2023 (12) TMI 503 - HC - Income Tax

Faceless assessment challenge fails as petitioner received notices but failed to file objections within time

Kerala HC dismissed the writ petition challenging faceless assessment proceedings. Petitioner claimed non-receipt of draft assessment order and notice, ... Validity of faceless assessment proceedings - as argued petitioner did not receive the draft assessment order and notice - violation of principles of natural justice - HELD THAT:- It is not in dispute that all other notices issued to the petitioner during the faceless assessment proceedings were served on him and he filed responses to the said notices. It would be hard to believe that the petitioner did not receive the draft assessment order and notice. Violation of principles of natural justice - As argued Sufficient time to the petitioner for filing reply/objection to the draft assessment order not provided assessee was afforded only three days time to file objection to the draft assessment order - Submission of the petitioner is also unsustainable, because violation of principles of natural justice would come only if the petitioner asked for extension of time to file reply/objection to the draft assessment order dated 24.9.2021, Ext.P11(b), or the notice dated 23.9.2021 and the authority denied such request for further time for filing reply/objection. In the present case, the petitioner did not choose to file reply to the notice dated 23.9.2021, nor objection to the draft assessment order. Therefore, the alleged violation of principles of natural justice does not exist. Thus it would be hard to believe that the petitioner did not receive draft assessment order and therefore, the decision in the case of Ellathkandi Khaleel Ahammad [2022 (8) TMI 139 - KERALA HIGH COURT] is of no use to the petitioner in the present case. No substance in the submission of the learned counsel for the petitioner that notice and draft assessment order were not served on the petitioner. Accordingly, the present writ petition is hereby dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether faceless assessment proceedings conducted under the E-Assessment/Faceless Assessment Scheme (Sections 143(3A), 143(3B) and related provisions) were vitiated by alleged technical glitches in the e-portal that prevented service of the draft assessment order and notice. 2. Whether summary completion of assessment after issuance of a draft assessment order and a short notice period (three days) violated principles of natural justice where the assessee neither received the draft/notice nor sought an extension. 3. Whether decisions relied upon by the petitioner (remand for insufficient opportunity to be heard) were applicable on the facts where no request for extension or objection was made. 4. Whether the existence of an alternative statutory remedy (appeal under the Act) bars entertainment of the writ petition. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity of faceless assessment in face of alleged e-portal technical glitches Legal framework: Assessments are to be carried out under the statutory scheme introduced by the Finance Act, 2019 via amendments to Section 143 and rules/notifications creating the E-Assessment/Faceless Assessment Scheme; notices, draft orders and assessments are effected through the electronic portal and service mechanisms prescribed therein. Precedent treatment: No new precedent was overruled. Earlier authority cited by petitioner involved remand where non-service was established. Interpretation and reasoning: The Court examined the record and noted that multiple other notices in the faceless proceedings were received and responded to by the assessee through the portal and electronic means. The news report of earlier portal glitches related to e-filing generally and pre-dated the draft order by approximately one month. There was no material to establish continuing portal dysfunction affecting service of the specific draft assessment order and notice. Given availability of real-time alerts and documented receipt of other communications, the Court found it implausible that the draft order and the notice were not served. Ratio vs. Obiter: Ratio - Where the record shows consistent receipt of electronic communications during faceless proceedings and no positive evidence of non-delivery of a specific draft order/notice, an allegation of non-service based solely on earlier, unrelated portal glitches is insufficient to set aside the assessment. Conclusion: The contention that technical glitches prevented service of the draft assessment order and notice is rejected for want of supporting evidence on the record. Issue 2: Alleged violation of principles of natural justice due to short notice (three days) to file objections to draft assessment order Legal framework: Principles of natural justice require reasonable opportunity to be heard before adversely affecting rights. Under the faceless scheme, draft assessment orders are issued with an opportunity to respond; time extensions may be sought where necessary. Precedent treatment: The Court distinguished cases remanding assessments where it was found that adequate opportunity was not provided or the assessee had sought time and been denied. Interpretation and reasoning: The Court held that a claim of denial of natural justice arising from an allegedly short response window becomes actionable only if the assessee sought additional time or otherwise communicated inability to respond within the prescribed period. Here the assessee neither filed objections nor requested extension. Absent an application for more time or contemporaneous challenge to the short notice, mere assertion post facto of insufficiency of time does not amount to denial of natural justice. The Court emphasized that alleged procedural inadequacy must be supported by evidence of attempts to seek relief or concrete inability to respond. Ratio vs. Obiter: Ratio - Failure to avail or seek the procedural remedy (request extension/raise objection) during the pending draft/notice period precludes a later successful challenge on the ground of inadequate opportunity unless service itself is disproved. Conclusion: The claim of violation of natural justice on the ground of a three-day reply window is unsustainable because no application for extension or contemporaneous objection was made. Issue 3: Applicability of precedents relied upon by the petitioner Legal framework: Judicial precedents that remand or quash assessments typically do so on findings that the assessee was not granted sufficient opportunity or that documents/notice were not served. Precedent treatment: The Court considered two precedents relied on by the petitioner - one remanding because the Tribunal found insufficient opportunity to be heard; another remanding because the draft assessment order was not served. The Court distinguished both on the facts. Interpretation and reasoning: In the first precedent the factual finding was lack of opportunity; in the second there was positive proof of non-service. In the present record there is evidence of receipt and response to multiple notices and no evidence of contemporaneous complaint about non-receipt or short notice. Therefore those authorities are inapplicable. Ratio vs. Obiter: Ratio - Precedents remanding assessments for procedural infirmity are fact-sensitive and do not assist where the record shows receipt of communications and absence of requests for relief during the relevant period. Conclusion: The relied-upon authorities are distinguishable and do not warrant remand or setting aside of the assessment on the facts before the Court. Issue 4: Availability of alternative remedy (appeal under statute) and continuance of writ jurisdiction Legal framework: Statutory appeal remedies are ordinarily the appropriate forum for challenging assessment orders; writ jurisdiction may be exercised in appropriate cases but availability of efficacious alternative remedy is a factor. Precedent treatment: The Revenue raised availability of appeal under the statute; the Court acknowledged the statutory remedy but proceeded to decide the writ on merits. Interpretation and reasoning: The Court found no bar to entertaining the writ in the circumstances of the petition but, on merits, found no infirmity in the assessment. Nonetheless, the Court expressly afforded relief in practical terms by permitting the assessee to file appeal against the assessment within three weeks and directing that such appeal be entertained and decided on merits without going into limitation, thereby preserving the statutory appellate route. Ratio vs. Obiter: Obiter/Ratione decidendi blend - While the Court did not dismiss the petition solely on grounds of alternative remedy, it recognized the availability of appeal and provided remedial directions to avoid prejudice to the assessee. Conclusion: The availability of the statutory appeal remains an efficacious remedy; the Court allowed a time-limited opportunity to file appeal and directed adjudication on merits without invoking limitation objections. Overall Conclusion The Court found no substance in allegations that portal glitches prevented service of the draft assessment order/notice or that principles of natural justice were violated by the three-day response period, particularly in the absence of any request for extension or contemporaneous objection. Authorities relied upon by the petitioner were distinguished on facts. The writ petition is dismissed; however, the assessee is permitted to file an appeal within three weeks, which is to be entertained and decided on merits notwithstanding limitation issues.