Reassessment order under Section 144B quashed for denying personal hearing in faceless assessment proceedings

Gujarat HC set aside a reassessment order under Section 144B for violating natural justice principles. The petitioner requested personal hearing through video conferencing twice during faceless assessment proceedings. While the first request was granted, intimation was sent after the scheduled hearing time. The second request was neither granted nor acknowledged, and the impugned order was passed immediately. The court held that revenue authorities failed to comply with mandatory provisions of Section 144B, which requires granting personal hearing upon request in faceless assessments. The petition was allowed solely on grounds of procedural violation without examining the merits.

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Issues:
Challenge to assessment order and demand notice under Income-Tax Act, 1961.

Analysis:
The petitioner challenged the assessment order dated 28.3.2022 and demand notice issued under Section 156 of the Income-Tax Act, 1961. The petitioner filed its return of income on 16.9.2010, declaring a total loss and brought forward loss for the Assessment Year 2010-11. The case underwent scrutiny assessment, resulting in an order assessing total loss and book profit under Section 115JB of the Act. Subsequently, the case was reopened due to alleged bogus purchases and wrong CENVAT credit claims. The Principal Commissioner of Income Tax revised the order under Section 263(1) of the Act, leading to fresh assessment directions. The petitioner approached the Income Tax Appellate Tribunal, and a notice under Section 143(2) was issued for scrutiny assessment. The petitioner raised objections regarding the notice's timing, but no response was received. The respondent issued a show cause notice proposing income variation, leading to a request for a personal hearing through video conferencing. However, the communication for the hearing was received late, and the order was passed without granting a new hearing date. The petitioner approached the High Court seeking to quash the assessment order and demand notice, requesting a stay on demand recovery. The petitioner argued violations of natural justice and procedural irregularities in the assessment proceedings.

The petitioner's counsel contended that the assessment order was made in violation of natural justice, citing failure to provide a personal hearing through video conferencing and non-issuance of required notices under the Act. The counsel highlighted that the Assessing Officer raised a substantial demand without providing a hearing, emphasizing arbitrariness and lack of natural justice principles. The petitioner urged the Court to set aside the assessment order based on these grounds. In contrast, the respondent's counsel supported the assessment order, asserting its legality and adherence to the law. The respondent argued that the petitioner had alternative remedies available and thus the writ petition was not maintainable. The respondent requested the Court to dismiss the petition.

After hearing both parties and reviewing the record, the Court considered whether the assessment order dated 28.3.2022 was legal and justified. The Court noted the petitioner's claim of lack of effective hearing during the re-assessment process, which remained uncontested by the revenue authorities. Referring to Section 144B of the Act, the Court emphasized the duty to grant personal hearings if requested in faceless assessments. The Court observed that while the petitioner's request for a video conferencing hearing was accepted, the intimation was delayed, and subsequent requests for advance notice were ignored. Consequently, the Court found that the revenue authorities did not comply with Section 144B, leading to a violation of natural justice principles. Therefore, the Court allowed the petition solely on the ground of procedural irregularities, quashing the assessment order and remanding the proceedings back to the revenue authorities for a fresh order in accordance with the law. No costs were awarded in the matter.

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