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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, Niral R. Mehta, JJ.
Kaypee Enterprise – Petitioner
Versus
Assessment Unit, Income Tax Department & Anr. – Respondents
R/Special Civil Application No. 4924 of 2024
Decided On : 02-09-2024
Natural Justice - Assessment Order - Income Tax Act, 1961 - Sections 143(3), 144B - The court emphasized the mandatory requirement of providing an opportunity for personal hearing and adherence to principles of natural justice in the assessment process, leading to the quashing of the assessment order.
Fact of the Case:
The petitioner challenged an assessment order passed under the Income Tax Act, claiming a violation of natural justice due to insufficient time to respond to a show-cause notice and lack of communication regarding an adjournment request.
Finding of the Court:
The court found that the petitioner was not given a fair opportunity to respond to the assessment order, as the adjournment request was neither accepted nor denied, constituting a breach of natural justice.
Issues: Whether the assessment order violated principles of natural justice by not granting the petitioner an adequate opportunity to respond to the show-cause notice.
Ratio Decidendi: The court held that the failure to provide a personal hearing and to consider the adjournment request violated the mandatory provisions of the Income Tax Act, specifically Section 144B.
Result: The assessment order was quashed and set aside, and the matter was remanded for fresh assessment with an opportunity for hearing.
ORDER :
BHARGAV D. KARIA, J.
1. Heard learned advocate Mr.B.S.Soparkar for the petitioner and learned Senior Standing Counsel Mr.Karan Sanghani for learned Senior Standing Counsel Mr.Nikunt Raval for the respondent no.2.
2. By this petition under Article 227 of the Constitution of India, the petitioner has challenged the Assessment Order dated 11.03.2024 passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 (for short “the Act”).
3. The assessee filed return of income for Assessment Year 2022-23 for declaring the income of Rs.1,63,13,600/- on 12.08.2022. It appears that thereafter, the notices were issued from time to time on 01.06.2023, 03.10.2023, 24.01.2024 and 04.03.2024 the
assessee filed reply to the notice issued under Section 143(2)/ 142(1) of the Act on 14.07.2023, 16.10.2023, 01.11.2023,
13.02.2024 and 07.03.2024.
4. After considering the replies filed by the petitioner a show-cause notice was issued along with the draft assessment order as per the provision of Section 144B of the Act on 04.03.2024 granting time to the petitioner upto 07.03.2024 to file the reply.
5. The petitioner on 05.03.2024 made an application for adjournment online, however the same was not responded and straight away the impugned Assessment Order was passed on 11.03.2024.
6. Learned advocate Mr.B.S.Soparkar for the petitioner submitted that there is clear violation of principle of natural justice as only three days time was granted in the show- cause notice dated 04.03.2024 and three out of the four issues in the show-cause notice were raised for the first time. It was also pointed out that though the assessee sought time to file reply on 05.03.2024 without considering such request for adjournment, the impugned order was passed on 11.03.2024. Learned advocate Mr.Soparkar referred to the impugned Assessment Order to point out that the Assessing Officer has stated that the request made by the petitioner is denied however, there was no communication from the respondent to the petitioner for denial of the adjournment request made on 05.03.2024. It was therefore submitted that the petitioner came to know about denial of the request only when the impugned Assessment Order dated 11.03.2024 was served upon the petitioner. It was therefore submitted that the petitioner ought to have been granted the opportunity of personal hearing and the same could not have been denied on the ground of time barring assessment as there was sufficient time available with the respondent Assessing Officer upto 31.03.2024 to pass the assessment order. In support of his submissions, learned advocate Mr.Soparkar referred to and relied upon the following decisions.
(i) Dangee Dums Ltd. Vs. National Faceless Assessment Centre, Govt. of India, [2023] 148 taxmann.com 22 (Gujarat);
(ii) Riddhi Steel and Tube Ltd. Vs. National Faceless Assessment Centre, [2022] 145 taxmann.com 542 (Gujarat);
(iii) Preethi Himachal & Co. Vs.UOI, [2022] 135 taxmann.com 265 (Himachal Pradesh)
7. On the other hand, learned Senior Standing Counsel Mr.Karan Sanghani appearing for the respondent submitted that the petitioner referred to and relied upon the order sheet which is placed on record by him to point out that on 09.03.2024, the right of the petitioner to file reply was blocked as the time granted to the petitioner was over. It was also pointed out that the Assessing Officer has categorically stated in the Assessment Order that the request was denied on account of the time barring assessment. It was submitted that the Assessing Officer has referred to all the replies filed by the petitioner and therefore, it could not be said that the petitioner has been denied any opportunity of making submissions and there is no breach of principles of natural justice.
8. Considering the above submissions, it is not in dispute that though the petitioner has prayed for the adjournment on 05.03.2024, the same was neither denied nor accepted and no communication for denial of such adjournment was made t
The court established that adherence to principles of natural justice is essential in tax assessments, particularly the right to a personal hearing.
Assessment - Ground of violation of principle of natural justice-not giving adequate and effective opportunity of hearing not made out - series of adjournments were granted on the prayer of the petit....
Taxation - Faceless assessment - Section 144B(7) of Act mandatorily provides for issuance of a prior show cause notice and draft Assessment Order before issuing final Assessment Order.
The assessment order was invalid due to non-compliance with procedural requirements under Section 144B of the Income Tax Act, breaching principles of natural justice.
The assessment order was quashed due to violations of natural justice and failure to follow mandatory procedures under Section 144B of the Income Tax Act.
The court established that adherence to procedural fairness, specifically adequate response time to Show Cause Notices, is essential in tax assessment proceedings.
Assessments without proper prior notice and opportunity to be heard violate natural justice principles as mandated under Section 144B of the Income Tax Act.
The failure to provide a personal hearing constitutes a breach of natural justice, necessitating the quashing of the assessment order.
The main legal point established in the judgment is that the assessment order passed under the Income Tax Act, 1961 must grant proper and meaningful opportunity to the assessee to respond to the show....
The central legal point established in the judgment is the mandatory requirement of issuing a prior show cause notice and draft assessment order under the Faceless Assessment Scheme as stipulated in ....
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