Court Quashes Tax Assessment Order for Denying Personal Hearing, Violating Natural Justice u/s 144B of Income Tax Act.

The court set aside the assessment order dated 25 May 2023, finding it violated the principles of natural justice due to the denial of a requested personal hearing, as mandated under Section 144B(6)(vii) and (viii) of the Income Tax Act, 1961. The court determined that the Petitioner had indeed requested a personal hearing, which was not granted, thus breaching statutory provisions. The matter was remanded for reconsideration, with instructions to provide the Petitioner a personal hearing, while leaving the merits of the assessment open for future determination.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the assessment order dated 25 May 2023 was passed in violation of the principles of natural justice due to the denial of a personal hearing requested by the Petitioner.
• Whether the provisions of Section 144B(6)(vii) and (viii) of the Income Tax Act, 1961, which mandate a personal hearing upon request, were breached in this case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice

Relevant legal framework and precedents:

The relevant legal framework is Section 144B(6)(vii) and (viii) of the Income Tax Act, 1961, which provides that if a request for a personal hearing is made, the income tax authority must allow such a hearing through video conferencing. The Petitioner also relied on a precedent from the Co-ordinate Bench of the Bombay High Court in a similar matter.

Court's interpretation and reasoning:

The court interpreted Section 144B(6)(vii) and (viii) to mean that once a request for a personal hearing is received, it is mandatory for the income tax authority to grant such a hearing. The court emphasized the importance of adhering to the principles of natural justice, which include the right to be heard.

Key evidence and findings:

The Petitioner provided evidence of having requested a personal hearing through digital communication and reiterated this request in subsequent written communications. The Respondents' affidavit did not firmly deny the receipt of such requests but suggested a possible technical issue in executing the request.

Application of law to facts:

The court applied the provisions of Section 144B(6)(vii) and (viii) to the facts, finding that the Petitioner had indeed requested a personal hearing, which was not granted. This constituted a breach of the statutory provisions and a violation of the principles of natural justice.

Treatment of competing arguments:

The Respondents argued that no request for a personal hearing was received, citing a technical issue. However, the court found this argument vague and unsupported by concrete evidence, particularly when contrasted with the documentary evidence provided by the Petitioner.

Conclusions:

The court concluded that the assessment order was passed in violation of the principles of natural justice due to the denial of a personal hearing, which was requested by the Petitioner. Consequently, the assessment order and any consequential notices were set aside.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

"Since, in this case, we are satisfied that the Petitioner requested a personal hearing and admittedly, no such personal hearing was granted to the Petitioner, we set aside the impugned assessment order on the grounds of violation of the principles of natural justice and fair play on the ground of breach of Section 144B(6) (vii) and (viii) of the Act, which provisions incorporate the principles of natural justice and fair play."

Core principles established:

• The statutory mandate under Section 144B(6)(vii) and (viii) of the Income Tax Act, 1961, requires that a personal hearing be granted if requested, as part of the principles of natural justice.
• Failure to grant a requested personal hearing constitutes a breach of natural justice and renders the assessment order void.

Final determinations on each issue:

• The assessment order dated 25 May 2023 was set aside due to the breach of the principles of natural justice.
• The matter was remanded for fresh consideration with instructions to grant the Petitioner a personal hearing.
• The court did not consider the merits of the assessment itself, leaving all contentions on merits open for future determination.

---