Section 144B mandates personal hearing when assessee requests it before adverse assessment order The HC ruled that under Section 144B, when an assessee specifically requests personal hearing and the Assessing Officer intends to pass an adverse ...
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Section 144B mandates personal hearing when assessee requests it before adverse assessment order
The HC ruled that under Section 144B, when an assessee specifically requests personal hearing and the Assessing Officer intends to pass an adverse assessment order, the AO must grant the opportunity for personal hearing. The word "request" in Section 144B(6)(vii) and (viii) does not make personal hearing optional when the AO maintains a tentative adverse opinion despite the assessee's written explanation. If personal hearing is denied and an ex parte order is passed wrongly, the appellate authority's powers become restricted, forcing it to perform the AO's functions, which disrupts the statutory scheme and deprives the assessee of one tier of appeal without fault.
Issues Involved: The judgment involves the legality of an ex parte scrutiny assessment order passed by the National Faceless Assessment Centre (NAFAC) under section 143(3) read with Section 144B of the Income Tax Act for the Assessment Year 2022-23. The main issue is the denial of the opportunity of personal hearing to the petitioner.
Denial of Opportunity of Personal Hearing: The court noted that the impugned assessment order was passed without considering the petitioner's request for a personal hearing, which was fallacious as the reply furnished was pending consideration. The court emphasized that Section 144B mandates the opportunity of hearing to be given to the petitioner upon a show-cause notice, and if the assessee requests a personal hearing, it must be provided. The court clarified that the grant of the opportunity of personal hearing is not optional but necessary under the Act.
Importance of Personal Hearing: The court highlighted the importance of oral hearing in assessment proceedings, stating that it is essential for an effective discussion and a reasoned conclusion by the Assessing Officer. It was emphasized that assessment orders should be passed after giving the assessee an opportunity to present their case, and oral hearing remains a near-mandatory requirement to ensure a just and proper order.
Recording Reasons and Appeal Authority's Powers: The judgment stressed the need for recorded reasons in assessment orders to allow the assessee to understand the basis for any tax adjustments. It also discussed the limitations on the first appeal authority's powers, noting that the authority can confirm, reduce, enhance, or annul an assessment order but cannot remit the matter for a fresh assessment. The court expressed concerns about restricted appeal powers in cases of ex parte orders and the potential impact on the appeal process.
Decision and Directions: The court allowed the writ petition, setting aside the impugned assessment order. The petitioner was directed to treat the order as a final show-cause notice and submit a reply within a week. If the Assessing Officer intends to accept the explanation furnished by the petitioner, he may pass the order without a further hearing. However, if the explanation is to be rejected, a date for a hearing must be fixed with prior notice. The petitioner was required to appear before the Assessing Authority as prescribed, and the assessment proceedings were to continue in accordance with the law.
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