Tax Reassessment Order Quashed for 2016-17: Breach of Natural Justice Due to Denial of Video Hearing.

The HC quashed the assessment order under Section 147 read with Section 144D of the Income Tax Act for A.Y. 2016-17, citing a breach of natural justice principles due to the denial of a personal hearing via video conferencing. The matter was remanded for a fresh order, to be passed within twelve weeks, ensuring the petitioner is granted a personal hearing. Interim relief was granted, staying the operation of the order, demand notice, and penalty imposition notice. The petition was allowed, and the Revenue's adjustment of a refund against the outstanding amount, in violation of the stay order, was noted.

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Issues:
1. Validity of assessment order passed under Section 147 read with Section 144D of the Income Tax Act for the assessment year 2016-17.
2. Breach of principles of natural justice in passing the assessment order.
3. Denial of opportunity of personal hearing through video conferencing.

Analysis:
The petitioner, engaged in the business of design, manufacturing, supply, and installation of lifts, filed a petition under Article 226 challenging the order dated 31.03.2022 passed under Section 147 read with Section 144D of the Income Tax Act for the assessment year 2016-17. The petitioner's case for A.Y. 2016-17 was initially taken up for scrutiny assessment under Section 143(3) of the Income Tax Act. The returned income was accepted after detailed scrutiny. Subsequently, the petitioner received a notice for reopening of assessment under Section 148, followed by multiple notices and replies regarding the issues raised. The respondent delayed proceedings for over three months after receiving responses from the petitioner.

In a sequence of events, just seven days before the assessment was getting time-barred, the respondent issued a show cause notice proposing an addition in the petitioner's case. Despite the petitioner submitting replies and additional evidences, the assessment order was passed confirming the proposed addition. The petitioner argued that the order was passed in breach of principles of natural justice due to the short notice period and denial of a personal hearing opportunity.

During the proceedings, the court granted interim relief staying the operation of the order, demand notice, and penalty imposition notice. It was noted that the Revenue had adjusted a refund from a different assessment year against the outstanding amount of the petitioner, breaching the stay order. After hearing both parties, the court found that the petitioner was denied a proper opportunity of personal hearing through video conferencing, leading to the quashing and setting aside of the assessment order. The matter was remanded for a fresh order to be passed within twelve weeks from the date of granting a personal hearing to the petitioner, ensuring compliance with the provisions of the Act. The petition was allowed accordingly.

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