The failure to grant a personal hearing as mandated under the Income Tax Act invalidates the assessment order, ensuring due process for taxpayers.

JUDGMENT

[Physical Hearing/Hybrid Hearing (as per request)]

Rajiv Shakdher, J.: (ORAL)

CM APPL. 55761/2022

1. Allowed, subject to just exceptions.

W.P.(C) 17476/2022 and CM APPL. 55760/2022 [Application filed on behalf of the petitioner seeking interim relief]

2. Issue notice.

2.1. Mr Ruchir Bhatia accepts notice on behalf of the respondents/revenue.

3. In view of the order that we propose to pass, Mr Bhatia says that no counter-affidavit is required to be filed, at this juncture. Accordingly, with the consent of counsel for the parties, the writ petition is taken up for final hearing and disposal, at this stage itself.

4. This writ petition is directed against assessment order dated 26.09.2022 passed by respondent no.1 under Section 143(3), read with Section 144B of the Income Tax Act, 1961 [in short, "the Act"]. Besides this, challenge is also laid to the notice of demand issued under Section 156 and two notices of even date i.e., 26.09.2022, issued under Section 271AAC(1) and Section 270A of the Act.

5. The record, as made available to us, shows that, inter alia, the petitioner in its reply dated 25.02.2022 to the show cause notice dated 08.02.2022, had asked for a personal hearing in the matter.

5.1. It appears that personal hearing, which is a requirement under Section 144B (vii) and (viii) of the Act, was not granted to the petitioner's authorized representative.

6. Broadly, the transaction which was subject matter of the impugned assessment order concerned the sale of immovable property referred to as Pushpanjali Farms, which the petitioner purchased in and about 2011-12, from one Ms Suniti Ghai, for a consideration of Rs. 23,00,00,000/.

6.1. The petitioner, which is a partnership firm, sought to sell the said land to a private limited company going by the name Sai Group Pvt. Ltd.

6.2. It is averred that the partners in the petitioner firm i.e., Mr Sanjeev Kapoor and Ms Ritu Kapoor, are both shareholders and Directors in Sai Group Pvt. Ltd.

6.3. The record also shows that Ms Suniti Ghai executed a sale deed dated 21.11.2019 in favour of Sai Group Pvt. Ltd. The petitioner claims that till such time the sale deed was executed, the consideration paid to Ms Suniti Ghai was shown as loans and advances in its balance sheets relevant for Assessment Year (AY) 2014-15 till AY 2019-20.

6.4. The instant proceedings concern AY 2020-21. In the said AY, the petitioner has, qua the aforementioned immovable property, registered a capital loss amounting to Rs.7,21,36,673/-.

7. The Assessing Officer (AO), evidently, found fault with this and proceeded to issue notice, which is part of the record, and pass the impugned assessment order under Section 143(3) of the Act.

8. As noticed hereinabove, personal hearing was not granted, before framing the assessment order, though asked for on behalf of the petitioner. Given this position, the aforementioned impugned order and notices cannot be sustained.

9. Accordingly, the impugned order and notices are set aside, with liberty to the AO to pass a fresh order after according personal hearing to the petitioner's authorized representative.

9.1. The AO will intimate to the petitioner date and time when hearing will be granted in the matter.

10. Before the AO proceeds further in the matter, the petitioner will be granted at least two weeks to file its written submissions in the matter concerning the transaction involving the subject property.

11. The writ petition is disposed of with the aforementioned directions. Pending application shall also stand closed.