2025 (8) TMI 386 - HC - Income Tax

Denial of Mandatory Video Conference Hearing Under Section 144B Violates Natural Justice, Order Quashed

Tyger Capital Pvt. Ltd. Versus Assessment Unit, Income Tax Department & Anr.

The HC held that denial of the mandatory video conference personal hearing under the Faceless Assessment provisions u/s 144B violates natural justice. ... Procedure of service of notice under the Faceless Assessment provisions u/s 144B - mandatory requirement of the Standard Operating Procedure - non granting requirement of video conference for personal hearing - HELD THAT:- If the assessee is not granted mandatory requirement of video conference for personal hearing, it would amount to breach of principles of natural justice. Even if the petitioner had not responded to the show-cause notice, the department could have written physical communication to the petitioner at the latest address known through speed-post. In the instant case, the petitioner had responded and categorically had demanded for personal hearing through video conferencing which was not granted by the respondent. Therefore, the authorities have failed to follow the mandatory requirement of the Standard Operating Procedure, and resultantly, the impugned Assessment Order dated 19.03.2025 as well as the demand notice dated 19.03.2025 would not stand at all. Resultantly, the impugned Assessment Order and demand notice are hereby quashed and set aside and the matter is remanded back to the National Faceless Assessment Authority to comply with the SOP and pass a fresh order. ISSUES: Whether the impugned Assessment Order under Section 143(3) read with Section 144B of the Income Tax Act, 1961, was passed in violation of the principles of natural justice due to denial of effective opportunity of personal hearing through video conferencing.Whether the procedure prescribed under the Standard Operating Procedure (SOP) dated 03.08.2022 for Faceless Assessment under Section 144B of the Act, particularly regarding service of notices and communication, was complied with.Whether failure to grant the requested personal hearing through video conferencing and non-compliance with the SOP amounts to invalidity of the Assessment Order and demand notice. RULINGS / HOLDINGS: The impugned Assessment Order and demand notice were passed in 'gross violation of the principles of natural justice' as the petitioner was not provided 'any effective opportunity of personal hearing through video conferencing' despite a categorical request.Non-compliance with the mandatory requirements of the SOP, including failure to grant personal hearing and inadequate communication, renders the Assessment Order and demand notice invalid and liable to be quashed.The matter is remanded to the National Faceless Assessment Authority to comply with the SOP and pass a fresh order 'after following the due procedure of law.' RATIONALE: The Court applied the procedural framework under Section 144B of the Income Tax Act, 1961, and the SOP dated 03.08.2022 issued by the Ministry of Finance for Faceless Assessment to assess compliance with procedural fairness and natural justice.The SOP mandates centralized communication, including physical letters by speed post and SMS notifications, to ensure effective notice and opportunity to respond, especially under Section 142(1) of the Act.The Court emphasized that the 'very idea behind conducting the video conferencing is to ensure that an assessee gets an opportunity to explain the case,' and failure to grant such hearing upon request constitutes a breach of natural justice.The Court noted that despite the petitioner's response and request for hearing, the authority proceeded to frame the assessment without granting the opportunity, which was avoidable given the limitation period had not expired.No dissent or doctrinal shift was indicated; the Court strictly enforced adherence to procedural safeguards embedded in the SOP and constitutional principles of natural justice.