The failure to grant a personal hearing in assessment proceedings violates principles of natural justice, invalidating the assessment order.

Headnote:(A) Income Tax Act, 1961 - Sections 143(3), 144B, 156, 274, 270A - Jurisdiction of the court to entertain writ petition against assessment order - Principles of natural justice - Assessment order quashed for failure to grant personal hearing after request made by petitioner. (Paras 16.2, 17)

(B) Natural Justice - Significance of providing an opportunity for personal hearing in assessment proceedings and the implications of non-compliance. (Paras 16.1, 16.3)

(C) Procedures under Income Tax - The necessity for adherence to timelines as prescribed by the CBDT, including the implications of extensions on assessment orders. (Paras 11, 16.4)

Facts of the case:
The writ petition challenged the assessment order and related notices passed by the tax authorities for the assessment year 2018-2019. The petitioner requested personal hearing in response to the show cause notice but was denied the opportunity.

Findings of Court:
The court determined that the assessment order was invalid due to non-compliance with the principles of natural justice, specifically the denial of a personal hearing.

Issues: Whether the respondent was obliged to grant a personal hearing to the petitioner after its request, and if not doing so constituted a breach of natural justice.

Ratio Decidendi: The court ruled that the respondent's failure to accommodate the petitioner's request for a personal hearing, especially given the extended deadline set by the CBDT, rendered the assessment order invalid and necessitated a fresh assessment after compliance with provisions for a personal hearing.

Result: Writ petition allowed; assessment order quashed.

JUDGMENT

[Court hearing convened via video-conferencing on account of COVID-19]

Rajiv Shakdher, J. (Oral)

CM APPL. 16238/2021

1. Allowed, subject to just exceptions.

CM APPL. 16239/2021

2. The prayer made in the captioned application is to grant exemption from filing requisite court-fee and sworn/notarised/affirmed affidavit(s) along with the writ petition. The prayer made in the captioned application is allowed, subject to the petitioner depositing the requisite court-fee and filing sworn/notarised/affirmed affidavit(s), within three days of the resumption of the normal and usual work pattern by this court.

3. The application is, accordingly, disposed of.

W.P.(C) 5277/2021 and CM APPL. 16237/2021

4. Issue notice.

4.1. Mr. Puneet Rai, accepts notice on behalf of the respondents. Mr. Rai says that, in view of the directions that we propose to pass, he does not wish to file a counter-affidavit/reply and that he would argue the matter based on the record, presently, available before us.

4.2. Given the fact that the respondent no. 1 is located in the National Capital Territory of Delhi [in short "Delhi"], Mr. Rai cannot, but accept, that this Court would have the jurisdiction in the matter, though, the discretion to entertain the same, would vest with the Court.

4.3. In our view, we are inclined to exercise jurisdiction in the matter, as this would, one way or the other, conclude the matter. It would save time and expense both, for the revenue, as well as the assessee and lend certainty as to how parties are to proceed further in the matter.

Preface:

5. This writ petition is directed against the assessment order dated 30.04.2021, passed by respondent no. 1, in exercise of powers under Section 143 (3) read with Section 144B of the INCOME TAX ACT , 1961 (in short 'the Act').

5.1. The impugned assessment order concerns assessment year 2018-2019.

5.2. Apart from the aforesaid, challenge is also laid by the petitioner to the notice of demand dated 30.04.2021 issued under Section 156 and the notice for initiation of penalty proceedings issued under Section 274 read with Section 270A of the Act of even date, i.e., 30.04.2021.

Background facts:

6. For the disposal of the writ petition, the following relevant facts are required to be noted:

(i) The petitioner had filed its return concerning the aforementioned assessment year, i.e., 2018-2019 on 03.10.2018.

(ii) The petitioner was issued notice under Section 143 (2) of the Act on 23.09.2019. Consequently, the petitioner's return was scrutinised pursuant to the said notice. The petitioner filed its reply on 05.11.2019.

7. Furthermore, the petitioner was also issued notices under Section 142 (1) of the Act between 11.12.2020 and 21.01.2021. The petitioner claims that it had filed replies qua various issues raised in the said notices.

7.1. In this behalf, petitioner has adverted to replies dated 28.12.2020, 14.01.2021, 16.01.2021, 20.01.2021 and 21.01.2021.

7.2. It appears, the petitioner was also served with another notice under Section 142 (1) of the Act on 05.03.2021, to which, the petitioner, once again, claims that replies dated 12.03.2021 and 24.03.2021, were submitted.

8. It is in this background; respondent no. 1 issued a show cause notice-cum-draft assessment dated 22.04.2021. Via this show cause notice, the petitioner was called upon to file its objections qua the same by 27.04.2021.

9. Pertinently, on 24.04.2021, the Central Board of Direct Taxes (CBDT) extended timelines for certain set of compliances required to be made by the assessees' under the Act.

10. Insofar as the assessment proceedings were concerned, the timeline was extended till 30.06.2021.

11. Since the time granted to the petitioner, to respond to the show cause notice dated 22.04.2021, was short, a request for accommodation of 15 days was made by it, via a formal application, on 27.04.2021. The application was submitted through the designated e-portal; the receipt of application is, thus

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