TaxTMI 
TaxTMI 
2025 (6) TMI 1327
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....e Respondents. 4. Having regard to the controversy arising in the petition, which is in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing. 5. The brief facts of the case are as follows: 5.1 The Petitioner filed its return of income for the Assessment Year 2018-19 on 30.11.2018 declaring Rs. 4,03,46,32,880/- as the total income. 5.2 The return of income was selected for scrutiny and the reference was also made by the National Faceless E-Assessment Centre (for short "NFAC") for determining the Arm's Length Price under Section 92CA (3) in respect of the International Transactions entered into by the Petitioner during the Financial Year 2017-18. 5.3 Thereafter, the Transfer Pricing Officer (TPO) passed the order under Section 92CA (3) dated 31.07.2021 computing the upward adjustment of Rs. 21,77,87,672/- and downward adjustment of Rs. 181,48,41,229/-. The TPO also recommended that a penalty under Section 271AA may be levied. 5.4 Thereafter, the Draft Assessment Order was passed by the NFAC on 29.09.2021. The Petitioner approached the Dispute Resolution Penal (for short "DRP") against the Draft Assessment Order....
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....with effect from 17.03.2023 and therefore, the another officer has taken forward the proceedings relying upon the Note regarding the video conferencing conducted as uploaded by the previous officer in case history/notings. 7.1 Learned Senior Advocate Mr. Soparkar therefore submitted that the impugned penalty order was passed by the another officer who has not heard the Petitioner during the video conferencing. It was therefore submitted that there is clear breach of principles of natural justice as there is general rule that "he who hears should decide", or "one who decides must hear". It was submitted that this is a salutary principle based on the proper administration of justice because if one person hears and another decides then personal hearing becomes an empty formality. It was submitted that even the written arguments are no substitute for an oral hearing. The reliance was placed on the decision of the Hon'ble Apex Court in case of Automotive Tyre Manufacturers Association Vs. Designated Authority and others reported in (2011) 2 SCC 258. 7.2 It was submitted that the impugned order is passed in violation of the principles of natural justice. Though the Petitioner has very ....
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....titioner during the Video Conference and on perusal of such notes as stated in the penalty order, the decision is arrived at. It was therefore submitted that there is no violation of principles of natural justice as canvassed by the Petitioner as the submissions made by the Petitioner are duly heard and considered while passing the impugned penalty order and therefore, the Petitioner should be relegated to avail the alternative remedy by preferring an appeal as per the provision of the Act so as to challenge the Order on merits instead of remanding the matter to the Respondent No. 1 for de novo proceedings. 9. We have considered the submissions made by the learned advocates appearing for the respective parties and also the decision of the Hon'ble Apex Court in the case of Automotive Tyre Manufacturers Association (Supra) in which the reliance was also placed on the decision of Gallapalli Nageswara Rao Vs. A.P.S.R.T.C. reported in AIR 1959 SC 308. 10. The Hon'ble Apex Court in the case of Gallapalli Nageswara Rao (Supra), the constitutional Bench of the Hon'ble Apex Court in case of Automotive Tyre Manufacturers Association (Supra), by majority view has held as under :- "(31) Th....
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....substitute for written arguments and personal hearing enables the authority concerned to watch the demeanour of the witnesses etc. and also clear up his doubts during the course of the arguments and as held by the Constitutional Bench of the Hon'ble Apex Court in case of Gullapalli (supra), if one person hears and other decides, then personal hearing becomes an empty formality. In the facts of the case as stated in Paragraph No. 2.5 of the impugned penalty order, admittedly the hearing was granted by the previous incumbent of the person who has passed the penalty order and therefore, he had no occasion to hear the Petitioner resulting into the breach of basic principle of natural justice. 13. We would have stopped our discussion at this stage by remanding the matter back to the Respondent No. 1-Assessment /Penalty Unit to grant fresh opportunity of hearing to the Petitioner by the Assessing Officer to whom such matter is allocated and to pass fresh penalty order in accordance with law by such Assessing Officer. 14. However, with the advent of faceless hearing, we are of the view that it would be difficult to implement such directions more particularly as per the provision of Sect....
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....tant Commissioner or Assistant Director, or Income-tax Officer, as the case may be; (iii) such other income-tax authority, ministerial staff, executive or consultant, as may be considered necessary by the Board." 16. Thus, the Assessment Unit and other similar Units are comprising of the Assessing Officer and in hierarchy as per Sub Section (4) of Section 144B of the Act. 17. Similarly, Section 274 of the Act prescribed the procedure of levy of penalty which reads as under :- "274. Procedure.-(1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees; (b) by the [Assistant Commissioner or Deputy Commissioner], where the penalty exceeds twenty thousand rupees, except with the prior approval of the [Joint Commissioner]. (2A) The Central Government may make a scheme, by notification in the Official Gazette, for the purposes of imposing penalty under this Chapter so as to impart greater efficiency, transparency and accountability by....
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....ose penalty in accordance with the provisions of this Scheme; (iii) penalty units, as it may deem necessary, to facilitate the conduct of faceless penalty proceedings, to perform the function of drafting penalty orders, which includes identification of points or issues for imposition of penalty under the Act, seeking information or clarification on points or issues so identified, providing opportunity of being heard to the assessee or any other person, analysis of the material furnished by the assessee or any other person, and such other functions as may be required for the purposes of imposing penalty; (iv) penalty review units, as it may deem necessary, to facilitate the conduct of faceless penalty proceedings, to perform the functions of review of draft penalty order, which includes checking whether the relevant material evidence has been brought on record, whether the relevant points of fact and law have been duly incorporated in the draft order, whether the issues on which penalty is to be imposed have been discussed in the draft order, whether the applicable judicial decisions have been considered and dealt with in the draft order, checking arithmetical correctness of com....
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....pecify their respective jurisdiction", the words "and such other functions as may be required for the purposes of review and the term "penalty review unit", wherever used in this Scheme, shall refer to an Assessing Officer having powers so assigned by the Board" shall be substituted; (B) in sub-paragraph (4), the words "the Regional Faceless Penalty Centres,", "Regional Faceless Assessment Centre," and "Regional Faceless Penalty Centre," shall be omitted;" 20. Paragraph No.5 of the said Scheme, 2021 provides for the Procedure of penalty. Clause 15 of the Paragraph No.5 provides for making proposal by penalty against imposition of penalty to send such proposal to the National Faceless Penalty Centre, which was amended by the Scheme of 2022 as under :- "(xv) the penalty unit shall, after considering the material on record including response furnished, if any, as referred to in clauses (viii), (x) and (xii) or report, if any, as referred to in clause (xiv), propose for,- (a) imposition of the penalty and prepare a penalty imposition proposal for imposition of such penalty; (b) non-imposition of the penalty, for reasons to be recorded in writing, and send the penalty imposit....