2025 (10) TMI 663 - HC - Income Tax

Assessment order for AY 2022-23 under s.143(3) r/w s.144B quashed for denial of video hearing; remanded for de novo order

HC quashed and set aside the assessment order dated 15.03.2024 for AY 2022-23 passed u/s 143(3) r/w s.144B, holding it violated principles of natural ... Validity of order passed u/s 143(3) r/w. Sec.144B - non granting an express opportunity of hearing through video conferencing though requested - HELD THAT:- It cannot be disputed that the impugned order is passed in clear violation and breach of principles of natural justice and the fact that the petitioner was not granted an opportunity of hearing through video conferencing is undisputed. Therefore, without entering into merits of the matter, the impugned order dated 15.03.2024 for the Assessment Year 2022-23 passed u/s 143(3) r/w. Sec.144B of the Act is hereby quashed and set aside and the matter is remanded to the respondent – AO to pass a fresh de novo order, in accordance with law after considering the reply of the petitioner as well as after providing an opportunity of hearing to the petitioner. ISSUES PRESENTED AND CONSIDERED 1. Whether an assessment order under Section 143(3) read with Section 144B of the Income Tax Act, 1961, framed without granting an express opportunity of hearing through video conferencing despite a request by the assessee, violates the principles of natural justice. 2. Whether repeated requests for adjournment by the assessee and the department's obligation to complete time-barred assessments justify framing the assessment without acceding to a requested video-conference hearing. 3. Whether procedural compliance with statutory provisions and the Standard Operating Procedure of the National E-Assessment Centre can cure a failure to afford the assessee an opportunity of hearing in the manner requested. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Violation of principles of natural justice by framing assessment without affording requested video-conference hearing. Legal framework: Principles of natural justice require that an affected party be afforded a reasonable opportunity to be heard before adverse action is taken; the Income Tax Act permits assessment proceedings under Section 143(3) and Section 144B and administrative mechanisms (including video conferencing) may be used to afford hearing. Precedent treatment: No specific precedents were cited or applied in the judgment; the Court proceeded on well-established principles of natural justice and the statutory scheme for assessment proceedings. Interpretation and reasoning: The Court found it undisputed on the record that the assessee had requested an opportunity of hearing through video conferencing and that such request was not acceded to before framing the assessment. The Court emphasised that the object of a video-conference hearing is to enable the assessee to explain the case effectively, and that denying the requested mode of hearing when the request is made and there is time to grant it amounts to breach of natural justice. The Court declined to enter into merits of the additions because the procedural defect of denial of hearing was fatal. Ratio vs. Obiter: Ratio - An assessment order framed without granting an express and requested opportunity of hearing through video conferencing constitutes a breach of principles of natural justice and renders the order liable to be quashed and remitted for fresh decision after affording the requested hearing. Conclusions: The assessment order was quashed and set aside on grounds of denial of the requested video-conference hearing; the matter was remanded to the Assessing Officer for de novo adjudication after providing an opportunity of hearing. Issue 2 - Legitimacy of department's action where repeated adjournments were sought and assessment was time-barred. Legal framework: The statutory limitation for completing assessments imposes an obligation on the tax authority to complete proceedings within prescribed time; however, statutory time constraints do not negate the requirement to afford a hearing where requested. Precedent treatment: The Court did not rely on or distinguish authority that permits closure of proceedings on time-bar grounds at the cost of audi alteram partem; it treated the time-bar argument as a factual contention rather than a legal trump over natural justice. Interpretation and reasoning: The Revenue contended that repeated adjournments requested by the assessee left the department with no option but to frame the assessment before limitation expired. The Court accepted that adjournment requests were made by the assessee, but found that there remained sufficient time to grant the requested video-conference hearing and that the mere pressure of limitation did not justify denying the requested opportunity. The Court therefore held that time-bar concerns could not cure the denial of an effective hearing. Ratio vs. Obiter: Ratio - Time-bar considerations do not permit the filing authority to bypass the requirement of granting an effective opportunity of hearing when such a request is made and there is adequate time to comply; denial on the ground of procedural expediency is not permissible. Conclusions: The department's reliance on limitation and adjournment history did not validate the impugned order; fresh assessment must be completed after affording the requested hearing within a specified timeframe. Issue 3 - Effect of alleged compliance with statutory procedure and Standard Operating Procedure (SOP) on the validity of an assessment framed without the requested hearing. Legal framework: Compliance with statutory forms, notices and administrative SOPs is relevant to the validity of proceedings, but such compliance cannot supplant the core requirement of audi alteram partem where the assessee has specifically sought a mode of hearing. Precedent treatment: No case law was applied to hold that adherence to SOP can cure substantive denial of hearing; the Court treated the SOP and statutory compliance as insufficient to validate an order passed without granting the requested opportunity of hearing. Interpretation and reasoning: Although the Revenue asserted that procedures prescribed by the Act and the National E-Assessment Centre's SOP were followed, the Court found the fact of non-grant of video-conference hearing undisputed and determinative. The Court held that procedural formalities and adherence to SOP do not override or negate the fundamental requirement to afford the assessee an effective opportunity to be heard in the manner requested. Ratio vs. Obiter: Ratio - Procedural compliance with statutory provisions or SOP does not cure a substantive breach of natural justice arising from failure to provide an expressly requested mode of hearing. Conclusions: Compliance with the Act and SOP was not a sufficient answer to the breach; the assessment order was liable to be quashed and remitted for fresh consideration after affording the requested hearing. Remedial direction and consequential conclusion (Court's operative determination): The impugned assessment order was quashed and set aside for breach of natural justice; the matter was remitted to the Assessing Officer to pass a fresh de novo order in accordance with law after considering the petitioner's reply and after providing an opportunity of hearing (including by video conferencing as requested), to be completed within twelve weeks from receipt of the judgment. No costs were imposed.