2024 (5) TMI 226 - HC - Income Tax

Assessment Order Quashed for Breach of Natural Justice; Case Remanded for New Order with Fair Hearing in 12 Weeks.

The HC quashed the assessment order and demand notice due to a breach of natural justice, as the petitioner's request for an adjournment was ignored. The ... Violation of principle of natural justice - non-granting opportunity of hearing to the petitioner - adjournment prayer made by the petitioner ignored - HELD THAT:- AO has not granted opportunity of hearing to the petitioner though petitioner has prayed for same which is not in dispute as per the screenshot placed on record . It appears that the petitioner has also personally met the respondent Assessing Officer and requested for time to file reply to the show-cause notice, however the same is not reflected in the impugned order nor the AO has referred to in the affidavit-in-reply. In view of the above undisputed fact of not granting opportunity of hearing to the petitioner, the impugned assessment order is hereby quashed and set aside and the same is remanded back to the Assessing Officer to pass fresh de novo order after giving opportunity of hearing to the petitioner from the show-cause notice stage. Such exercise shall be completed within 12 weeks from the date of receipt of copy of this order. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessment order passed without granting an opportunity of hearing to the assessee, despite the assessee having requested an adjournment and sought time to file a reply to a show-cause notice, constitutes a breach of the principles of natural justice requiring quashment and remand. 2. Whether an online/portal request for adjournment and a personal oral request to the Assessing Officer, when not reflected in the order-sheet, can nevertheless establish that an opportunity to be heard was sought and thereby engage the duty to afford a hearing before passing a final assessment order. 3. Whether, where breach of natural justice is found, the appropriate judicial remedy is to quash the impugned order and remit the matter to the Assessing Officer for fresh decision from the show-cause stage, without adjudicating the substantive merits of the additions made. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Breach of natural justice by passing assessment order without hearing after adjournment request Legal framework: The requirement to afford an opportunity of hearing before taking adverse action is a core tenet of the principles of natural justice applicable to quasi-judicial proceedings, including assessments under the Income Tax Act; show-cause proceedings require that an affected party be given reasonable opportunity to respond before an adverse addition is made. Precedent Treatment: No specific precedent was cited or relied upon in the adjudication; the Court applied settled principles of natural justice as governing the duty to hear before prejudicial action. Interpretation and reasoning: The Court recorded that the assessee was served a digitally signed show-cause notice fixing a short timeline to respond, that the assessee made an online adjournment request and personally met the Assessing Officer to seek time to compile documents, and that nevertheless a final assessment was passed without any recorded hearing. The absence of any reference to the adjournment request in the order-sheet and in the respondent's affidavit did not negate the contemporaneous screenshot evidence of the request. On these undisputed facts, the Court concluded the Assessing Officer failed to grant the opportunity sought and thereby breached natural justice. Ratio vs. Obiter: Ratio - Where an assessee timely seeks an opportunity to reply to a show-cause notice and the request is substantiated on the record (here by portal screenshot and admitted personal contact), passing a final assessment without affording that opportunity breaches the principles of natural justice, warranting quashment and remand. Obiter - Observations about the Assessing Officer's reliance on absence of order-sheet entries are ancillary; the decisive point is the undisputed request for hearing. Conclusions: The impugned assessment order was quashed and set aside for want of opportunity of hearing; the Court remitted the matter for fresh consideration from the show-cause stage. Issue 2 - Evidentiary effect of portal screenshot and oral request absent order-sheet noting Legal framework: Administrative and quasi-judicial bodies must take into account communications made by parties through prescribed channels; absence of internal noting does not automatically negate an otherwise evident request for hearing where corroborative material is before the Court. Precedent Treatment: The judgment did not treat any precedent as determinative on the interplay between electronic portal entries, oral communications, and internal order-sheet notings; instead, it assessed the probative value of the materials on record. Interpretation and reasoning: The Court found the screenshot of the portal request and admission that the petitioner personally met the Assessing Officer to seek adjournment sufficiently established that an opportunity to be heard had been sought. The lack of an order-sheet entry was noted by the respondent, but the Court treated the absence of such internal notation as not dispositive in the face of the other contemporaneous evidence and the fundamental obligation to afford hearing before adverse action. Ratio vs. Obiter: Ratio - Electronic requests and corroborating evidence of a contemporaneous oral request can establish that an opportunity to be heard was sought, such that failure to act on that request breaches natural justice even if internal order-sheet entries are silent. Obiter - The Court's comments implicitly caution administrative officers to maintain proper order-sheet entries but do not lay down doctrine on the sufficiency of order-sheet notings. Conclusions: The portal screenshot and admitted personal solicitation were adequate to prove that a hearing was sought; the Assessing Officer's failure to record or act upon the request did not cure the breach. Issue 3 - Appropriate remedy where breach of natural justice is established in an assessment Legal framework: Where a quasi-judicial authority decides a matter without affording an opportunity to be heard, the usual judicial response is to quash the impugned decision and remit the matter for fresh decision after affording the required hearing; courts avoid deciding the substantive merits where procedural infirmity is the sole basis for interference. Precedent Treatment: The Court followed established remedial practice of remand for de novo consideration rather than deciding the substantive assessment issues. Interpretation and reasoning: The Court expressly limited its intervention to the procedural breach, declined to examine the correctness of the substantive addition, and ordered the Assessing Officer to pass a fresh order after affording opportunity from the show-cause stage. A time frame of 12 weeks for completion of the exercise was imposed to ensure expeditious disposal. Ratio vs. Obiter: Ratio - Quashment of the impugned assessment and remand for de novo consideration after providing the opportunity to be heard is the appropriate remedy for breach of natural justice in assessment proceedings. Obiter - The imposition of a 12-week timeline is a case-specific direction to ensure finality and does not create a general rule on timelines. Conclusions: The assessment order was set aside and remitted for fresh decision after hearing; the Court did not adjudicate merits and imposed a 12-week period for compliance. Cross-references and Practical Implications Where procedural requests (including electronic portal requests and oral requests) for adjournment or hearing are made and supported by contemporaneous evidence, authorities must either record refusal with reasons or grant an opportunity; failure to do so will attract judicial interference for breach of natural justice, with the usual remedy being quashment and remand to the decision-making authority to reconsider after hearing.