TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1317
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....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 non-observance of principle of natural justice. A le....
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....er, 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 issued. Therefore, furnishing the written reply to show cause notice on 07.04.2021 without clicki....
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....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 the strength of the submissions made before this Court and also considering the material which has been placed o....
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....o 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 respondent to provide the option of the video conferencing for discussing the issue personally on 07.04.2021. However, accordin....
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....nsist 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 sustainable stand of the revenue that such request having come on 07.04.2021 after having exercised the option of filing the reply, needs to be terme....
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....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 the National Faceless Assessment Centre to finalize the draft assessment where no response to the show cause notice is received in a case where the draft assessment order....
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....he 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 representative in connection with any proceedings before the income-tax authority at the National Faceless Assessment Centre or Regional Faceless Assessment Centre or any unit set up under this sub-section; (vii) in a case where a variation is proposed in the draft as....
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....or 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, verification and authentication of information and response including documents submitted during the assessment proceedings; (f) receipt, storage and retrieval of information or documents in a centralised manner; (g) circumstances in which proviso to sub-section (6) shall apply; (h) circumstances in which personal hearing referred....
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....er 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 very strong deterrence issued by the legislature for the revenue to adhere to the detailed requirement of this provision as otherwise the assessment would be non-est. 16.8 In this backdrop, worthwhile would be to refer to the decision of the Delhi High Court rendered in case of Sanjay Aggarwal vs. National Faceles Assessment Centre, Delhi, reported in (2021) 127 t....
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....as 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 charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up may approve the request for personal hearing referred to in clause (vi) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii); (xii) the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior a....
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....cheme, 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 National Faceless Assessment Centre. While so doing, it has relied on the decision of the Delhi High Court. The Court accordingly held the assessment order passed as unsustainable, leaving it open to the authorities to carry forward the process in accordance with Section 144B. Relevant paragraphs would need reproduction. "47.Sum and substance of the submissions on behalf of petitioner is that personal hearing in the present matter is essential to properly appreciate the natu....
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....O) 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) of clause (xxiii) prescribes courses to be adopted by NFAC in the case of non-response to show cause notice by an assessee. Clause (xxiii) purports to treat the assessees according to their categorization under sub-clause (a), items (A) or (B). Clause (xxiii), sub clause (a), item (A) prescribes, in the case DAO or FDAO proposes variation prejudicial to an eligible assessee, to forward DAO or FDAO to the eligible assessee and in the case of others, pursuant item (B) NFAC may finalize DAO or FDAO and serve a copy of assessment ord....
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....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 authority in any unit;" 60. Plainly reading aforesaid provision would show that whenever assessee requests for personal hearing so as to make oral submissions or to present case, it is before income-tax authority in any unit. Subsection (7), clause (vii) shows that request for personal hearing is to be approved by the authorities referred to therein upon its opinion that the request is covered by sub-clause clause (xii). Clause (xii) empowers authorities with prior approval of the Board to lay down the standards, procedures and processes for effective functioning of National F....
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....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 carried out as per the procedure contained in Section 144 B of the IT Act. As noted above, Sub-section (9) of Section 144B of the IT Act in no uncertain term provides that after the 1st day of April, 2021, the assessment made under Section 143 (3) or under Section 144(4) of the IT Act shall be non est, when not made in accordance with the procedure detailed in Section 144B of the IT Act. The opportunity of hearing as envisaged under Section 144B of the IT Act also shall need to be scrupulously adhered to as the principles of natural justice are unfailingly ingrained in this provision. 19. Reverting to the facts on the matte....
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.... 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 question how to check the status of VC request raised? Answer: VC request raised by assessee will either be approved or rejected. If approved, then the department will send an email and SMS communication informing the date and time for VC along with VC URL. The VC details will be displayed in the user's e-proceeding VC Notice schedule. The login password will be shared 2 hours before the scheduled time of VC on to the registered mobile number. If rejected, then rejection remarks and rejection letter will be displayed to the assessee in VC Notice schedule in addition to email and SMS communication. Below are the steps to check the status of VC requ....
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....f 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 taken. This was so clarified in ECIL itself in the following words: "31. Hence, in all cases where the enquiry officer's report is not furnished to the delinquent employee in the disciplinary proceedings, the courts and tribunals should cause the copy of the report to be furnished to the aggrieved employee if he has not already secured it before coming to the court/tribunal and given the employee an opportunity to show how his or her case was prejudiced because of the non-supply of the report. If after hearing the parties, the court/tribunal comes to the conclusion that the non-supply of the report would have made no difference to the ultimate findings and the punishment given, the ....
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....al 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 other transferees, we have found that the terms of government grant did not permit transfers of land without permission of the State as grantor. Remand of cases of a group of transferees who were not heard, would, therefore, be of no legal consequence, more so, when on this legal question all affected parties have got full opportunity of hearing before the High Court and in this appeal before this Court. Rules of natural justice are to be followed for doing substantial justice and not for completing a mere ritual of hearing without possibility of any change in the decision of the case on merits. In view of the legal position explained by us above, we, therefore, refrain from remanding these cases in exercise of our ....