New Globe Logistik LLP Vs ACIT (Bombay High Court)
Summary: The Bombay High Court, in , quashed the faceless assessment order passed for Assessment Year 2023-24 on the grounds of non-consideration of the assessee’s timely reply and denial of a requested personal hearing. The assessment proceedings were conducted under Section 144B of the Income-tax Act, 1961, by the National Faceless Assessment Centre (NFAC). A final show cause notice dated 21 February 2025 proposed variations to the returned income and required a response by 28 February 2025. Since extensive explanations and supporting documents were required, the assessee sought additional time, which the NFAC granted until 4 March 2025. The assessee uploaded its detailed reply, documents and evidence within the extended deadline. However, the assessment order dated 11 March 2025 incorrectly recorded that no reply had been furnished and proceeded on the assumption that the assessee had accepted the proposed variations. Challenging the assessment, the petitioner contended that the order was based on incorrect facts and violated the principles of natural justice and the mandatory requirements of Section 144B.
The petitioner submitted that the NFAC was legally obligated to consider the reply and supporting documents before passing an adverse assessment order. Reliance was placed on , wherein the Bombay High Court had held that failure to consider an assessee’s response vitiates faceless assessment proceedings. The petitioner further argued that it had specifically requested a personal hearing through video conferencing in its reply dated 4 March 2025, but the request was ignored. Referring to Section 144B(6)(vii) and the decisions in and , the petitioner contended that denial of a requested hearing rendered the proceedings legally unsustainable. The Revenue did not dispute the material facts but submitted that an alternative remedy was available. It nevertheless suggested that, if the petition were allowed, the proceedings could be restored to the stage of the show cause notice. The High Court observed that the assessee had unquestionably submitted its reply within the extended deadline granted by the NFAC. Consequently, the finding that no response had been furnished was factually incorrect. The Court held that failure to consider the reply violated Section 144B(1)(xv), independently warranting interference with the assessment order.
The High Court further held that the NFAC’s failure to grant a personal hearing despite the assessee’s specific request constituted an additional violation of the statutory procedure and principles of natural justice. Referring to , the Court reiterated that the requirement of granting an opportunity of hearing under Sections 143(3) and 144B must be complied with before passing an adverse assessment order. The Court also referred to the Supreme Court’s decision in , which emphasised that an assessment order must be passed only after providing the assessee a reasonable opportunity to present its case and that subsequent appellate proceedings cannot substitute this requirement. Following these principles and the decision in , the Court concluded that the assessment order was unsustainable on both grounds. Accordingly, it set aside the assessment order and restored the proceedings to the NFAC at the stage of the show cause notice dated 21 February 2025. The NFAC was directed to consider the reply already filed, grant a personal hearing and pass a fresh assessment order within eight weeks from the date of the judgment. The Court clarified that it had expressed no opinion on the merits of the proposed additions, which remained open for fresh consideration.
Cases Discussed
- Milestone Brandcom (P) Ltd. v. NFAC — [2022] 138 taxmann.com 45 (Bom); (2022) 441 ITR 470
- M.I. Alloys v. ITO — Writ Petition No. 1748 of 2024, order dated 13 January 2025
- Vimal Trading v. NFAC — Writ Petition No. 12317 of 2022, order dated 27 February 2025
- Tin Box Co. v. CIT — 249 ITR 216 (SC)
FULL TEXT OF THE ORIGINAL JUDGMENT
1. RULE. Respondents waive service. With the consent of the parties, Rule made returnable forthwith and heard finally.
2 The facts are in a narrow compass. The assessment of the Petitioner for Assessment Year (AY) 2023-24 was picked up for scrutiny under the Faceless Assessment Scheme as contained in Section 144B of the Income Tax Act, 1961 [“the Act” for short]. Pursuant to the same, various notices were issued to the Petitioner by the Assessment Unit, National Faceless Assessment Centre (NFAC), the 2nd Respondent herein. To these notices, replies alongwith relevant documents, were filed by the Petitioner from time to time.
3 Thereafter, the NFAC issued a Final Show Cause Notice dated 21.02.2025 proposing variation to the income as returned by the Petitioner. The Petitioner was required to file a reply to this notice by 28.02.2025. According to the Petitioner, since various and voluminous details were to be furnished in response to the said Notice dated 21.02.2025, it sought an extension of time to furnish the same. Resultantly an online request for granting further time upto 04.03.2025 was made by the Petitioner. Pursuant to the request so made by the Petitioner, the 2nd Respondent, vide communication dated 28.02.2025, accepted the Petitioner’s request and directed it to file the response by 04.03.2025. Promptly, on 04.03.2025, the Petitioner uploaded its reply with all the explanations, documents and evidences. However, on 11.03.2025, the 2nd Respondent, NFAC passed the Assessment Order. In the said order, at paragraph 3.5.1 it is stated that “In response to the show cause notice issued on 27.02.2025, the Assessee requested for an adjournment. Therefore, adjournment was granted till 04.03.2025. However, the Assessee failed to furnish any reply within the stipulated time. Therefore, it can be concluded that the Assessee company agreed with the proposed variation.” It is against this order and particularly the observations therein as mentioned above, that the Petitioner has approached this Court seeking quashing of the Assessment Order, the consequential demand notice and the penalty and other proceedings, on the ground that the same is in violation of the principles of natural justice and the provisions of Section 144B of the Act.
SUBMISSIONS:
4. In this factual backdrop, Mr. Gandhi, the learned Counsel for the Petitioner, submitted that:
(a) the Assessment Order, and which is a quasi-judicial order, mentions an incorrect fact and proceeds on that basis to make additions to the returned income of the Petitioner. It is submitted by him, that admittedly, a response along with all relevant documents and submissions was furnished by the Petitioner and within the time granted by the 2nd Respondent as per submissions uploaded on 04.03.2025 [Exhibit K1] and therefore the Petitioner had not accepted the proposed variation as incorrectly stated in the order. Further, it was incumbent upon the 2nd Respondent, NFAC to consider the response uploaded by the Petitioner before passing any order adverse to the Petitioner;
(b) this non-consideration of the reply of the Petitioner, apart from being in violation of the principles of natural justice, is also in violation of Section 144B(10)(xv) of the Act which mandates that the NFAC must consider the reply furnished by the Assessee before passing the Assessment Order. The learned Counsel relied on the judgement of this Court in the case of Milestone Brandcom (P).Ltd., v/s. NFAC [2022] 138 taxxman.com 45 (Bom)/(2022) 441 ITR 470 (Bombay) to contend that non- consideration of reply filed by the Assessee vitiates the Faceless Assessment Order;
(c) along with the reply dated 4th March 2025, the Petitioner also requested for personal hearing before the 2nd Respondent, NFAC, in case the submissions of the Assessee were not acceptable to him and before any adverse order was to be passed. However, admittedly, this personal hearing was not granted. Even this amounts to not granting a fair hearing to the Petitioner and is in violation of the principles of the natural justice. That apart, this is also in violation of Section 144B(6) (vii) of the Act, which mandates grant of a personal hearing, if the same is requested for by the Assessee. In this regard, judgements of this Court in the case of M. I. Alloys v/s. ITO- Writ Petition No.1748 of 2024 [order dated 13.01.2025] and Vimal Trading v/s. NFAC – Writ Petition No.12317 of 2022 (order dated 27.02.2025) were relied upon to contend that not granting a personal hearing despite a request from the Assessee vitiates the assessment proceeding and the consequential Assessment Order.
5 On the other hand, Ms. Kiran Singh, the learned Counsel appearing for the Revenue, though did not dispute the facts as stated above, however, submitted that the Petitioner has an alternative remedy available and he could have pursued the same. She however fairly stated that if this Court is inclined to allow the Petition then the present Assessment be remanded back to the stage of the Show Cause Notice dated 21.02.2025 and the Faceless Assessing Officer, NFAC [the 2nd Respondent herein] be allowed to consider the reply as well as the request for a personal hearing as asked for by the Petitioner.
CONCLUSION:
6 We have considered the material on record and the submissions of the parties. Admittedly, in the present case, the Petitioner furnished its reply on 04.03.2025, to the final Show Cause Notice dated 21.02.2025 which is within the time granted by the 2nd Respondent himself on 28.02.2025. Therefore, the observations of the 2nd Respondent that no response is furnished by the Petitioner clearly proceeds on incorrect facts and cannot be sustained. Not just that, it is also in violation of Section 144B(1)(xv) of the Act which specifically mandates that the reply of the Assessee as well as all material available with the Assessment Unit shall be taken into consideration before passing the final Assessment Order. Therefore, the impugned order deserves to be set aside on this ground itself.
7 Further, it is also a matter of fact that the Petitioner did seek a personal hearing by video conference vide its letter filed on 04.03.2025. The said personal hearing has not been granted before passing the Assessment Order. This is in violation of Section 144B(6)(vii) of the Act which reads as under:-
“144B:-
(6) For the purposes of faceless assessment:
(vii) in a case where a variation is proposed in the income or loss determination proposal or the draft order, and an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per such income or loss determination proposal, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income tax authority of the relevant unit.”
8 Further, this Court has, in the case of Vimal Trading v/s. NFAC – Writ Petition No. 12317 of 2022 categorically held that grant of a personal hearing is mandatory in terms of Section 143 (3) of the Act. The relevant portion of this decision reads thus:-
“29: …. The contents of paragraph 3 of the said Show Cause Notice-cum-draft Assessment Order are to be construed in the light of the clear legislative intent in Section 143 (3) of the IT Act. In other words, the requirement of hearing the assessee being categorically provided for in the above statutory provision, the same ought to be followed in letter and sprit. Thus, on a proper reading and interpretation of Section 143(3) of the IT Act, one cannot by-pass such statutory mandate of granting an opportunity of hearing the assessee which is required to be followed before passing the assessment order.
30. …… However, the facts reveal that without considering such categorical request made by the petitioner for grant of personal hearing to it, before passing the impugned final assessment order was turned down by the respondents. Instead, the respondents proceeded to pass the impugned final assessment order dated 9 September 2022 without hearing the petitioner, overlooking the salutary principle of audi alteram partem, according to which the petitioner cannot be condemned unheard.
31. We may observe that the compliance of such principles of natural justice assumes special significance in the facts of the present case, as such requirement of personal hearing is also intrinsic and ingrained under Section 144B of the IT Act. The respondents have invoked the said provision of Section 144B read with Section 143(3) of the IT Act in passing the impugned final assessment order dated 9 September In this context, we refer to a judgment of the Supreme Court in the case of Tin Box Co. v. CIT [20011 116 Taxman 491/249 ITR 216 (SC),where the Supreme Court held that placing evidence before the first appellate authority or before the Tribunal is of no consequence, as it is the assessment order that counts. Such order must be made after the assessee has been given a reasonable opportunity of presenting his case. Clearly, in the facts of the given case such principle has not been followed by the respondents.”
(emphasis supplied)
9. Further, a similar view has been taken by this Court in the case of M.I. Alloys (supra). It is therefore evident the impugned order deserves to be quashed on both the above stated counts and we hold accordingly.
10 The assessment is now restored to the file of the Assessing Officer, NFAC at the stage of the Show Cause Notice dated 21.02.2025. The NFAC is directed to consider the reply filed by the Petitioner and thereafter grant a personal hearing before passing the Assessment Order. The Assessment Order shall be passed within a period of 8 weeks from today.
11 We make it clear that we have not expressed any opinion on the merits of the matter which shall be considered by the NFAC in the proceedings before it.
12 Rule is made absolute in the aforesaid terms and the Petition is also disposed of in terms thereof. No order as to costs.
13 This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
