2025 (7) TMI 522 - HC - Income Tax

Assessment order quashed due to improper reopening notice and denial of hearing under section 144B(6)(vii)

Gujarat HC allowed the petition challenging an assessment order for A.Y. 2015-16. The AO passed the impugned order dated 28.03.2022 without proper notice ... Validity of reopening of assessment - relevant Assessment Year - No opportunity of hearing to the petitioner - HELD THAT:- AO has passed the impugned Assessment Order dated 28.03.2022 for the Assessment Year 2015-16 though there is no notice for reopening the assessment for the said Assessment Year because, by corrigendum dated 18.08.2021, the notice issued on 30.03.2021 for A.Y. 2015-16 was corrected to be the notice for A.Y. 2016-17. Respondent/AO has also not provided any opportunity of hearing to the petitioner as per the provisions of section 144B(6)(vii) of the Act though the petitioner has requested for the same as is evident from the screenshot placed at Annexure M at page 75 which shows that the petitioner has requested for personal hearing on 24.03.2022 and without considering such request, the impugned assessment order is passed on 28.03.2022. Matter should be remanded back to the AO to pass a fresh de novo order after giving an opportunity of hearing to the petitioner for A.Y. 2016-17 and the petitioner should also be permitted to raise all the contentions which can be raised in accordance with law. Petition succeeds and is accordingly allowed. The core legal questions considered by the Court in this matter include:1. Whether the reopening notice issued under section 148 of the Income Tax Act, 1961 (the Act) was valid and correctly issued for the relevant Assessment Year.2. Whether the Assessment Order dated 28.03.2022 was passed for the correct Assessment Year as per the notice issued and corrigendum.3. Whether the petitioner was afforded the opportunity of personal hearing as mandated under section 144B(6)(vii) of the Act, particularly in light of the petitioner's request for hearing through video conference.4. Whether the impugned Assessment Order suffers from procedural infirmities warranting its quashing and remand.Issue 1: Validity and Correctness of Reopening Notice Under Section 148The relevant legal framework involves section 148 of the Income Tax Act, which empowers the Assessing Officer (AO) to reopen an assessment if there is reason to believe that income chargeable to tax has escaped assessment. The reopening must be for a specific Assessment Year (AY) and must be supported by reasons recorded in writing.In this case, the AO initially issued a notice dated 30.03.2021 under section 148 for AY 2015-16. Subsequently, a corrigendum dated 18.08.2021 was issued clarifying that the reopening notice pertained to AY 2016-17 and not AY 2015-16. The petitioner argued that all subsequent notices and assessments proceeded incorrectly on the basis of AY 2015-16, which was not the subject of valid reopening.The Court noted that the corrigendum effectively corrected the year of reopening to AY 2016-17. However, the AO continued to issue notices and ultimately passed the Assessment Order for AY 2015-16, which was inconsistent with the reopening notice as corrected.The Court held that the reopening notice for AY 2015-16 was effectively superseded by the corrigendum, and therefore, the impugned order passed for AY 2015-16 was without jurisdiction. This constituted a fundamental procedural irregularity.Issue 2: Assessment Order Passed for Correct Assessment YearThe Assessment Order dated 28.03.2022 was passed for AY 2015-16, despite the corrigendum clarifying that the reopening was for AY 2016-17. The petitioner contended that the additions made in the order related to AY 2016-17 and not AY 2015-16, thus rendering the order erroneous.The Court observed that the AO's reference to AY 2015-16 in the impugned order was inadvertent and contrary to the corrigendum. The AO's failure to align the order with the correct AY meant that the order was not maintainable in law.This discrepancy led the Court to conclude that the impugned order was invalid as it was passed without jurisdiction over the stated AY, and the factual findings and additions pertained to a different AY.Issue 3: Opportunity of Personal Hearing and Compliance with Section 144B(6)(vii)Section 144B(6)(vii) of the Income Tax Act mandates that where the assessee requests a personal hearing through video conference, the AO must provide such an opportunity before passing the assessment order.The petitioner had requested a video conference hearing on 24.03.2022, as evidenced by the screenshot annexed to the petition. Despite this, the AO proceeded to pass the assessment order on 28.03.2022 without granting the hearing.The Court emphasized the mandatory nature of this provision and held that the failure to provide the requested opportunity of hearing violated the principles of natural justice and statutory requirements. This procedural lapse was a significant infirmity in the assessment process.Issue 4: Procedural Infirmities and Appropriate RemedyGiven the above findings, the Court considered the appropriate course of action. The impugned Assessment Order was quashed and set aside on the grounds of jurisdictional error (wrong AY) and violation of the statutory right to hearing.The Court ordered a remand of the matter to the AO to pass a fresh de novo assessment order for AY 2016-17, after providing the petitioner an opportunity of hearing in accordance with law, including the option of video conference if requested.The Court directed that the fresh assessment be completed within twelve weeks from the date of receipt of the order copy. No costs were imposed.Significant Holdings and Core Principles EstablishedThe Court succinctly stated:'The impugned order dated 28.03.2022 is hereby quashed and set aside and the matter is remanded back to the Assessing Officer to pass a fresh de novo order for A.Y. 2016-17 after giving an opportunity of hearing to the petitioner in accordance with law.'This underscores the principle that an assessment order must be passed for the correct AY as per valid reopening notices and corrigenda, failing which it is without jurisdiction and liable to be quashed.Further, the Court reinforced the mandatory nature of section 144B(6)(vii) requiring the AO to provide a hearing through video conference when requested by the assessee, emphasizing adherence to principles of natural justice.The Court's final determination was that the impugned order was invalid on procedural grounds and must be set aside to safeguard the assessee's statutory rights and ensure proper compliance with the Income Tax Act.