In Tyger Capital Pvt. Ltd. Versus Assessment Unit, Income Tax Department & Anr. - 2025 (8) TMI 386 - GUJARAT HIGH COURT, the petitioner company filed its income tax return for the assessment year 2023-24 declaring income to the tune of Rs.47.64 crores. The return of the petitioner was selected for scrutiny on 19.06.2024. The Department issued a show cause notice to the petitioner based on the scrutiny on 22.02.2025. The Department issued a show cause notice but the same was sent to the email id of the petitioner. The petitioner updated its latest e-mail id on the income tax portal. The Department, without noticing the latest email id of the petitioner, sent the notice to the previous email id of the petitioner. Therefore, the petitioner was not able to receive the show cause notice.
The petitioner noticed the show cause notice while accessing its income tax E-filing account. A request was made by the petitioner for personal hearing through video conferencing by clicking the appropriate tab on the portal. The Department fixed the personal hearing on video conference on 03.03.2025. A request was made by the petitioner for adjournment of one week to comply with the show-cause notice dated 22.02.2025 during the video conference. The Department granted adjournment of three days to the petitioner directing him to file reply on or before 06.03.2025.
The petitioner filed its reply to the show cause notice issued to it on 06.03.2025. During the personal hearing the petitioner requested for personal hearing through video conference. The Department, without caring the request of the petitioner framed the assessment under Section 143 (3) read with Section 144B of the Income Tax Act, 1961 (‘Act’ for short) on 19.03.2025. The order determined the income of the petitioner as Rs.52.33 crores. The Department also issued a demand notice to the petitioner for the above said amount.
Being aggrieved against the above said assessment order the petitioner filed the present writ petition before the High Court. The petitioner sought the following reliefs from the High Court-
- to quash and set aside the impugned Assessment Order dated 19.03.2025 as well as the demand notice dated 19.03.2025 for the Assessment Year 2023-24;
- to stay the implementation and operation of the impugned Assessment Order dated 19.03.2025 as well as the demand notice dated 19.03.2025 for the Assessment Year 2023-24 pending the admission, hearing and final disposal of the writ petition; and
- to pass any other and further relief deemed just and proper be granted in the interest of justice.
The petitioner submitted the following before the High Court-
- The impugned Assessment Order passed by the respondent for the year under consideration is patently bad, illegal and contrary to law, inasmuch as, it was passed in gross violation of the principles of natural justice without providing any effective opportunity of personal hearing through video conferencing.
- The purpose of video conferencing is to ensure that an assessee gets an opportunity to explain the case to the authority concerned.
- If the petitioner was not at all afforded an opportunity to represent the case through video conferencing, though a categorical request was made.
- Non granting of hearing through video conference amounts to the violation of principles of Natural Justice.
- The video conference which was held on 03.03.2025 ended merely after granting extension of three days to the petitioner to submit his reply by 06.06.2023.
- The petitioner was not granted an opportunity to show-cause as to why addition of income should not be made in his case.
- The limitation for framing assessment was getting expired on 31.03.2025, and therefore, there was sufficient time with the respondent for framing assessment.
- Therefore, the respondent ought not to have shown any undue haste in framing the assessment for the year under consideration.
In view of the above, the petitioner prayed the High Court to quash the impugned order.
The Revenue did not dispute the submissions made by the petitioner before the High Court. The Revenue prayed the High Court to pass appropriate orders. The High Court analysed the provisions of Section 144B of the Act and also the Standard Operating Procedure for the procedure of issuing of show cause notice etc. Section 144B of the Act introduced the faceless assessment scheme. The said section provides that the assessment, reassessment or re-computation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner.
In para G3 of the said procedure it is provided for the centralized communication to improve compliance of notice under section 142(1) of the Act, as detailed below-
- In all cases where assessee is not responsive to the notice under section 142(1), on directions of NaFAC, Insight shall prepare centralized communication, as per format, about non-responsiveness.
- Send physical letter at the latest known address through Speed Post; and
- Send SMS about non-responsiveness, on the latest available mobile number of the assessee.
- All attributes of the communication, including PAN, Assessment Year, address at which the letter is sent, speed post tracking ID, date on which letter is sent, mobile number on which SMS is sent along with the date and time of sending, will be updated in the database accessible to AU on Insight.
- To ensure completeness of record, the AU shall enter all the details along with the date of delivery, if any, of the Speed Post letter in the Case History.
Para N prescribes the process of assessment-
- To ensure completeness of record, the AU shall enter all the details, along with the date of delivery, if any, of the Speed Post letter in the Case History.
- The show cause notice shall be drafted after conduct of all necessary enquiry/verification and collection of relevant information.
- The show cause notice should contain-
- Complete description of the issues involved;
- Details of all notices/opportunities given;
- Details of dates of compliance/non-compliance of the assessee;
- Summary of all submissions of the assessee to demonstratably reflect application of mind and consideration of all submissions;
- Specific information/material proposed to be used against the assessee;
- Variations proposed on the basis of reasonable inferences drawn.’
- To ensure adherence to the principles of natural justice and reasonable opportunity to the assessee, timelines to be given for obtaining response to the SCN shall be-
- Response time of 7 days from the issue of show cause notice.
- Response time of 7 days may be curtailed, keeping in view the limitation date for completing the assessment.
- Wherever personal hearing is sought by the assessee through the button on the e-filing portal, AU shall accord personal hearing to the assessee through Video Conferencing facility.
- To ensure adherence to the principles of natural justice and reasonable opportunity to the assessee, Video Conferencing must be given within 2-3 days of request by the assessee.
The High Court observed that the Standard Operating Procedure can be interpreted that if the assessee is not granted mandatory requirement of video conference for personal hearing, it would amount to breach of principles of natural justice. Even if the petitioner had not responded to the show-cause notice, the department could have written physical communication to the petitioner at the latest address known through speed-post. In this case, the High Court observed that the petitioner sought for a personal hearing by clicking the tab in the income tax portal. But the Department did not grant personal hearing to the petitioner. However, it passed the assessment order in its absence.
The High Court, therefore, held that the authorities have failed to follow the mandatory requirement of the Standard Operating Procedure, and resultantly, the impugned Assessment Order dated 19.03.2025 as well as the demand notice dated 19.03.2025 would not stand at all. The High Court set aside the impugned assessment order and demand notice for recovery of the tax. The High Court remanded the matter back to the National Faceless Assessment Authority to comply with the Standard Operating Procedure and pass a fresh order after following the due procedure of law.