Dr K R Shroff Foundation Vs Additional CIT/ JCIT/ DCIT/ ACIT / ITO (Gujarat High Court)
It is a matter of record that the show cause notice dated 21.04.2021 was responded to on 26.04.2021. The hearing through video conference was requested for between 4:00 pm. to 6:00 pm. on any working day, however, the show cause notice was received on 25.05.2021 in response to the said request on 21.04.2021. This communication admits that due to technical glitch, the request for video conference could not be provided. It is further directed that for availing the video conference clicking on the hyperlink under the column video conference through login at e-filing portal on or before 28.05.2021 should be done so that the personal hearing through video conference can be provided.
It is the grievance of the petitioner that it could not find any hyperlink on the Income-Tax Portal which could be activated. It is also averred in the petition itself that through various replies made on 27.05.2021, 23.08.2021, 01.09.2021, 04.09.2021, 07.09.2021 and 09.09.2021 this aspects have brought to the notice of the department. It is only on 13.09.202 1 the letter was received intimating the schedule of personal hearing on 14.09.2021 at 12:09 pm. It was since a day prior to the scheduled date of video conference, the petitioner was not prepared to conduct the hearing through video conference which is understandable and more so, as he was being represented by an authorized representative being the senior advocate. Even if he is not represented by the learned advocate, a day’s time may be insufficient for anyone as all would have their prior commitments.
In any case, it is stated that no hyperlink for activating the video conference was available online and instead the link to join video conference along with password was provided. Thus, the insistence on the part of the petitioner on a previous occasion in its communication by way of notice dated 25.05.2021 that for personal hearing through video conference, the facilities can be availed as provided by clicking on the hyperlink under the column video conference and through login at e-filing portal does not appear to be working and its challenge by the petitioner appears to be fortified.
We have watched the video as provided to us pursuant to the directions issued by us as mentioned herein above and it is quite obvious that the learned senior advocate representing the petitioner went on asking and also waited, however, from the other side, there was no reply. It is only after about 22:00 minutes in the chat box, the reply was received that the authorized person was audible and therefore, he could speak. A request was also made whether the submissions could be uploaded to which the answer is in affirmative however, there was no facility for sharing the screens of submissions. It is also quite clear that from 26:00 minutes to 40:00 minute hearing continued and then from 40:52 minutes to 45:06 minutes the audio was silent though the video went on and learned counsel went on speaking on the first issue and at 45:06 minutes, as rightly urged, the video of learned advocate was abruptly terminated while learned advocate was speaking.
Even during the process of watching and also inquiring as to whether in fact what has been provided in the rejoinder categorically is as given by minute to minute and second to second, we have found that to be true and it would really try anyone’s patience. The anonymity of a conductor of VC though is a well accepted measure, but, merely because the State has authority to decide the manner of conducting, it cannot put the assessee to such a receiving end that it starts feeling itself in a helpless situation.
In Special Civil Application No. 7477 of 2021 also, this Court has held that the video conferencing is mandatory once the assessee seeks personal hearing. Non-providing of the same is in violation of the principles of natural justice. The petitioner though has been provided the video conferencing, one would notice that the technical glitch at couple of times and the opportunity which has been presently given is surely insufficient and incomplete. This surely is not in consonance with the objective with which the legislature has brought this faceless assessment regime. It needs to be understood that till the system in place is robust and this happens over a period of time, then there is a scope to move forward and strengthen the same.
As can be noticed from the instant case, here also, the modification is proposed in the draft assessment order and the assessee had requested for personal hearing. It is to be noted that as averred in the petition, in a response to the show cause notice dated 21.04.2021 raising objections on 26.04.2021, the petitioner has furnished the fresh documents which have been paged from 93 to 284 in its submission of objections, explanation and details. It has also answered to the serious question raised questioning the creditworthiness of Arrow Electronics India Pvt. Ltd. It has also chosen to substantiate the uploading of these documents by various documents furnished before this Court and also downloading the details from the e-portal of Income Tax Department. An attempt is made to show to this Court that in the final assessment order which has been pronounced on 17.09.2021, there is no whisper of any of these materials. There is no change made in the draft assessment order after these additional material has been sent. This also is indicative of the fact that the opportunity of hearing given after the request made on the receipt of the draft assessment order is mere a formality. Not only the time granted is of less than 24 hours, the non-response initially and disruption which eventually resulted into sudden snap of the link, never was thereafter responded to, even when request was made on the part of the petitioner for permitting the hearing which had remained unconcluded.
We would, therefore, hold that the provisions which have been envisioned to bring transparency and accountability in the system if are not observed as contemplated under the law, it will become imperative for the Court to intervene.
From what is noticed from the VC conducted in the instant case and as CBDT circular mandates a request for VC hearing and personal hearing is not under contemplation nor requested for by the petitioner. However, once such opportunity of hearing through VC is available, it cannot be for namesake nor can that tire assessee or the authorized representative and must be given in its true spirit. There shall need to be response for the person to be sure that he/she is not talking to the screen and resultant outcome also must bear its testimony.
According to this Court, this merit as on the ground of nonobservance of principles of natural justice the Court is choosing to relegate the matters to the concerned authority, it would prefer not to enter into this arena of merit. The same shall be reserved to be agitated before the Income Tax Authorities and thereafter, if eventuality arises in future. The other two decisions are along the line and therefore are not required to be diluted being along the very line.
With the aforesaid reasons, we are of the firm opinion that this is a matter where the order needs to be quashed and the petitioner needs to be availed an opportunity afresh by the respondent from the stage where it was left. Accordingly, the petition is Allowed. The order dated 17.09.2021 is quashed and set aside with all its consequences. Notice issued of penalty under Sections 274 and 278(A) dated 17.09.2021 also shall be quashed.
FULL TEXT OF THE ORDER OF GUJARAT HIGH COURT
This is a petition under Article 226 read with Articles 19(1)(g) and 14 of the Constitution of India aggrieved by the non-availment of the opportunity as required under the law, challenging the action of the respondent authority under Section 143(3) read with Section 144(B) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) assessing the income of the petitioner for the year 2018-19 and raising the demand of tax and penalty thereby vide order date 17.09.2021.
2. The brief facts leading to the present petition are as follows:-
2.1. The petitioner is a trust. The trusties and the beneficiaries are individuals and citizens of India. It is a public trust carrying on charitable activities under the Bombay Public Trust Act, 1950 registered on 19.01.2002.
2.2. The petitioner filed return of income for the assessment year 2018-19 on 26.10.2018 offering Nil income. The same was offered on 10.05.2019 under Section 143(1) of the Act. The case of the petitioner was selected under CASS for Complete Scrutiny to verify some issues. Various correspondences took place between the parties for the purpose of framing of the assessment and the same eventually resulted into the issuance of show cause notice on 21.04.2021 reproducing the draft assessment order therein.
2.3. In response to the show cause notice, the petitioner uploaded reply on 26.04.2021 and also requested for personal hearing through video conferencing. The proposed time on the part of the petitioner was from 4:00 pm. to 6:00 pm. on any working day. In response to this, on 25.05.2021 a show cause notice was issued which said that due to technical error, the request of personal hearing through video conference could not be processed. The respondent acknowledged the reply and the request of personal hearing. It further directed to make a request for personal hearing through video conference through facility provided for this purpose by clicking on the hyperlink under the column video conferencing, through login at e-filing portal on or before 28.05.202 1 so that the personal hearing through video conference can be provided.
2.4. The petitioner was unable to find any hyperlink on the Income Tax Portal which could be activated for the purpose of confirming the virtual conference, therefore, he wrote for number of times to activate the hyperlink for making request for personal hearing. He submitted through various replies dated 27.05.2021, 23.08.2021, 01.09.2021, 04.09.2021, 07.09.202 1 and 09.09.202 1 that the link was not activated. Eventually on 13.09.202 1 a letter was received fixing the personal hearing on 14.09.202 1 at 12:09 p.m., leaving no time for the petitioner to prepare. No hyperlink for activating the video conference was available online and instead the link to join the video conference along with password was provided.
2.5. It is the grievance of the petitioner that not only the hyperlink to activate the video conference was not available but the option to seek adjournment to the same video conference was also not available on the web portal. The given date and time of 14.09.202 1 at 12:09 pm. was inconvenient to the petitioner due to non-availability of the authorized representative, however, due to system glitch at the end of the respondent, the petitioner was not able to seek adjournment through the portal, therefore, the petitioner wrote an e-mail to request to reschedule the video conference to Friday on 17.09.2021 between 3:00 pm. to 5:00 pm. It was replied that the petitioner needs to seek adjournment online through web portal only and e-mail will not be responded.
2.6. It is the say of the respondent that the time of video conference for the personal hearing was not changed despite the legitimate request of the petitioner for keeping the personal hearing on 17.09.2021 and it was held on 14.09.202 1, therefore, the petitioner joined five minutes earlier than the time given on 14.09.202 1, however, it had started late due to technical glitch at the end of the respondent. The petitioner could not hear anything from the other side and while the petitioner made partial submissions and it was making further submissions, the video conference got abruptly terminated. The petitioner requested to provide personal hearing through video conference to complete the submissions vide letter dated 14.09.202 1.
2.7. It is averred by the petitioner that it was shocking not to receive any further communication regarding the video conference and instead to receive the impugned assessment order dated 17.09.202 1 without availing any opportunity of personal hearing through video conference and in the said assessment order, it has been mentioned surprisingly that video conference was conducted although it was not properly conducted, as emphatically averred and the petitioner was not allowed to make the fullest submissions. There is no reference of the request of second personal hearing due to sudden disconnection.
2.8. The demand notice to pay Rs. 6,33,50,88,520/- within 30 days of the service of notice as well as the notice of penalty under Section 274 read with Section 270(A) dated 17.09.2021 had been issued. The said assessment order issued under Section 143(3) read with Section 144(B) is under challenge. This is alleged to be an order without jurisdiction and violative of principles of natural justice and contrary to law.
3. In response to the same, affidavit-in-reply is filed by the Commissioner of Income Tax (Exemption), Ahmedabad denying all the averments. According to the respondent, there is an alternative efficacious remedy available if the petitioner is aggrieved by the assessment order and can file an appeal before the Commissioner of Income Tax (Appeals) and thereafter, challenge can lie before the Appellate Tribunal. It is a settled law that the person aggrieved cannot abandon the statutory mechanism stipulated under the Act.
3.1. In case of Chhabil Dass Agarwal [357 ITR 357] the Apex Court has permitted the challenge to the assessment order on a very limited ground. The sole challenge here is the violation of principles of natural justice as the opportunity of personal hearing averredly not provided. The said contention, according to the respondent, is baseless and has been denied eventually. The video conference has been conducted, according to the respondent, on 14.09.2021 and the learned counsel for the petitioner also had joined. He raised similar contentions during the course of the hearing which also form the part of written submissions. Before framing the assessment, the concerned Assessing Officer had considered the submissions filed prior to the draft assessment order and the detailed submissions made along with the voluminous evidences filed in response to the draft assessment as also the arguments advanced have been considered.
3.2. This is not a case of lack of jurisdiction nor violation of principles of natural justice. According to the respondent, through the prism of element of prejudice test, the aspect of violation of principles of natural justice shall need to be considered. Since the assessment order clearly reflected that the representative of the petitioner was heard, his allegations and averments would not hold the grounds on merit and the submissions written as well as oral made by the petitioner during the course of the assessment proceedings have already been taken note of.
3.3. There had been para-wise denial which may not be necessary to be reproduced. The emphasis all along is that the matter does not deserve any consideration.
4. The affidavit-in-rejoinder is also filed where seriously the question is raised as to what amounts to the giving of opportunity as required under the law. It is also reiterated emphatically by the petitioner that the so called opportunity was of namesake and at every stage, the faceless assessment was in fact ear-less assessment.
5. We have since noticed the reiterative submission of technical glitch which resulted into abrupt disconnection and reiterative emphasis on the same, we passed the following order on 12.10.2021 which deserves reproduction:-
“We have heard today learned counsels on both the sides. During the course of hearing an issue that had cropped up is in relation to the making available the copy of the Video Conferencing which had been recorded on the date on which the hearing had taken place. We are supplied with the FAQs for seeking VC and seeking VC adjournment where one of the questions is as follows :
“Would department provide the copy of the recording of video conferencing ? If yes, how to obtain the same ?
Ans Yes, after video conferencing is successfully conducted .’VC’ recording’ hyperlink will be displayed under the “VC link details” column. Under the ‘VC recording’ hyperlink, the URL details from which the recording can be downloaded will be mentioned. The status and VC recording noting made by the Income Tax Authority will be available under the “ITD remarks”. The recording will be made available within a reasonable period, not exceeding two days of recording. The recording can be downloaded from the portal through which the video conferencing was held.
Steps to check the recording of video conferencing availability and the URL details from which it can be downloaded.
2. According to learned Advocate Mr. Soparkar the recording is to be made available within a reasonable time not exceeding the two days of recording. According to him an attempt was made to download the recording which had taken place and the facility since was not available, it was not possible for him to avail the recording of the video conferencing that took place.
3. We noticed that the answer to the question in the FAQs supplied to us is quite clear that the recording will be made available within a reasonable period, not exceeding the two days of recording. “Recording can be downloaded from the portal through which the video conferencing was held.” We have noticed that steps have been given to check the recording of the VC, availability and the URL details from which it can be downloaded.
3.1 We would like to get more inputs in this regard and know as to whether the recording of VC which had taken place with the petitioner would be available for viewing. If the request had not come on that day itself, because the answer as provided in the FAQs states that providing of such recording would be within a reasonable time, not exceeding the two days of recording. In absence of any further details as to how long such recording would be maintained by the department, the details can be obtained by learned Senior Advocate Mr. Bhatt on seeking necessary instructions in this regard. The said recording of video conferencing if already available on the portal and protected by the password, the details shall be furnished to the Court.
4. The matter is being posted on the 14.10.2021.
5. The further hearing on the aspect of the interim relief which is being pressed into service shall be done on that day.
6. The matter shall be kept on top ten matters.
7. Direct Service is permitted today. ”
5.1. As the receipt of the instructions and the availability of the video conference was taking a while and the demand of penalty under Section 274 read with Section 278(A) required the payment within 30 days, this Court deemed it appropriate to pass the following order on 14.10.2021:-
“1. Pursuant to the order passed by this Court on 12.10.2021, both the sides have been heard today.
2. Learned Senior Advocate Mr. Bhatt has urged that necessary instructions which have been sought by him have not National
3. In the meantime, as the request has come from the petitioner that notice of penalty under Section 274 read with Section 2 78(A) dated 17.09.2021 requires the payment to be done within 30 days, and the time is expiring on 17.10.2021, according to the assessee, there will be serious consequences which will be difficult for them to meet with. The request, therefore, is to stay the operation of the demand made by addition in the assessment order as well as the demand of notice by virtue of the notice of penalty under Section 274 and 2 78(A).
4. According to learned senior advocate Mr. Bhatt, as the addition is huge and also the penalty amount runs into crores of rupees, there should be a balance struck by the Court while acceding to the request and staying the same. He has urged that let an undertaking be filed by the petitioner and a specified portion be also earmarked from the property so that the recovery eventually may not be difficult for the Revenue. He is hopeful to get the details of video recording in a week’s time.
5. Learned Senior Advocate Mr. S.N.Soparkar, on seeking instructions from the petitioner, has submitted that so far as earmarking certain properties or the substantial amount while the Court decides this matter, it may take some time to seek instruction. However, for now, the Court may accept undertaking in relation to three fixed deposits of the petitioner Trust.
6. The matter is being posted on 25.10.2021 for both the purposes i.e. for availing the recording of the video conference dated 14.09.2021 as also for the petitioner to let the Court know of the security it offers for the demand raised.7.
7. In the meantime, the three fixed deposits with Housing Development Finance Corporation Limited each of Rs.25,00,00,000/-, maturing on 23.04 .2022, with the amount of maturity of Rs.31,75,59,697/- in the Kotak Mahindra Bank Ltd., Auda Garden, Ahmedabad, having Bank Account No.5612118006, MICR Code: 380485016, IFSC CODE: KKBK0002560, are being furnished as security, the details of which are as under:-
