2024 (6) TMI 1303 - HC - Income Tax

Assessment order quashed for denying personal hearing opportunity under Section 144B and CBDT Circular 06.09.2021

Gujarat HC quashed an assessment order for violating natural justice principles by denying personal hearing opportunity. The jurisdictional AO rejected ... Validity of assessment order passed without providing opportunity of personal hearing - violation of principle of natural justice - transfer of case from National Faceless Assessment Center to that of jurisdictional AO under section 144B (8) - request of the petitioner to grant personal hearing was rejected by the respondent No. 1 as there was no functionality to conduct hearing through video conference. HELD THAT:- The contentions raised on behalf of the respondent that there is no functionality to conduct hearing through video conference cannot be accepted because as per the provisions of the section 144B of the Act as well as circular dated 06.09.2021 issued by the CBDT, the respondent-Assessing Officer is required to give personal hearing through video conference and if the facility is not available then the personal hearing is to be conducted in a designated area in Income Tax Office and the hearing proceedings are to be record. As per Circular No. 06.09.2021 respondent Assessing Officer was required to give personal hearing to the petitioner and if it is not technically possible through video conference, then the personal hearing ought to have been conducted in a designated area of the Income Tax office. Therefore, the contention of the respondent which is stated on oath is contrary to the circular issued by the CBDT. The contention raised on behalf of the respondent that the petitioner has alternative efficacious remedy to file appeal before the CIT (Appeal) the petition may not be entertained is also not tenable in view of the fact that there is a breach of principle of natural justice by not providing opportunity of hearing to the petitioner though required as per the provisions of section 144B read with circular issued by the CBDT dated 06.09.2021 which is binding upon respondent-Assessing Officer in view of the settled legal position Hon’ble Supreme Court in case of Whirlpool Trade Marks, Mumbai And Others [1998 (10) TMI 510 - SUPREME COURT] Similarly, the contention raised on behalf of the petitioner that the jurisdictional officer has passed the impugned order without jurisdiction is also not tenable in view of the notings made in the order sheet in view of the fact that the assessment proceedings were conducted pursuant to the order passed under section 263 and therefore, the same is required to be conducted by jurisdictional Assessing Officer. Petition partly allowed and impugned assessment order is hereby quashed and set aside. The matter is remanded back to the respondent No. 1 Assessing Officer to give opportunity of hearing to the petitioner either through video conference or through personal hearing in the designated area of the income tax office as per the para 2B of the Circular dated 06.09.2021 issued by the CBDT. Issues Involved:1. Violation of principles of natural justice due to denial of personal hearing.2. Jurisdictional authority to pass the assessment order.3. Availability of alternative efficacious remedy.Issue-wise Detailed Analysis:1. Violation of principles of natural justice due to denial of personal hearing:The petitioner argued that the assessment order dated 18.03.2024 was passed without providing an opportunity for a personal hearing, violating the principles of natural justice. Despite requests for personal hearings on 15.02.2024 and 08.03.2024, the respondent passed the order without granting such a hearing. The petitioner cited several decisions supporting the necessity of personal hearings, including Bharat Aluminium Company Ltd vs. Union of India [2022] 134 taxmann.com 187 (Delhi) and others.The respondent contended that there was no functionality to conduct hearings through video conferences. However, the court noted that as per section 144B of the Act and the CBDT circular dated 06.09.2021, the Assessing Officer is required to provide personal hearings through video conference or, if not feasible, in a designated area of the Income Tax Office. The court found the respondent's contention contrary to the CBDT circular, which mandates personal hearings in such cases.2. Jurisdictional authority to pass the assessment order:The petitioner claimed that the impugned assessment order was passed without jurisdiction as the case was initially with the National Faceless Assessment Center. The petitioner argued that no notice regarding the transfer of the case under section 144B (8) was received, and the assessment order did not refer to any such transfer.The respondent countered that the assessment was finalized by the National Faceless Assessment Center on 18.01.2021, but following the order under section 263 dated 27.03.2023, the case was transferred to the jurisdictional Assessing Officer on 13.11.2023. The court found that the assessment proceedings were conducted pursuant to the order under section 263, and thus, the jurisdictional Assessing Officer had the authority to conduct the assessment.3. Availability of alternative efficacious remedy:The respondent argued that the petition should not be entertained due to the availability of an alternative remedy by appealing to the CIT(A) and further to the Appellate Tribunal. However, the court held that this contention was not tenable given the breach of natural justice principles by not providing a personal hearing as required by section 144B and the CBDT circular.Conclusion:The court concluded that the petitioner's right to a personal hearing was violated and the assessment order was passed without jurisdiction. The impugned assessment order dated 18.03.2024 was quashed and set aside. The matter was remanded back to the respondent Assessing Officer to provide an opportunity for a hearing either through video conference or in a designated area of the Income Tax Office, as per the CBDT circular dated 06.09.2021. This exercise was to be completed within twelve weeks from the receipt of the court's order. The rule was made absolute to the aforesaid extent, with no order as to costs.