TaxTMI 
TaxTMI 
2021 (10) TMI 1317
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....etitioner filed its return of income for the Assessment Year 2018-2019 on 26.07.2018 at Rs.Nil. His case was processed under Section 143(1) of the Income Tax Act, 1961 by the CPC, Bangalore and on 05.11.2019 assessed the total income at Nil. 2.3 It is averred that his case was selected for limited scrutiny to examine two issues and notices had been issued under Section 143(2) and 143(1) on 22.09.2019 and 30.01.2020 respectively. The show cause notice was as to why the addition should not be made in respect of the interest income to the tune of Rs. 35,20,89,796/- and a contract receipt amount of Rs. 72,21,79,676/- from the National Highway Authority of India ('the NHAI' for short) received during the year under consideration. According to the petitioner, these were not income but the advances contingent upon the final decision of the Delhi High Court. 2.4 According to the petitioner, in disregard to the submission as well as the decision of the Apex Court, the respondent passed the impugned assessment order adding the income as mentioned above under Section 144 (3) r/w Section 144B of the Act. 2.5 The petitioner has questioned the action of the respondent on the ground of n....
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....ed 06.04.2021 is that if the respondent is not satisfied with the explanation of the petitioner, then the petitioner be provided video conferencing option to discuss the issue. 5.2 It is a contention of the respondent that the opportunity of hearing through video conferencing could not be afforded to the petitioner on account of failure on the part of the petitioner to submit such request as per the guidelines for personal hearing. 5.3 The NFAC, New Delhi had issued the Standard Operating Procedure (SOP) for Assessment Unit, Verification Unit, Technical Unit and Review Unit under the Faceless Assessment Scheme, 2019 on 19.11.2020. The guidelines have been circulated through the video conferencing issued by the NFAC through e-mail dated 13.04.2021 and the steps have been described. No such request for personal hearing as per the steps as detailed in this reply have been made although, the option for personal hearing through video conferencing was activated in the work list on the date of show cause notice dated 04.4.2021. For preferring the personal hearing through video conferencing appropriate hyperlink is available in the e-filing portal every time the show cause notice is ....
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....lines issued by NeFAC dated 13.04.2021 are issued only on 13.04.2021 whereas the request was made on 07.04.2021 and hence, the guidelines did not exist at the relevant time and secondly, these guidelines are not available in the public domain and hence, there is no way the petitioner could have known them. The website of the Income Tax Department also does not reflect these guidelines. There is nothing on the record to establish that this had been made known to everyone. 7. This Court had extensively heard the learned advocate, Mr.Bandish Soparkar and learned senior advocate, Mr.Manish Bhatt assisted by the learned senior standing counsel, Mrs.Mauna Bhatt. As the heavy reliance was placed on the guidelines issued by the NFAC circulated through email dated 13.04.2021, an order was passed on 29.09.2021 to let the Court know of the date and the authority which had issued the guidelines for personal hearing through video conferencing. Before initiating the dictation, the compliance of the order of this Court dated 29.09.2021 was inquired about and the reply to which has been given on the part of the respondent of absence of such instructions on the part of the department. 8. On t....
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....aft assessment order on 04.04.2021, proposing to modify the income and the sum payable which is served electronically to the petitioner. In response to the said show cause notice, the reply has been given 06.04.2021. In continuation of the reply dated 06.04.2021 further communication had been sent to the Income Tax Officer on 07.04.2021 requesting specifically that if the respondent is not satisfied with the explanation, the petitioner should be provided video conferencing option to discuss the issue. The reply mentions the continuation of reply dated 06.04.2021, the further submissions have been made on merits and on 15.04.2021 also, further reply has been tendered. 12. There is no reference in the communication dated 08.04.2021 of the letter of 07.04.2021, however, according to the petitioner. The communication dated 08.04.2021 addressed to the Income Tax Officer is a reply on merits therefore, in continuation of the earlier reply dated 06.04.2021 this had been sent electronically. As mentioned, the draft assessment order was served upon the petitioner on 04.04.2021. It is not being disputed that in continuation of the reply dated 06.04.2021, the request was made to the respon....
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....4.2021 is an afterthought. He of course had three options and yet, once having accepted the option (b) and having acted upon, he cannot insist on hearing on 07.04.2021. The opportunity was already given to him and he could not have then asked and alleged on 21.04.2021 of non availment of opportunity. There is no element of prejudice as is being sought to be made. 15. We are not in an agreement with the submissions made by the Revenue for the simple reason that the request was in continuation of the reply which had been filed by the petitioner after the final notice was issued on 04.04.2021 with the draft assessment order. Within two days, the reply came to be filed on 06.04.2021 in response to the said notice. His request for the personal hearing had come on the third day of the issuance of the notice. The Court cannot be oblivious of the fact that it was not the case where the assessment was getting time barred. The addition proposed by way of the draft amendment was substantial therefore, within three days of the issuance of the notice and within a day's time of filing of the reply, if a request is made on the part of the petitioner for personal hearing, it is not a sustainabl....
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....ncluding by way of an automated examination tool, whereupon it may decide to- (a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, assessee on the basis of such assessment; or (b) provide an opportunity to the assessee, in case any variation prejudicial to the interest of assessee is proposed, by serving a notice calling upon him to show cause as to why the proposed variation should not be made; or (c) assign the draft assessment order to a review unit in any one Regional Faceless Assessment Centre, through an automated allocation system, for conducting review of such order; 16.2 The assessee in case where a show cause notice has been served upon him as per the procedure laid down in Clause xvi of Section 144B(1) furnishes response to the National Faceless Assessment Centre on or before the scheduled date and time or within the extended time. 16.3 Clause (xxiii) provides for....
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....ed copy thereof in the assessee's registered account; or (b) sending an authenticated copy thereof to the registered email address of the assessee or his authorised representative; or (c) uploading an authenticated copy on the assessee's Mobile App. and followed by a real time alert; (iii) every notice or order or any other electronic communication shall be delivered to the addressee, being any other person, by sending an authenticated copy thereof to the registered email address of such person, followed by a real time alert; (iv) the assessee shall file his response to any notice or order or any other electronic communication, through his registered account, and once an acknowledgement is sent by the National Faceless Assessment Centre containing the hash result generated upon successful submission of response, the response shall be deemed to be authenticated; (v) the time and place of dispatch and receipt of electronic record shall be determined in accordance with the provisions of section 13 of the Information Technology Act, 2000; (vi) a person shall not be required to appear either personally or through authorised r....
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....her person is not denied the benefit of faceless assessment merely on the consideration that such assessee or his authorised representative, or any other person does not have access to video conferencing or video telephony at his end; (xii) the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centres and the unit set up, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:- (a) service of the notice, order or any other communication; (b) receipt of any information or documents from the person in response to the notice, order or any other communication; (c) issue of acknowledgment of the response furnished by the person; (d) provision of "e-proceeding" facility including login account facility, tracking status of assessment, display of relevant details, and facility of download; (e) accessing, verif....
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....nal Faceless Assessment Scheme Centre with the prior approval of the Board to lay down the standard procedure and process for effective functioning of the National Faceless Assessment Centres, Regional Faceless Assessment Centres and the Unit set up in an automated and mechanised environment for the various services including the service of notice, order or other communication, the receipt of an information or document, etc. One of which is important is sub-clause (h) of clause (xii) which provides for the circumstances in which the personal hearing referred to the clause (viii) needs to be approved. 16.7 Specific mention of sub-section (9) of Section 144 B needs at this stage which starts with Non-obstante clause and declares that the assessment made under sub-section (3) of Section 143 or under Section 144 in the cases referred to in sub-section (2)other than sub-section(8) on or after the 1st day of April, 2021, shall be non est if such assessment is not made in accordance with the procedure laid down under the said section. Principles of natural juristic writs large in this provision and legislature's instead to avail the opportunity of hearing also is stamped all over. A ve....
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....come, both via the show-cause notice dated 13-4-2021 as well as the show-cause notice-cum-draft assessment order dated 23-4-2021. As noticed above, the declared income was proposed to be, substantially, varied. 11.3 In this context, if one were to look at the relevant provisions, [which, or the sake of convenience are extracted hereafter], then, one would get a sense as to why the legislature has provided a personal hearing in the matter: "144B. Faceless assessment - (1).** (7) For the purposes of faceless assessment- (vii) in a case where a variation is proposed in the draft assessment order, or final draft assessment order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show-cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income tax authority in any unit; (viii) the Chief Commissioner or the Director General, in c....
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....10 We entirely agree with the findings of the Delhi High Court on essential requirement of availment of opportunity of personal hearing to the assesse whereby asked for. The need to bring on the statute section 144B for faceless assessment, was essentially for the purpose of bringing transparency and accountability and also to make it easier for all concerned by employing technological advances as tools. The Court was also of the opinion that without or with such statutory scheme, the system has to be necessarily and essentially both transparent and accountable. 17. The Bombay High Court in case of M/s. Piramal Enterprises Ltd. vs. Addl. Commissioner of Income Tax, reported in (2021) 129 taxmann.com 18 (Bombay) was considering the issue of non availment of opportunity of hearing to hold that whenever the assessee requests for personal hearing so as to make the oral submissions or to represent the case, the same needs to be approved by the authorities referred to in the provision. The request is covered by sub clause (h) of clause (xii) which empowers the authorities with prior approval of the Board to lay down the standards, procedures and processes for effective functioning of ....
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....ssessee is proposed, would provide opportunity to the assessee by serving a notice to show cause according to sub-clause (b) OR under sub-clause (c) decide to assign any DAO to a Review Unit (RU), whether prejudicial to interest of assessee or not. If the matter is referred to RU, the process according to clauses (xvii) to (xx) is to take place culminating into, a final draft assessment order (FDAO) by an Assessment Unit. 51. When draft assessment order (DAO) or final draft assessment order (FDAO) is prejudicial to the interest of the assessee, it entails an opportunity to showcause pursuant to sub-clause (b) of clause (xvi), giving option under clause (xxii) to assessee of furnishing response to NFAC. 52. Procedure as contained in clause (xxiii) is to be followed in the cases where DAO or FDAO is prejudicial to the interest of assessee after notice has been served on the assessee. 53. It would be seen that, up to clause (xxii) there is no segregation or distinction in treatment to be given to assessees bifurcating them into two categories viz, 'eligible assessee' and others' (other than eligible assessee). 54. Sub-clause (a)....
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....in draft assessment order, an opportunity is to be provided to the assessee by serving a notice to show-cause and the assessee or his representative can request for personal bearing so as to make his oral submissions or to present his case before the income-tax authorities in any unit. Further sub-section (7) provides under clause (ix) for hearing through video conferencing or video telephone including use of any telecommunication application software which support video conferencing or video telephone. 59. Sub section (7), clause (vii) stipulates as under :- "(7) For the purpose of faceless assessment- (i) to (vi)... (vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income tax authorit....
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....ce. 64. Section 144B of the Income-tax Act, 1961 captioned 'Faceless Assessment commences vide its sub-section (1) with a non-obstante clause and compulsively requires assessment u/ss 143(3) and 144 shall be by prescribed procedure contained in subsection (1) of section 144B in the cases referred to in sub-section (2) thereof. 65. Sub-section (9) of section 144B declares that assessment made under section 143(3) or under section 144(4) referable to sub-section (2) other than sub-section (8) on or after 1st day of April, 2021 shall be non est if such assessment is not made in accordance with the procedure laid down under section 144B. There is a telling/pronounced rigour, to follow the procedure under section 144B, lest the assessment would be non est. 66. Going by the provisions under section 144B, when hearing has been envisioned and incorporated, it is imperative to observe principles of natural justice as stipulated." 18. In summation, it can be deduced from the provisions, as also the decisions discussed that Section 144B of the IT Act under heading of the Faceless Assessment provides for the assessment under Section 143 (3) and 144 to be carri....
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....d which insists that on the day on which the reply is given, there is any prohibition to tender the subsequent reply in continuity. It also does not anywhere prohibit making of such a request through the e-portal of the department. 20.1 Para-11 of E Assessment Scheme, 2019 notified on 12.09.2019 as modified on 13.08.2020 provides that no personal appearance in the Centre or unit would be there but request for personal hearing can be made by the assessee or his authorised representative in Faceless Assessment Scheme. 21. The FAQs of the Income Tax Department shows the process for video conferencing facility and in a question as to what is the process, it answer this wise. "Answer: VS stands for 'video conferencing'. Using the VC facility, an assessee is enable to express or submit one's response orally before an Income Tax Authority who has initiated the proceedings and expect the response from the user. This facility has been enabled by the department as a substitute for personal appearance/hearing before an Income Tax Authority. The facility for oral submission is in addition to submitting response in writing." 21.1 It further provides following....
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....ent was not getting barred, non-availment of the opportunity of the personal hearing surely has resulted into the violation of the principle of natural justice and therefore, the indulgence would be necessary. 24. At this stage, the decision which is sought to be pressed into service by the revenue if of Dharampal Satyapal Limited vs. Deputy Commissioner of Central Excise, Gauhati and others, reported in (2015) 8 SCC 519 where the Apex Court has held that even when there is an infraction of principle of natural justice, then, further question that needs to be addressed is as to whether the purpose would be sub-served in remitting the case to the authority to make fresh demand of amount recoverable, only after issuing notice to show cause to the appellant. As what is necessary to be considered is the principle of prejudice as well as "the useless formality theory". Relevant paragraphs would need reproduction. "44. At the same time, it cannot be denied that as far as courts are concerned, they are empowered to consider as to whether any purpose would be served in remanding the case keeping in mind whether any prejudice is caused to the person against whom the action is ta....
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....ication becomes refundable. Even after the notice is issued, the appellant cannot take any plea to retain the said amount on any ground whatsoever as it is bound by the dicta in R.C. Tobacco. Likewise, even the officer who passed the order has no choice but to follow the dicta in R.C. Tobacco. It is important to note that as far as quantification of the amount is concerned, it is not disputed at all. In such a situation, issuance of notice would be an empty formality and we are of the firm opinion that the case stands covered by "useless formality theory". 47. In Escorts Farms Ltd. v. Commr., this Court, while reiterating the position that rules of natural justice are to be followed for doing substantial justice, held that, at the same time, it would be of no use if it amounts to completing a mere ritual of hearing without possibility of any change in the decision of the case on merits. It was so explained in the following terms: "64. Right of hearing to a necessary party is a valuable right. Denial of such right is serious breach of statutory procedure prescribed and violation of rules of natural justice. In these appeals preferred by the holder of lands and some....