Faceless income-tax assessment denied despite hearing request u/s144B, making additions on suspicion; assessment order set aside.

The dominant issue was the validity of a faceless assessment under s. 144B where the assessee had requested a personal hearing. The ITAT held that s. 144B(6)(viii) uses mandatory language ("shall"), requiring the assessing unit to grant a personal hearing through video conferencing/video telephony upon request; failure to do so, without recording reasons, constitutes a statutory breach vitiating the assessment. The ITAT further noted that additions made on mere suspicion could not survive once the assessment suffered from this illegality. Consequently, the assessment order was set aside and the appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(a) Whether failure to grant a requested personal hearing through video conferencing/video telephony, as contemplated under section 144B(6)(viii), vitiated the assessment and warranted setting aside and remand for fresh assessment.

(b) Whether, in the circumstances recorded by the authorities, the assessment and the sustained addition based on "suspicion" could be upheld, or whether the matter required reconsideration after affording effective opportunity of hearing.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Mandatory personal hearing upon request under section 144B(6)(viii) and consequence of non-compliance

Legal framework: The Court considered section 144B(6)(viii) as providing that where a request for personal hearing is received, the income-tax authority of the relevant unit shall allow such hearing through video conferencing/video telephony, to the extent technologically feasible, in accordance with the prescribed procedure.

Interpretation and reasoning: The Court held that the opportunity of personal hearing under section 144B(6)(viii) is a statutory opportunity and becomes mandatory once requested. The Court treated the use of the word "shall" as making the grant of such hearing compulsory when a request is received. It found, on the facts, that the assessee had requested personal hearing, yet no such hearing was granted and no reasons were recorded in the assessment order for denying the request. The Court further reasoned that in money-related tax matters, denial of such opportunity can cause irreparable prejudice, and assessment must be free from "doubt and surmises," requiring that the assessee be given every opportunity to substantiate claims.

Conclusion: Non-grant of the requested personal hearing constituted violation of section 144B(6)(viii) and deprived the assessee of effective opportunity. The assessment could not be upheld; the appellate order and assessment order were set aside and the matter was remanded for fresh assessment with direction to provide an opportunity of being heard.

Issue (b): Sustainability of assessment founded on suspicion and the proper course

Interpretation and reasoning: The Court noted that the assessment proceeded on suspicion regarding genuineness of a transaction and that the addition was described as having been made after the assessing authority "raised suspicion" and treated the transaction as non-genuine. Coupled with the denial of mandatory hearing, the Court held that the assessment and the addition "made on suspicion" could not be sustained at that stage and required reconsideration after providing proper hearing and opportunity to the assessee.

Conclusion: The Court declined to adjudicate the addition on merits separately because the matter was being remanded due to violation of section 144B(6)(viii). The proper course was to remand to the assessing authority for reframing the assessment afresh after granting the mandated hearing.

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