Less than 24 Hours allowed for personal hearing & adjournment not allowed- HC Quashes Assessment Order

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:-

8. Learned Senior Advocate, Mr. Soparkar has additionally, on instructions, submitted that till the further order of the Court, these FDRs shall not be withdrawn. An undertaking to that effect shall be also filed by the petitioner on or before 21.10.2021.

9. For now, the matter is being posted on 25.10.2021, accepting the version of learned Senior Advocate with a direction to the concerned bank to be sent through the registry the undertaking given by the petitioner through the learned Senior Advocate for it not to permit the release of FDRs till further order of the Court.

10. There shall be stay of demand of addition made in the assessment order impugned and the demand of penalty till the next adjourned date.

11. Other and further order with regard to the additional security for protecting the interest of the Revenue shall be passed on 25.10.2021 after hearing both the sides.”

5.2. On completion of pleadings, this Court has heard at length learned Senior Advocate Mr. Saurabh Soparkar assisted by learned advocate Mr. B.S.Soparkar for the petitioner and learned Senior Advocate Mr. Manish Bhatt assisted by learned advocate Mr. Karan Sanghani appearing for the respondents and respective sides have strenuously attempted to bring home their respective stands.

5.3. Learned Senior Advocate Mr. Soparkar in support of his detailed submissions along the line of pleading has relied on the following authorities, which are essentially addressing the merits:-

(i) Saurashtra Education Foundation vs. Commissioner of Income-Tax [[2004]141 Taxman 26 (Gujarat)]

(ii) Assistant Commissioner of Income-Tax vs. Surat City Gymkhana [[2008] 170 Taxman 612 (SC)]

(iii) Hiralal Bhagwati vs. Commissioner of Income-tax [[2000] 246 ITR 188]

5.4. Learned Senior Advocate Mr. Bhatt has fervently defended the department to urge that hue and cry made by the respondent is to shrink the huge legal liability and apt opportunity is already given.

6. This Court has been made available the pen drive for watching the video of VC conducted and that exercise was conducted by this Court minutely and carefully. One glaring aspect we could notice was the amount of patience that would be required at the end of the assessees and their authorized representatives in conducting the video conference. Transparency through faceless assessment is a very laudable objective to be achieved which shall address various undesirable aspects, however, this surely cannot put the assesses to jeopardy and more particularly, when the entire system is at a nascent stage. Here is a stage where the system is in the making, where there are bound to be hiccups and there is a huge scope for improvisation.

7. We would have expected the administration to come forward and also accept the limitations of the system. Once there is an acceptance of its limitations, there is a scope of improvisation and not otherwise. What means to be an opportunity of hearing or what amounts to the observations of principles of natural justice need not be conveyed and explained and told to the department and yet, we would like to quote the wisdom of the Apex Court on this aspect. In S.L.Kapoor vs. Jagmohan and Others [(1980) 4 SCC 379] after referring to certain English and Indian decisions, of course in the context of that case, “In our view the principle of natural justice know of no exclusionary rule dependent on whether it would have made any difference if natural justice had been observed. The non-observance of natural justice is itself prejudice to any man and proof of prejudice independently of proof of denial of natural justice is unnecessary.”

7.1. Watching of the video itself is a reason for us to hold in no uncertain terms that not only there is a violation of the need of availing opportunity of hearing but, there is surely a requirement of also paying heed to such complaints, often made and correct the system wherever needed. Why we say so, we hereby give the following reasons.

8. 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.

8.1. 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.

8.2. 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.

8.3. On 14.09.2021, in the affidavit-in-rejoinder the chronology of events during hearing through VC has been provided which is as follows as we have had an occasion to run through this video.:-

9. 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.

9.1. 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.

9.2. 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.

9.3. We could also notice that the material which has been already shared has not been in any manner reflected in the final order. After the supply of draft assessment order, the reason for providing the opportunity is to ensure that the other and further material and the submissions made on the part of the petitioner also are given due regard. If availing an opportunity after once the draft assessment order is preferred, is a mere formality, the importance of that stage possibly has not recognized by the department.

10. We would like to refer to the Circular F No. PR. CCIT/NeAC/SOP/2020-21 dated 23.11.202 which is a Standard Operating Procedure (SOP) for personal hearing through video conference under Faceless Assessment Scheme, 2019. The Principal Chief Commissioner of Income Tax, National e-assessment Centre, with the prior approval of the Central Board of Direct Taxes (CBDT), New Delhi, laid down the circumstances in which the personal hearing through video conference is allowed in the faceless assessment scheme. Where any modification is proposed in the draft assessment order issued by the AU and the Assessee or the authorized representative in her/his written response disputes the facts underlying the proposed modification and makes a request for a personal hearing, the CCIT ReAC may allow personal hearing through video conference after considering the facts and circumstances where the assessee can submit written submissions in response to the draft assessment order. The video conference will ordinarily be of 30 minutes duration. It may be extended on the request of the assessee or the authorized representative. The assessee also may furnish documents / evidences to substantiate the point raised in the video conference during the session or within reasonable time allowed by the AU after considering the facts and circumstances of the case.

11. 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.

12. The decision of High Court of Orissa in case of Elite Education Society vs. Chairman, Central Board of Direct Taxes, Ministry of Finance, Department of Revenue and Others [W.P. (C) No. 18472 of 2021] shall be necessary to be referred to at this stage where the Court has held that the requirement for providing the hearing in terms of Section 144(B)(7)(vii) is not merely directory but mandatory one.

“5. The requirement for providing such hearing in terms of Section 144 B (7) (vii) of the Income Tax Act, 1961 (‘Act’) is not merely directory, but a mandatory one. It reads as under:-

“144-B (7) For the purposes of faceless assessment–

“(vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment 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 the such draft or final draft or revised draft assessment order, the assess or his authorized 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 in any unit.”

6. Not only is the Assessee given a right to make a request for personal hearing, but it is mandatory for the authority to provide for such personal hearing.

7. With there being no dispute that the Petitioner did make such a request, it was incumbent on the Opposite Parties to have given it an opportunity of being heard. The reply filed by the Opposite Parties only deals with the merits of the assessment itself and does not dispute that the above mandatory procedural requirement was not complied with.

8. In that view of the matter, on this short ground, the impugned assessment order is set aside and the matter is remanded to the assessing officer, i.e. National e-Assessment Centre, for compliance of the mandatory requirement of Section 144 B (7) (vii) of the Act and provide a personal hearing to the Petitioner as requested by it on a date and time to be conveyed to it at least one week in advance. It is made clear that the hearing can be in either physical or virtual mode. A fresh assessment order shall be passed thereafter within three months. If aggrieved by such order, it would be open to the Petitioner to seek appropriate remedies in accordance with law.

9. The Court makes it clear that it has not expressed any view on the merits of the case, except on the above limited procedural error of non-compliance with the mandatory requirement of Section 144 B (7) (vii) of the Act.”

12.1. The decision of Bombay High Court in case of Piramal Enterprises Limited vs. Addl./Jt./Dy./Asstt. Commissioner of Income Tax/Income Tax Officer, Delhi [[2021] 129 taxmann.com 18 (Bombay)], where also the Court held that the faceless assessment is not made in accordance with the procedure laid down under Section 144(B). There is a telling / pronounced rigour, to follow the procedure under section 144B, lest the assessment would be non est. It further held that as per the provisions of Section 144(B), when the hearing has been envisioned and incorporated, it is imperative to observe the principles of natural justice as stipulated. High Court of Delhi in case of Sanjay Aggarwal vs. National Faceless Assessment Centre, Delhi [[2021] 127 taxmann.com 637 (Delhi)] held and observed thus:-

“11.3. In this context, if one were to look at the relevant provisions, [which, for the sake of convenience are extracted hereafter], then, one would get a sense as to why the legislature has provided a personal hearing in the matter:

“144B. Faceless assessment –

(1) xxx xxx xxx

(7) For the purposes of faceless assessment–

xxx xxx   xxx

(vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment 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 the such draft or final draft or revised draft assessment order, 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 in any unit;

(viii) the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up may approve the request for personal hearing referred to in clause (vii) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii);

xxx                        xxx                           xxx

(xii) the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centres and the unit set up, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:–

xxx                        xxx                          xxx

(h)  circumstances in which personal hearing referred to clause (viii) shall be approved;

xxx                      xxx                           xxx”

[Emphasis is ours]

11.4. A careful perusal of clause (vii) of Section 144B (7) would show that liberty has been given to the assessee, if his/her income is varied, to seek a personal hearing in the matter. Therefore, the usage of the word ‘may’, to our minds, cannot absolve the respondent/revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides this, under sub-clause (h) of Section 144B (7)(xii) read with Section 144B Signature Not Verified By:VIPIN KUMAR RAI Signing Date:09.06.2021 00:54 :32 (7) (viii), the respondent/revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua the same.

11.5. In several matters, we have asked the counsels for the revenue as to, whether any standards, procedures and processes have been framed for dealing with such requests. The response, which we have got from the standing counsels including Mr. Chandra, is that, to the best of their knowledge, no such standards, procedures as also processes have been framed, as yet.

Conclusion:

12. Therefore, in our view, given the aforesaid facts and circumstances, it was incumbent upon the respondent/revenue to accord a personal hearing to the petitioner. As noted above, several requests had been made for personal hearing by the petitioner, none of which were dealt with by the respondent/revenue.

12.1. The net impact of this infraction would be that, the impugned orders will have to be set aside. It is ordered accordingly.”

13. 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.

13.1 A detailed study on the subject of faceless assessment regime in India in comparison of the other foreign countries is brought on record by learned Senior Advocate Mr. Soparkar. The study eulogizes that “It is a revolutionary move by the Indian Government to improve the tax transparency by way of disconnecting the taxpayer and the tax authorities. The electronic correspondence, personal hearing through video conference and central point of contract aim to ease the representation process for the taxpayers and tax authorities while maintaining objectivity and anonymity.” The comparative study has been taken taken while comparing with the six countries i.e. Australia, UK, USA, Canada, Netherlands and Singapore. The author summed up saying that some of the aspects newly introduced in India are nearly similar to the procedure prevailing in other countries. On video conference, it says that personal hearing in India is through video conference and not in person whereas in all other countries, there is no restriction to the number of hearings and there is no specific condition needed for invoking the provision of personal hearing. The personal hearing also is in person and not limited to the video conference.

13.2. 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.

14. In case of Hiralal Bhagwati vs. Commissioner of Income-tax [[2000] 246 ITR 188], the trust in question was registered as public charitable trust and was registered with the office of Charity Commission under the provisions contained under the Bombay Public Trust Act. The object of the trust was to help by giving financial aid to the employees of the Gujarat Law Society, in cases of death of an employee during his/her services, illness or permanent disability which incapacitates the employee to discharge his/her duties. The trust was denied exemption under Section 80(G) of the Act on the ground that the object of the trust was to register only the employees of the assessee and therefore, the object could not be of the general public utility. The Income Tax Officer issued notice under Section 148 of the Act. The petitioner had questioned this notice as being without jurisdiction. The Court held that the registration of the charitable trust under Section 12(A) is not idle or empty formality. It required that not only the application to be filed in a prescribed form stating all the details but also the names and addresses of the trusties and managers to be furnished to serve the charitable purpose. The Court held that it is not necessary that the object must be to serve the whole mankind or all persons living in a country or province. Even if a section of public is given benefit, it cannot be said that it is not a trust for charitable purpose in the interest of public. It is not necessary that the public at large must get the benefit. Considering the object of general public utility, the matter needs to be decided.

14.1. 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.

15. 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. This will not in any manner prejudice the rights of either side.

16. Pursuant to the order of this Court on 14.10.202 1, three fixed deposits maturing on 23.04.2022 for the sum of Rs. 25,00,00,000/- if matures prior to the passing of the order, the amount shall be continued to be in the bank and shall not be withdrawn by the respondents.

17. Let the matter be proceeded with from the stage of availing opportunity of hearing through video conference on fixing the time of such conference within two weeks of the receipt of copy of this order. Let the entire process be completed, as far as possible in eight weeks’ time