2021 (6) TMI 336 - HC - Income Tax

Court rules in favor of petitioner, orders fresh proceedings due to lack of personal hearing compliance.

The Court found in favor of the petitioner, holding that the revenue should have granted a personal hearing as requested, in compliance with Section 144B ... Faceless assessment - return was processed under Section 143(1) - Infraction of the statutory scheme encapsulated in Section 144B - HELD THAT:- A careful 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’, 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) read with Section 144B (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. 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. Conclusion - As 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. The net impact of this infraction would be that, the impugned orders will have to be set aside. It is ordered accordingly. This brings us to Mr. Chandra's submission that; the respondent/ revenue should be allowed to proceed afresh in the matter, in accordance with the law. To our minds, if the law permits the respondent/revenue to take further steps in the matter, the Court, at this stage, need not make any observations in that regard. If and when such steps are taken, and there is a grievance, the petitioner can take recourse to the relevant provisions of the Act. The entire scheme, encapsulated under Section 144B of the Act, was laid down to bring transparency as well as accountability in the system.According to us, irrespective of whether such a statutory scheme was framed or not, the system has to be both, transparent, and the persons administering it, have to remain accountable. Therefore, what Mr. Goel has said is something, which is, obvious. Issues:Challenge to assessment order and consequential proceedings for AY 2018-2019; Request for personal hearing denied by revenue; Compliance with statutory scheme under Section 144B of the Income Tax Act, 1961.Analysis:1. The petitioner challenged the assessment order dated 28.04.2021 and subsequent proceedings for AY 2018-2019, seeking various reliefs including quashing of the assessment order, prohibition on its operation, and stay on collection of disputed demand. The petitioner contended that despite requesting a personal hearing due to the complexity of the matter, the revenue did not grant the same, alleging a violation of Section 144B of the Act.2. The petitioner's counsel argued that the impugned assessment order was contrary to the statutory scheme of Section 144B and that non-accordance of a personal hearing rendered the assessment proceedings non-est. The respondent's counsel, on the other hand, contended that the provision for a personal hearing was discretionary, not mandatory, and multiple opportunities were given to the petitioner to respond.3. The Court noted that the petitioner consistently requested a personal hearing both before and after the issuance of show-cause notices, emphasizing the complexity of the matter. The provision in Section 144B(7)(vii) allows an assessee to seek a personal hearing if income is varied, indicating an obligation on the revenue to consider such requests.4. It was observed that no standards or procedures were in place for dealing with requests for personal hearings, highlighting a lack of framework for compliance with Section 144B. Consequently, the Court held that the revenue should have granted a personal hearing to the petitioner, and failure to do so necessitated setting aside the impugned orders.5. The Court directed that if the law permits, the revenue may proceed afresh in the matter, and emphasized the importance of transparency and accountability in the system, irrespective of statutory provisions. The writ petition and related application were disposed of accordingly, with the case papers to be archived.This detailed analysis of the judgment highlights the issues raised, arguments presented by both parties, the Court's interpretation of the statutory provisions, and the ultimate decision reached by the Court.