside.
