Right to fair hearing requires opportunity to explain disputed transactions and a virtual hearing before fresh assessment.

Challenge concerned validity of an assessment completed without affording the taxpayer a real opportunity to respond to notices and disputed cash-deposit particulars; court applied the principle of fair opportunity to be heard and directed that where procedural defects and disputed factual entries (including alleged wrongfully attributed deposits) deny meaningful response, the assessment may be set aside. Outcome: the impugned assessment order was set aside; the taxpayer was permitted to file explanations within a fixed period, to be followed by receipt of explanations, a virtual hearing and a fresh order in accordance with law.

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Issues: Whether the impugned assessment order dated 20.03.2022 passed for Assessment Year 2017-18 should be set aside and the petitioner given an opportunity to submit explanations and a virtual hearing in respect of alleged cash deposits and related notices under Sections 142(1) and 148 of the Income-tax Act, 1961.

Analysis: The petitioner's case, supported by medical incapacity and errors in the notices and recorded cash-deposit particulars, shows that the petitioner did not have a real opportunity to respond to the notices placed on the e-filing portal. The record identifies a discrepancy as to an alleged deposit amount which the petitioner asserts does not belong to him, and the petitioner has proffered explanations for other deposits. In these circumstances, fairness requires that the petitioner be permitted to file explanations and be afforded a hearing before any fresh assessment is finalised. The respondent is directed to receive the explanation, provide an opportunity of virtual hearing, and thereafter pass an appropriate order in accordance with law and rules within an expeditious timeframe.

Conclusion: The impugned assessment order dated 20.03.2022 is set aside and the petitioner is permitted to submit explanations to the notice dated 29.06.2021 within three weeks from receipt of the copy of the order; thereafter the respondent shall consider the explanations, afford a virtual hearing, and pass an appropriate order in accordance with law.

Ratio Decidendi: Where an assessment is completed without affording the assesseee a fair opportunity to explain disputed transactions or to be heard, the assessment order can be set aside and the assessee must be granted an opportunity to file explanations and a hearing before a fresh decision in accordance with the governing law.

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