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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Vodafone Roaming Services Sarl – Appellant
Versus
Assistant Commissioner of Income Tax Circle International Tax 3 1 1, Delhi & Anr. – Respondents
W.P.(C) 8592 of 2023 & CM Nos.32646-47 of 2023
Decided On : 04-07-2023
Income Tax Act - Tax Residency - The court set aside the impugned draft assessment order and granted liberty to the Assessing Officer to pass a fresh draft assessment order, taking into account the petitioner's response and granting a personal hearing to the authorized representative of the petitioner.
Fact of the Case:
The petitioner, a tax resident of Luxemburg, challenged various orders and notices issued under the Income Tax Act, 1961, claiming that the income received was not chargeable to tax in India.
Finding of the Court:
The court set aside the impugned draft assessment order and granted liberty to the Assessing Officer to pass a fresh draft assessment order, taking into account the petitioner's response and granting a personal hearing to the authorized representative of the petitioner.
Issues: The issues revolved around the tax residency of the petitioner, the chargeability of income in India, and the procedural irregularities in the assessment process.
Ratio Decidendi: The court emphasized the importance of considering the petitioner's response and providing a fair opportunity for a personal hearing in the assessment process.
Final Decision: The writ petition was disposed of, and the pending interlocutory application was closed.
JUDGMENT
Physical Hearing/Hybrid Hearing (as per request)]
Rajiv Shakdher, J. (Oral)
CM No.32647/2023
1. Allowed, subject to just exceptions.
W.P.(C) 8592/2023 & CM No.32646/2023 [Application filed on behalf of the petitioner seeking interim relief]
2. Issue notice.
2.1. Mr Aseem Chawla, learned senior standing counsel, accepts notice on behalf of the respondents/revenue.
3. Given the direction that we propose to issue, Mr Chawla says that he does not wish to file a counter-affidavit, and he will argue the matter based on the record presently available with the court.
3.1. Therefore, with the consent of learned counsel for the parties, the matter is taken up for hearing and final disposal, at this stage itself.
4. This writ petition is directed against the following orders and notices:
(i) Notice dated 02.06.2022 issued under Section 148A(b) of the Income Tax Act, 1961 [in short, "Act"].
(ii) Order dated 26.07.2022 passed under Section 148A(d) of the Act.
(iii) Consequential notice dated 27.07.2022 issued under Section 148 of the Act.
(iv) Notice dated 10.05.2023 issued under Section 142(1) of the Act.
(v) Draft assessment order dated 24.05.2023 passed under Section 144C(1) of the Act.
5. The record shows that the petitioner is a tax resident of Luxemburg.
6. It is the respondent/revenue's assertion that the petitioner failed to file a return for the Assessment Year (AY) in issue, i.e., AY 2014-15.
7. The respondents/revenue take the stand that the petitioner has not offered for levy of tax, income earned against cellular roaming services provided to an entity going by the name Tata Tele Services Ltd.
7.1. The said income has been pegged at Rs.2,44,85,873/-.
8. According to the respondents/revenue, the income received nothing but royalty, and thus, falls within the purview of Section 9(1)(vi) of the Act.
9. On the other hand, it is the petitioner's stand that no part of the income received, accrued or arose in India.
9.1. In sum, the petitioner claims that the said income was not chargeable to tax in India, which is why no return was filed.
10. Besides this, it is the petitioner's case that it had filed a substantive reply on 12.10.2022, not only vis-a-vis notice dated 02.06.2022 issued under Section 148A(b), but also the consequent notice issued under Section 148 of the Act dated 27.07.2022.
10.1. The petitioner claims that this reply has not been taken into account by the Assessing Officer (AO) while passing the impugned draft assessment order under Section 144C(1) of the Act.
11. It is also the petitioner's case that it was not served with a statutory notice, as required under the proviso appended to Section 144 of the Act.
12. We may note that there is a reference to a notice dated 17.05.2023 in the draft assessment order, which was purportedly issued under the proviso appended to Section 144 of the Act.
13. Given the aforesaid circumstances, Mr Chawla says that, apart from anything else, the petitioner's response dated 12.10.2022 ought to have been taken into account by the AO.
14. Having regard to the aforesaid circumstances, according to us, the best way forward would be to set aside the impugned draft assessment order. It is ordered accordingly.
15. Liberty is, however, granted to the AO to pass a fresh draft assessment order.
16. While passing fresh draft assessment order, the AO will take into account the reply dated 12.10.2022 filed by the petitioner.
17. Furthermore, the AO will grant personal hearing to the authorized representative of the petitioner.
17.1. For this purpose, the AO will issue a notice setting forth the date and time of hearing.
18. Needless to add, the AO will deal with all the contentions raised by the petitioner in its reply dated 12.10.2022, and those which are adverted to in the instant writ petition.
19. The writ petition is disposed of, in the aforesaid terms.
20. Consequently, the pending interlocutory application shall stand closed.
21. Parties will act based on the digitally s
The court highlighted the significance of considering the taxpayer's submissions and providing a fair opportunity for a personal hearing in the assessment process under the Income Tax Act.
The principle of natural justice and fair opportunity in assessment proceedings under the Income Tax Act.
Failure to grant a personal hearing by the Assessing Officer violates principles of natural justice, necessitating the annulment of the assessment order.
A personal hearing is essential in tax assessment procedures to ensure administrative fairness; failure to provide one invalidates the assessment orders.
The Assessing Officer must consider the petitioner's response and furnish the information/material before passing an order under Section 148 of the Income Tax Act.
Procedural fairness and consideration of petitioner's response in assessment proceedings under the Income Tax Act
Grant of personal hearing is a mandatory requirement under Section 144B(6)(vii) of the Income Tax Act, and failure to provide such a hearing can result in the setting aside of the assessment order.
The Assessing Officer must provide adequate reasoning for reassessment actions and ensure compliance with natural justice principles.
Breach of principles of natural justice in assessment proceedings under the Income Tax Act, 1961.
Compliance with procedural requirements and the right to a fair hearing are essential in proceedings under the Income Tax Act, 1961.
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