Hero Products India Pvt Ltd Vs National Faceless Assessment Centre & Ors. (Bombay High Court)
The Bombay High Court considered a writ petition seeking to quash the Assessment Order dated 21 March 2022 passed under Section 147 read with Sections 144 and 144B of the Income-tax Act, 1961, and the Notice of Demand dated 21 March 2022 issued under Section 156.
The petitioner challenged the assessment proceedings on two principal grounds:
1. The notice under Section 143(2) was not validly issued and served in accordance with Section 282 of the Income-tax Act read with Rule 127 of the Income-tax Rules, 1962.
2. The assessment order was passed in breach of the principles of natural justice without granting a fair and effective opportunity of hearing.
According to the petitioner, its registered primary email address on the income-tax portal was dhanashree.sawant@apac.hero.ca, while its registered secondary email address was chandrasekhar.ella@apac.hero.ca, which was also reflected in the Ministry of Corporate Affairs database. The petitioner stated that while filing its return of income in response to a notice under Section 148 on 20 October 2021, it had specifically mentioned its registered email address.
The petitioner contended that despite these registered email addresses being available with the Department, all subsequent communications, including the notice under Section 143(2), were sent to tarini.03@gmail.com. According to the petitioner, although this email address appeared in the return for Assessment Year 2015-16, it did not belong to the petitioner and had apparently been entered by its earlier tax consultants. The petitioner further stated that another email address, rushabhapatel30@gmail.com, appearing in the return for Assessment Year 2016-17, belonged to the Chartered Accountant acting as its auditor and tax consultant, who had ceased to represent the petitioner during the assessment proceedings.
The petitioner submitted that although certain communications may have been received on those email addresses, the crucial statutory notices, including the show cause notice and the notice proposing additions, were not effectively served on its registered email addresses. Consequently, it was denied a fair and effective opportunity to submit its explanation and supporting documents before the assessment order was passed. The petitioner therefore contended that the assessment order was liable to be quashed for breach of the principles of natural justice.
The respondents submitted that all notices had been uploaded on the e-filing portal and were also sent to the petitioner’s email addresses. Relying upon the affidavit of the Deputy Commissioner of Income Tax, the respondents submitted that the petitioner had responded to the notice under Section 148 by seeking reasons for reopening and that the notice had been uploaded on the ITBA portal and sent to tarini.03@gmail.com and rushabhapatel30@gmail.com. According to the respondents, sufficient opportunities had been granted during the assessment proceedings and the petitioner ought to have informed the National Faceless Assessment Centre regarding the change in email addresses resulting from the change of its Chartered Accountant. It was therefore contended that no deficiency existed in the assessment proceedings and that the writ petition should be dismissed.
After considering the submissions and examining the record, the High Court noted that it was undisputed that the petitioner had furnished sawant@apac.hero.ca in its return filed in response to the notice under Section 148 and that chandrasekhar.ella@apac.hero.ca was also registered on the income-tax portal and reflected in the Ministry of Corporate Affairs database. It was also undisputed that none of the subsequent notices had been sent to either of these registered email addresses.
The Court observed that although detailed arguments had been advanced on the validity of service under Section 282 read with Rule 127, it was unnecessary to decide that issue. On examining the material on record, the Court found that the assessment proceedings had been completed without granting the petitioner a fair and effective opportunity to respond to the proposed additions. The Court observed that disputes had arisen between the petitioner and its auditor, who had subsequently resigned on 21 January 2022. In those circumstances, further notices sent to the auditor’s email address did not appear to have been effectively communicated to the petitioner. Considering these peculiar facts, the Court held that the petitioner had not received an adequate opportunity to place its explanation and supporting documents on record before the assessment order was passed.
The High Court held that, in order to ensure that justice was done, the Assessing Officer should provide the petitioner with a fresh hearing on the show cause notice, permit the petitioner to submit its response, and thereafter pass a fresh assessment order.
The Court expressly clarified that it had not examined the merits of the assessment or the rival contentions relating to the validity of service under Rule 127, and that all such contentions were kept open.
Accordingly, the High Court:
- Quashed and set aside the Assessment Order dated 21 March 2022 and the Notice of Demand dated 21 March 2022 issued under Section 156.
- Restored the assessment proceedings to the file of the Assessing Officer.
- Directed the Assessing Officer to provide the petitioner with an adequate opportunity to file replies, documents, and submissions.
- Directed that, after the petitioner files its response, it shall be granted a personal hearing through video conferencing on a date and time fixed by the Faceless Assessing Officer.
- Directed the Faceless Assessing Officer to thereafter pass a speaking assessment order dealing with all the contentions raised by the petitioner.
- Directed that the entire exercise of granting a hearing and passing the fresh assessment order be completed within four months from the date of uploading of the judgment.
- Directed the petitioner to submit an authenticated copy of the judgment to Respondent No. 2 with a request to enable uploading of its submissions in response to the notices already issued on the ITBA Portal.
The Rule was made absolute, the writ petition was disposed of, and no order as to costs was passed.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally.
2. The above Writ Petition is filed seeking to quash and set aside the impugned Assessment Order dated 21stMarch 2022 passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961 (the IT Act) and the impugned Notice of Demand dated 21st March 2022 issued under Section 156 of the IT Act.
3. The challenge in the above Writ Petition is laid on two grounds :-
(a) The notice under Section 143(2) of the IT Act was not validly issued and served upon the Petitioner in accordance with Section 282 of the IT Act read with Rule 127 of the Income Tax Rules, 1962.
(b) The impugned Assessment Order came to be passed in breach of principles of natural justice without granting the Petitioner a fair and effective opportunity of hearing.
4. To put it in a nutshell, it is the case of the Petitioner that the Petitioner’s registered primary email address on the income tax portal was dhanashree.sawant@apac.hero.ca and its registered secondary email address was chandrasekhar.ella@apac.hero.ca. The secondary email address, namely chandrasekhar.ella@apac . hero.ca , was also reflected in the database of the Ministry of Corporate Affairs. It is further the case of the Petitioner that while filing its return of income in response to notice under Section 148 on 20th October 2021, the Petitioner had specifically mentioned its email addresses as dhanashree.sawant@apac.hero.ca .
5. It is the case of the Petitioner that despite the Petitioner’s primary and secondary email IDs being available with the Respondents, all subsequent notices, including notice under Section 143(2) of the IT Act, were sent to tarini.03@gmail.com . According to the Petitioner, though the said email ID was reflected in the Return of Income for Assessment Year 2015-16, the said email ID does not belong to the Petitioner and appears to have been mentioned by the earlier tax consultants handling the compliance aspects of the Petitioner Company. The Petitioner further states that in the Return of Income for A.Y.2016-17, the email ID rushabhapatel30@gmail.com was mentioned, which pertained to the Chartered Accountant appointed as the Auditor and tax consultant of the Petitioner, who had ceased to represent the Petitioner during the assessment proceedings.
6. According to the Petitioner, though certain communications appear to have been received on tarini.03@gmail.com and rushabhapatel30@gmail.com, the crucial statutory notices, including the Show Cause Notice and the notice proposing additions, were not effectively served on the Petitioner’s registered email IDs. According to the Petitioner, it was therefore denied a fair and effective opportunity to place its explanation and supporting documents on record before the passing of the impugned Assessment Order. The Petitioner therefore contends that the impugned Assessment Order is bad in law and liable to be quashed and set aside on the ground of breach of principles of natural justice.
7. On the other hand, it is the case of the Respondents that notices were uploaded on the e-filing portal and were also sent on the email address of the Petitioner. Mr. Sharma, the learned counsel for the Respondent relying upon the affidavit filed by one Ajay Kumar Singh, Dy. Commissioner of Income Tax Circle-1 Kalyan, who is Respondent No.2, submits that the Petitioner has responded to the notice issued under Section 148 of the IT Act by seeking the reasons of reopening. The said notice, in addition to being uploaded on the ITBA portal was also sent to the mail ID tarini.03@gmail.comand rushabhapatel30@gmail.com. Thereafter, sufficient notices/ opportunities were given to the Petitioner. In the facts of the present case, no fault could be found on the part of the Respondent. The Petitioner could have intimated the National Faceless Assessment Centre about change of their mail on account of change of their CA. In the facts of the present case, no deficiency could be found with the assessment proceedings and therefore, the Writ Petition be dismissed, was the submission.
8. We have heard learned counsel for the parties and also perused the papers and proceedings in the above Writ Petition.
9. It is not in dispute that the Petitioner had furnished its email address being sawant@apac.hero.cain the return filed in response to notice under Section 148. The secondary email address, namely chandrasekhar.ella@apac.hero.ca, was also registered on the income tax portal and was also reflected in the database of the Ministry of Corporate Affairs. It is also not in dispute that none of the notices were sent on either of these two email addresses registered on the portal.
10. Though elaborate submissions were made by both sides on the issue of validity of service of notices under Section 282 of the IT Act read with Rule 127 of the Income Tax Rules, 1962, we do not deem it necessary to conclusively adjudicate the said issue in the facts of the present case. Having heard the parties and upon perusal of the material on record, we find that the assessment proceedings culminating into the impugned Assessment Order, appears to have been completed without granting the Petitioner a fair and effective opportunity to respond to the proposed additions. We say so because it appears that disputes had arisen between the Petitioner and its Auditor, who subsequently resigned on 21st January 2022. In view thereof, further notices issued by the Respondents on the email ID of the said Auditor do not appear to have been effectively communicated to the Petitioner. In view of these peculiar facts, we are satisfied that Petitioner did not get an adequate opportunity to place on record its explanation and supporting documents before passing of the impugned Assessment Order.
11. We are, therefore, of the view that in order to ensure that justice is done, the Assessing Officer should give a fresh hearing to the Petitioner on the Show Cause Notice issued, provide an opportunity to the Petitioner to submit its response, and thereafter pass a fresh Assessment Order.
12. We clarify that we have not examined the rival contentions on merits, including the contentions relating to the validity of service under Rule 127, and all such contentions are expressly kept open.
13. Hence, looking at the totality of the facts of the case, we pass the following order :-
(a) The impugned Assessment Order dated 21stMarch 2022 (Exhibit-E1) and the impugned Notice of Demand dated 21st March 2022 issued under Section 156 (Exhibit-E2) are hereby quashed and set aside.
(b) The assessment proceedings are restored to the file of the Assessing Officer.
(c) The Assessing Officer shall provide adequate opportunity to the Petitioner to file replies, documents and submissions in support of its case.
(d) Once the Petitioner files its response, the Petitioner shall be given a personal hearing through video conferencing on a date and time fixed by the Faceless Assessing Officer. Once this exercise is completed, the Faceless Assessing Officer shall proceed to pass a fresh Assessment Order, which shall be a speaking order dealing with all the contentions raised by the Petitioner.
(e) This entire exercise (of granting hearing and thereafter passing the Assessment Order) shall be completed within a period of four months from the date of uploading of this order.
14. Rule is made absolute in the aforesaid terms, and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.
15. The Petitioner shall forthwith submit an authenticated copy of this order to Respondent No.2, with a request to enable it to upload its submissions in response to the various notices issued so far on the ITBA Portal.
16. 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.
