Assessment order quashed for denying video conferencing hearing request violating natural justice under Section 143(3) and 144B

The Gujarat HC quashed an assessment order issued under Section 143(3) read with Section 144B and demand notice under Section 156 due to violation of natural justice principles. The petitioner had specifically requested a personal hearing through video conferencing, which was denied by the assessing officer. The court held that failure to provide the requested video conferencing facility constituted a clear breach of natural justice, emphasizing that the maxim Audi Alteram Partem requires fair hearing opportunities. The court noted that essential ingredients of fair hearing include proper notice and adequate opportunity to defend one's case. Since the petitioner's reasonable request for video conferencing was not accommodated, the assessment proceedings were deemed invalid. The case was decided in favor of the assessee, with both the assessment order and demand notice being set aside.

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ISSUES:

• Whether the Assessment Order issued under Sec. 143(3) read with Sec. 144B of the Income Tax Act, 1961 and the Demand Notice under Sec. 156 can be sustained where the assessee was not provided an opportunity of personal hearing through video conferencing despite a specific request.
• Whether the Assessing Officer is obliged to consider and deal with each document and explanation furnished by the assessee and provide a reasoned order rejecting or accepting such submissions.
• Whether the time limit provided to the assessee to respond to the show-cause notice under Sec. 69A read with Sec. 115BBE is reasonable and in accordance with principles of natural justice.
• Whether the reopening of assessment under Sec. 148 was justified on the basis of undisclosed deposits and whether proper procedure was followed.

RULINGS / HOLDINGS:

• The impugned Assessment Order and Demand Notice are not tenable as the petitioner was denied the opportunity of personal hearing through video conferencing, constituting a breach of the principles of natural justice.
• The Assessing Officer failed to consider the documents and replies filed by the petitioner and did not provide a reasoned order addressing the petitioner's explanations before making a substantial addition of Rs. 3,01,65,010/-, which is against the duty to pass a reasoned order.
• The time limit provided to the petitioner to respond to the show-cause notice was not reasonable and contrary to the ratio laid down by this Court that a three-day period is inadequate for filing a response.
• The reopening of assessment under Sec. 148 was based on the petitioner's undisclosed deposits with SRMMSUCCSL, and requisite approval was obtained; however, procedural lapses in hearing rendered the final order unsustainable.

RATIONALE:

• The Court applied the fundamental principle of natural justice embodied in the maxim Audi Alteram Partem, emphasizing that a person must be given a proper notice and a fair opportunity to defend their case, including the right to personal hearing.
• The Court relied on established jurisprudence requiring Assessing Officers to deal with each averment and document submitted by the assessee and to pass a reasoned order explaining acceptance or rejection of explanations.
• The Court referred to prior decisions holding that a three-day time frame to respond to show-cause notices under the Income Tax Act is inadequate and violates principles of natural justice.
• The Court noted the procedural requirements under the Faceless Assessment Scheme and the Standard Operating Procedure (SOP) dated 3.8.2022, mandating compliance with due procedure before finalizing assessment orders.
• The judgment reflects a doctrinal reinforcement of natural justice in tax proceedings, particularly emphasizing the necessity of providing personal hearing opportunities through video conferencing in faceless assessments.

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