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IN THE HIGH COURT OF DELHI AT NEW DELHI
MANMOHAN, NAVIN CHAWLA, JJ.
Bharat Aluminium Company Ltd. - Petitioner
Versus
Union of India & Ors. - Respondents
W.P.(C) No. 14528 of 2021 & CM Appl. No. 45702 of 2021
Decided On : 14-01-2022
Income Tax Act, 1961 - Section 143(3), 144B and 156 - Taxation - Faceless Assessment Scheme - Assessment order - Challenged - Show Cause Notice - Respondent No.3 in draft assessment order as well as in impugned final assessment order had proceeded to make additions to assessed income on false premise that the petitioner had not furnished relevant details / information in response to statutory notice issued under Section 142(1) of Act. He stated that respondent No.3 had failed to appreciate that the petitioner was unable to upload file due to technical glitches on respondent’s own portal. He emphasised that petitioner had still filed reply to the notice that too within due date vide email and there was no non-compliance on the part of the petitioner.
Finding of the Court:
Court is unable to comprehend as to how despite ‘Nil’ or ‘Null’ variation proposed in show cause notice, additions had been made to assessed income in draft Assessment Order and final Assessment Order. Infact, while show cause notice assessed a total loss of Rs.1,76,94,91,428/-, impugned final assessment order and notice makes a demand of Rs.1,69,77,44,240/- as if petitioner made a super profit - Court finds that no opportunity of personal hearing was given despite a specific request made by petitioner - Court opinion that a faceless assessment scheme does not mean no personal hearing - It is not understood as to how grant of personal hearing would either frustrate concept or defeat very purpose of Faceless Assessment Scheme - Where an action entails civil consequences, like in present matter, observance of natural justice would be warranted and unless law specifically excludes application of natural justice, it should be taken as implanted into the scheme. The settled position in law is that where exercise of a power results in civil consequences to citizens, unless statute specifically rules out application of natural justice, rules of natural justice would apply, including right to personal hearing. Denial of such opportunity is not in consonance with scheme of Rule of Law governing our society - The word “may” in Section 144B(viii) should be read as “must” or “shall” and requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory - Classification made by the respondents/Revenue by way of Circular is not legally sustainable as classification between fact and law is not founded on intelligible differentia and the said differentia has no rational relation to object sought to be achieved by Section 144B of Act - An assessee has a vested right to personal hearing and same has to be given, if an assessee asks for it. The right to personal hearing cannot depend upon facts of each case - Impugned final assessment order and impugned notice issued by respondent No.3 to petitioner are set aside and matter is remanded back to Assessing Officer who shall issue a Show Cause Notice and a draft assessment order and thereafter pass a reasoned order in accordance with law.
Result: Writ petition disposed of.
JUDGMENT :
Manmohan, J.
1. Present writ petition has been filed by the petitioner challenging the action of respondent No.3 in passing the impugned final assessment order dated 27th November, 2021 under Section 143(3) of the Income Tax Act, 1961 [for short ‘the Act’] and the impugned notice dated 27th November, 2021 under Section 156 of the Act for Assessment Year 2018-19.
ARGUMENTS ON BEHALF OF THE PETITIONER
2. Mr. Arvind Datar, learned senior counsel for the petitioner stated that the impugned orders have been passed arbitrarily, without following the principles of natural justice and in gross violation of the scheme of faceless assessment under Section 144B of the Act, inasmuch as even after the ‘Nil’ or ‘Null’ variation proposed in the show cause notice, additions had been made to the assessed income in the draft assessment order as well as in the impugned final assessment order.
3. He contended that respondent No.3 in the draft assessment order as well as in the impugned final assessment order had proceeded to make additions to the assessed income on the false premise that the petitioner had not furnished relevant details / information in response to the statutory notice dated 19th August, 2021, issued under Section 142(1) of the Act. He stated that respondent No.3 had failed to appreciate that the petitioner was unable to upload the file due to technical glitches on the respondent’s own portal. He emphasised that the petitioner had still filed reply to the notice that too within the due date vide email dated 3rd September, 2021 and, thus, there was no non-compliance on the part of the petitioner.
4. Mr. Arvind Datar submitted that while Section 144B(1)(xvi) provides an opportunity to the assessee by serving a Show Cause Notice in case any variation of assessment is proposed which is prejudicial to the interest of assessee, Section 144B(1)(xxv) provides for issuance of draft assessment order to the assessee after considering the reply to Show Cause Notice. He emphasized that in the present case, respondent No.3 issued a Show Cause Notice under Section 144B(1)(xvi) proposing ‘Null’ or ‘Nil’ variation and the petitioner duly confirmed the same vide letter dated 16th September, 2021. However, thereafter, respondent No.3 took a complete turnaround and issued the draft assessment order proposing variations for which no Show Cause Notice was ever issued to the petitioner.
5. He pointed out that this Court in multiple cases, including Rani Promoter Pvt. Ltd. vs. Additional Commissioner of Income Tax [2021 (7) TMI 919-Delhi High Court] and Toplight Corporate Management (P.) Ltd. vs. National Faceless Assessment Centre Delhi [(2021) 128 taxmann.com 221 (Delhi)], has unequivocally held that issuance of Show Cause Notice, mentioning the proposed additions under Section 144B(xvi), is a mandatory requirement and any assessment order passed without issuance of such Show Cause Notice is bad in law. He even stated that in the instant case, the Show Cause Notice, referred to in the final Assessment Order, was never served upon the petitioner.
6. He also stated that the petitioner had not been granted any opportunity of personal hearing, despite a specific request having been made under Section 144B(7) of the Act by the petitioner. He submitted that Section 144B(7)(vii), (viii) and (ix) provides opportunity of personal hearing through video conferencing where such option is exercised by the assessee. He stated that this Court in Sanjay Aggarwal vs. National Faceless Assessment Centre [2021 (6) TMI 336 - Delhi High Court] and Umkal Healthcare (P.) Ltd. vs. NFAC [(2021) 131 taxmann.com 325 (Delhi)] has held that it was incumbent upon the Department to accord a personal hearing to the assessee where such a request was made under Section 144B(7) and failure to do so would amount to violation of principles of natural justice as well as mandatory procedure prescribed in the Faceless Assessment Scheme under Section 144B of the Act.
7. He lastly submitted
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