The essential principles of natural justice are the following: Justice should not only be done but seen to be done. One cannot be a judge in his own cause. No party should be condemned unheard. u Impartial hearing must be extended to the person against whom a charge is framed to state his case. Final decision should be by way of a speaking order, for such an order prevents any bias or prejudice creeping into the decision.
The person proceeded against is required to be informed about the exact nature of charges leveled against him. The authority taking a decision must apply his mind to the explanation furnished. Application of mind must be apparent from the order as held by the Supreme Court in the case of Tar Lochan Dev Sharma v. State of Punjab [2001] 6 SCC 260
The importance of a show cause notice has been reiterated by Supreme Court in the case of Umanath Pandey v. State of UP [2009] 12 SCC 40-43 as under: “Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly vitiated. Thus, it is but essential that a party should be put on notice of the case before any adverse order is passed against him.”
In the case of Biecco Lawrie Ltd v. State of West Bengal [2009] 10 SCC 32, the Supreme Court observed as under: “One of the essential ingredients of fair hearing is that a person should be served with a proper notice, i.e. a person has a right to notice. Notice should be clear and precise so as to meet and make an effective defence. Denial of notice and opportunity to respond result in making the administrative Opportunity not a rigid doctrine decision as vitiated. The adequacy of notice is a relative term and must be decided with reference to each case. But generally a notice to be adequate must contain the following: (a) time, place and nature of hearing; (b) legal authority under which hearing is to be held; (c) statement of specific charges which a person has to meet.”
In the case of Maruti Suzuki India Ltd. v. Addl. CIT [2010] 192 Taxman 317 (Delhi), it was held that a cryptic order sheet noting would not amount to a proper show cause notice to a party to defend his case. It would amount to failure to adhere to the principles of natural justice.
In CCE v. ITC Ltd. [1995] 2 SCC 38 (SC), it has been held that an assessee should be asked to show cause as to why he should not be visited with higher tax before such levy. He must be given an opportunity of meeting those grounds. This is a requirement of the principles of natural justice.
Suraj Mall Mohta and Co. v. A. V. Visvanatha Sastri [1954] 26 ITR 1 (SC), the Supreme Court has held that the assessment proceedings before the Income-tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before any conclusion is arrived at. The assessee has a right to inspect the record and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income Tax Act.
Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC), the Supreme Court emphasised that the principles of natural justice are applicable to the proceedings under the Income-tax Act. It observed: “It is … surprising that the Tribunal took from the representative of the department statement of gross profit rates of other cotton mills without showing the statement to the assessee and without giving him an opportunity to show that statement had no relevancy whatsoever to the case of the mill in question.”
Gargi Din Jwala Prasad v. CIT [1974] 96 ITR 97 (All.) also, the Court has held similarly. The power of revision conferred by section 25 of the Wealth Tax Act, 1962 is not administrative but quasi-judicial in nature. The expression ‘may make such inquiry and pass such order thereon’ does not confer any absolute discretion. In exercising the power the Commissioner must decide the issue with an unbiased mind, consider the objections of the affected party impartially and decide the dispute by following the principles of natural justice. He cannot make his judgment based on matters not disclosed to the assessee. He cannot act according to the dictates of another authority. This was so held by the Supreme Court in Sirpur Paper Mill Ltd. v. CWT [1970] 77 ITR 6 (SC)
The opportunity of being heard should be real, reasonable and effective. The same should not be for name sake. It should not be a paper opportunity. This was so held in CIT v. Panna Devi Saraogi [1970] 78 ITR 728 (Cal.). In Smt. Ritu Devi v. CIT [2004] 141 Taxman 559 (Mad.), time of just one day was given to the assessee to furnish reply. This was held as denial of opportunity. As held in E. Vittal v. Appropriate Authority [1996] 221 ITR 760 (AP), where a decision is based upon a document in a proceeding, copy of the same should be provided to the affected party. Otherwise, it would violate the principles of natural justice as the opportunity of being heard should be an effective opportunity and not an empty formality. Denial of opportunity may make an order void. Limitation of time cannot stand in the way of not giving adequate opportunity. The principle is inviolable.
Where nothing unfair can be discerned from the act of not giving opportunity, the rule may not be attracted. It is not a rigid doctrine. In the case of Union of India v. W. N. Chadha AIR 1993 SC 1082, the Supreme Court observed as overleaf:
“The rule of audi alteram partem is not attracted unless the impugned order is shown to have deprived a person of his liberty or his property. The rule of audi alteram partem is a rule of justice and its application is excluded where the rule will itself lead to injustice. There is exclusion of the application of audi alteram partem rule to cases where nothing unfair can be inferred by not affording an opportunity to present and meet a case. This rule cannot be applied to defeat the ends of justice or to make the law ‘lifeless, absurd, stultifying and self-defeating or plainly contrary to the common sense of the situation’ and this rule may be jettisoned in very exceptional circumstances where compulsive necessity so demands.” (paras 80 to 88
In Chairman Mining Board v. Ramjee 1977 AIR 965 SC, the Supreme Court observed as under: “Natural justice is no unruly horse, no lurking landmine, nor a judicial cure-all. If fairness is shown by the decision-maker to the man proceeded against, the form, features and the fundamentals of such essential procedural propriety being conditioned by the facts and circumstances of each situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice without reference to the administrative realities and other factors of a given case can be exasperating. Courts cannot look at law in the abstract or natural justice as a mere artefact… If the totality of circumstances satisfies the Court that the party visited with adverse order has not suffered from denial of reasonable opportunity the Court will decline to be punctilious or fanatical as if the rules of natural justice were sacred scriptures.”
Kishan Lal v. UOI [1998] 97 Taxman 556 (SC), a speaking order reduces arbitrariness. A reasoned order speaks for itself. It embodies in itself the principles of natural justice. In the case of Asstt. Commissioner Commercial Tax Department, Works Contract and Leasing Quota v. Shukla & Bros. [2010] (4) JT 35, the Supreme Court observed that it shall be obligatory on the part of the judicial or quasi-judicial authority to pass a reasoned order while exercising statutory jurisdiction. In the absence of a reasoned order, it would become a tool for harassment
In Thakur V. Hariprasad v. CIT [1987] 32 Taxman 196 (AP), the High Court held as follows: “The doctrine of natural justice is a facet of fair play in action. No person shall be saddled with a liability without being heard. In administrative law, this doctrine has been extended when a person is made liable in an action without being heard. The principles of natural justice do not supplant the law but merely supplement the law or even humanise it. If a statutory provision can be read consistent with the principles of natural justice, the court could do so, for the Legislature is presumed to intend to act according to the principles of natural justice.”
The Court cannot ignore the mandate of the Legislature. As held in Swadeshi Cotton Mills Co. Ltd. v. Union of India [1981] 51 Comp. Cas. 210/AIR 1981 SC 818, 831 where a statutory provision specifically excludes the application of rules of natural justice, the Court cannot ignore it. It cannot extend the rule to the excluded category
In the case of Peerless General Finance & Investment Co. Ltd. v. Dy. CIT [1999] 236 ITR 671 (Cal.) it was observed that the principles of natural justice can be presumed as necessary unless there exists a statutory prohibition. In Rajesh Kumar v. Dy. CIT [2006] 157 Taxman 168 (SC), the Supreme Court observed that when civil consequences ensue, there is hardly any distinction between an administrative order and a quasi-judicial order. The Supreme Court further held that there might have been difference of opinions at one point of time, but it is now well-settled that a thin demarcated line between an administrative order and quasi-judicial order now stands obliterated. In Sahara India (Firm) v. CIT [2008] 169 Taxman 328 (SC), the Supreme Court held that unless a statutory provision either specifically or by necessary implication excludes the application of principles of natural justice, because in that event the Court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences for the party affected. In case of conflict between a statutory provision and natural justice, the former should prevail. But where there is no such exclusion in the statute, the application of the principles can be assumed in cases where in exercise of administrative jurisdiction the rights of citizens are affected to their prejudice. This was so held in the case of Asiatic Oxygen Ltd. v. STO [1982] Tax LR (NOC) 200 (Ori).
The AP High Court in the case of Thakur V. Hariprasad v. CIT [1987] 32 Taxman 196 has held that where the principles of natural justice are not followed, the order is only voidable and it can be cured with a direction to afford opportunity to the assessee of being heard. The decision in the case of Grindlays Bank Ltd. v. ITO [1980] 3 Taxman 38 (SC) is also to the same effect
Issue of Show Cause Notice:- Show cause notice means a Court order that requires a party to appear before the court and explain why a certain course of action should not be taken against it. If the party cannot convince the court or fails to appear, that course of action is taken.
Syed Maqsoodulla Vs ITO (ITAT Bangalore) – ITA No. 397/Bang/2019-the assessee’s turnover was Rs.9,45,200/- and offered income of Rs.4,84,158/– u/s. 44AD of the I.T. Act. If the AO wants to make any addition, he shall ignore income returned by the assessee and proceed to scrutiny the accounts so as to make any addition. Therefore, in our opinion, this income offered us. 44AD of the Act is to be accepted. Now, there is no necessity of maintaining books of accounts and production of bills and vouchers Accordingly, I we delete the addition made by the AO and confirmed by the CIT(A). Further, at this stage, it is observed that the CIT(A) is not justified in enhancing the assessment without giving mandatory notice u/s. 251(2) of the I.T. Act.
Metal Forgings V. Union of India 2002 –SUPREME COURT- the Supreme Court held that show cause notice is a mandatory requirement for raising demands and that communications, orders, suggestions or advices from department cannot be deemed to be a show cause notice
Supreme Court in Gokak Patel Vokkart Ltd. Vs. CCE MANU/SC/0400/1987 has held that the provisions of Section 11A(1) & (2) (equivalent to Section 73 and 74 of CGST Act) of Central Excises and Salt Act, 1944 make it clear that a notice of show cause has to be issued and the reply to SCN has to be considered by the adjudicating authority and then only, the amount has to be determined/adjudicated under Order-in- Original
In The Comm Of Central Excise V Tata Tech Limited 2008 – SC has held that the show cause notice is the foundation in the matter of levy and recovery of duty, penalty and interest and if the point is not raised in the show cause notice, it cannot be raised at the appellate stage
Notifications/Circulars related to the Faceless Assessment Scheme: section 144B shall be Ins. after section 144A by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021
| Sl no | Notification number | Subject Matter |
| 1 | Notification No. 61/2019 [F.No. 370149/154/2019-TPL] / SO 3264(E) :- 12 September, 2019 | E- Assessment Scheme, 2019 |
| 2 | Notification No. 62/2019 [F.No. 370149/154/2019-TPL]/ SO 3265(E) :- 12 September, 2019 | Certain directions for giving effect to E- Assessment Scheme, 2019 |
| 3 | Notification No. 60/2020 [F.No. 370149/154/2019-TPL] / SO 2745(E) :- 13 August, 2020 | Amendment in Notification No. 61/2019 [F.No. 370149/154/2019-TPL] / SO 3264(E) dated 12 September, 2019, with respect to Faceless Assessment Scheme, 2019 |
| 4 | Notification No. 61/2020 [F.No. 370149/154/2019-TPL] / SO 2746(E) :- 13 August, 2020 | Amendment in Notification No. 62/2019 [F.No. 370149/154/2019-TPL]/ SO 3265(E) dated 12-09-2020, with respect to Certain directions related to Faceless Assessment Scheme, 2019 |
| 5 | Notification No. 62/2020 [F. No. 187 /3 /2020- ITA-1] / SO 2754(E) :- 13 August, 2020 | Amendment in Notification No. 51/2014/[F.No. 187/35/2014 (ITA. I)]/ SO 2753(E), dated 22-10-2014 with respect to jurisdiction of PCsIT jurisdictional charges |
| 6 | Notification No. 63/2020 [F. No. 187/3/2020-ITA-I] / SO 2755(E) :- 13 August, 2020 | Amendment in Notification No. 50/2014 [F. NO. 187/38/2014(ITA.I)]/ S.O. 2752(E), dated 22-10-2014, CCsIT Jurisdictional Charges |
| 7 | Notification No. 64/2020 [F. No. 187/3/2020-ITA-I] / SO 2756(E) :- 13 August, 2020 | Notified income-tax authorities to facilitate conduct of faceless assessment proceedings under NeAC |
| 8 | Notification No. 65/2020 [F. No. 187/3/2020-ITA-I] / SO 2757(E) :- 13 August, 20 | Notified income-tax authorities to facilitate conduct of faceless assessment proceedings under ReACs |
| 9 | Notification No. 66/2020 [F. No. 187/3/2020-ITA-I] / SO 2758(E) :- 13 August, 2020 | Notified PCsIT (Verification Unit) to act as the Prescribed Authority u/s 133C of the Act |
| 10 | Corrigendum: Notification No. 68/2020 [F. No. 187/3/2020 (ITA.-I)] / SO 2902(E):- 27 August, 2020 | Amendment in Notification No. 62/2020 [F. No. 187 /3 /2020- ITA-1] / SO 2754(E), dated 13-08-2020 with respect to jurisdiction of PCsIT Jurisdictional charge. |
| 11 | Corrigendum: Notification No. 69/2020 [F. No. 187/3/2020 (ITA.-I)] / SO 2903(E) :- 27 August, 2020 | Amendment in Notification No. 63/2020 [F. No. 187/3/2020-ITA-I] / SO 2755(E), dated 13-08-2020 with respect to CCsIT Jurisdictional Charges.
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| 12 | Corrigendum: Notification No. 70/2020 [F. No. 187/3/2020 (ITA.-I)] / SO 2904(E) :- 27 August, 2020 | Amendment in Notification No. 65/2020 [F. No. 187/3/2020-ITA-I] / SO 2757(E) , dated 13-08-2020 with respect to Notified Income-tax authorities to facilitate conduct of faceless assessment proceedings under ReACs |
| 13 | Notification No. 79/2020 [F. No. 187/3/2020-ITA-I] / SO 3304(E) :- 25 September, 2020 | Notifying DCsIT/ACsIT/NeAC as prescribed authority u/s 143(2) of the Act |
Show cause notice or draft assessment order in faceless scheme: Clause (xi) of section 144B(1) specially deals where the assessee fails to comply with the notice referred to in clause (vi) or notice issued under sub-section (1) of section 142 or with a direction issued under sub-section (2A) of section 142, the National Faceless Assessment Centre shall serve upon such assessee a notice under section 144 giving him an opportunity to show-cause, on a date and time to be specified in the notice, why the assessment in his case should not be completed to the best of its judgment;
(xii) the assessee shall, within the time specified in the notice referred to in clause (xi) or such time as may be extended on the basis of an application in this regard, file his response to the National Faceless Assessment Centre;
(xiii) where the assessee fails to file response to the notice referred to in clause (xi) within the time specified therein or within the extended time, if any, the National Faceless Assessment Centre shall intimate such failure to the assessment unit;
(xiv) the assessment unit shall, after taking into account all the relevant material available on the record make in writing, a draft assessment order or, in a case where intimation referred to in clause (xiii) is received from the National Faceless Assessment Centre, make in writing, a draft assessment order to the best of its judgment, either accepting the income or sum payable by, or sum refundable to, the assessee as per his return or making variation to the said income or sum, and send a copy of such order to the National Faceless Assessment Centre;
(xvi) the National Faceless Assessment Centre shall examine the draft assessment order in accordance with the risk management strategy specified by the Board, including by way of an automated examination tool, whereupon it may decide to—
(a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment; or
(b) provide an opportunity to the assessee, in case any variation prejudicial to the interest of assessee is proposed, by serving a notice calling upon him to show cause as to why the proposed variation should not be made; or
(c) assign the draft assessment order to a review unit in any one Regional Faceless Assessment Centre, through an automated allocation system, for conducting review of such order;
(xxii) the assessee may, in a case where show-cause notice has been served upon him as per the procedure laid down in sub-clause (b) of clause (xvi), furnish his response to the National Faceless Assessment Centre on or before the date and time specified in the notice or within the extended time, if any;
(xxiii) the National Faceless Assessment Centre shall,—
(a) where no response to the show-cause notice is received as per clause (xxii),—
(A) in a case where the draft assessment order or the final draft assessment order is in respect of an eligible assessee and proposes to make any variation which is prejudicial to the interest of said assessee, forward the draft assessment order or final draft assessment order to such assessee; or
(B) in any other case, finalise the assessment as per the draft assessment order or the final draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment;
(b) in any other case, send the response received from the assessee to the assessment unit;
(xxiv) the assessment unit shall, after taking into account the response furnished by the assessee, make a revised draft assessment order and send it to the National Faceless Assessment Centre;
(xxv) the National Faceless Assessment Centre shall, upon receiving the revised draft assessment order,—
(a) in case the variations proposed in the revised draft assessment order are not prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order, and—
(A) in case the revised draft assessment order is in respect of an eligible assessee and there is any variation prejudicial to the interest of the assessee proposed in draft assessment order or the final draft assessment order, forward the said revised draft assessment order to such assessee;
(B) in any other case, finalise the assessment as per the revised draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, alongwith the demand notice, specifying the sum payable by, or refund of any amount due to, the assessee on the basis of such assessment;
(b) in case the variations proposed in the revised draft assessment order are prejudicial to the interest of the assessee in comparison to the draft assessment order or the final draft assessment order, provide an opportunity to the assessee, by serving a notice calling upon him to show-cause as to why the proposed variation should not be made;
(xxvi) the procedure laid down in clauses (xxiii), (xxiv) and (xxv) shall apply mutatis mutandis to the notice referred to in sub-clause (b) of clause (xxv);
(xxvii) where the draft assessment order or final draft assessment order or revised draft assessment order is forwarded to the eligible assessee as per item (A) of sub-clause (a) of clause (xxiii) or item (A) of sub-clause (a) of clause (xxv), such assessee shall, within the period specified in sub-section (2) of section 144C, file his acceptance of the variations to the National Faceless Assessment Centre;
Further clause xxv of CBDT notification date 13/08/2020 :
(xxv) the National e-assessment Centre shall, upon receiving the revised draft assessment order,—
(a) in case no modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, finalise the assessment as per the procedure laid down in sub-clause (a) of clause (xvi); or
(b) in case a modification prejudicial to the interest of the assessee is proposed with reference to the draft assessment order, provide an opportunity to the assessee, by serving a notice as per the procedure laid down in sub-clause (b) of clause (xvi);
(c) the response furnished by the assessee shall be dealt with as per the procedure laid down in clauses (xxii), (xxiii), and (xxiv);
Depending on the facts and the circumstances of a case, violation of the principles of natural justice may or may not invalidate an order. In the case of State of Orissa v. Dr. (Miss) Binapani Dei [1967] 2 SCR 625, it was observed as overleaf: An order by the State to the prejudice of a person in derogation of his vested rights may be made only in accordance with the basic rules of justice and fair play. The deciding authority, it is true, is not in the position of a Judge called upon to decide an action between contesting parties, and strict compliance with the forms of judicial procedure may not be insisted upon. He is however under a duty to give the person against whom an enquiry is held an opportunity to set up his version or defence and an opportunity to correct or to controvert any evidence in the possession of the authority which is sought to be relied upon to his prejudice. For that purpose the person against whom an enquiry is held must be informed of the case he is called upon to meet, and the evidence in support thereof. The rule that a party to whose prejudice an order is intended to be passed is entitled to a hearing applies to judicial tribunals and bodies of persons invested with authority to adjudicate upon matters involving civil consequences. It is one of the fundamental rules of our Constitutional set up that every citizen is protected against exercise of arbitrary authority by the State or its Officers. Duty to act judicially would therefore arise from the very nature of the function intended to be performed; it need not be shown to be super-added. If there is power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power. If the tails of justice be ignored and an order to the prejudice of a person is made, the order is a nullity. That is a basic concept of the rule of law and importance thereof transcends the significance of a decision in any particular case.”
In Ridge v. Baldwin [1964] AC 40 and Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147, the House of Lords held that breach of natural justice nullifies the order. The order passed in violation of the principles of natural justice is of no value as held by the Supreme Court in R. B. Shreeram Durga Prasad and Fatechand Nursing Das v. Settlement Commission [1989] 43 Taxman 34 (SC).
R. v. Paddington Valuation Officer [1966] 1 QB 380, 402 (CA), Lord Denning said as under: “It is necessary to distinguish between two kinds of invalidity. The one kind is where the invalidity is so grave that the list is a nullity altogether. In which case there is no need for an order to quash it. It is automatically null and void without more ado. The other kind is when the validity does not make the list void altogether, but only voidable. In that case it stands unless and until it is set aside
In Ponkunnam Traders v. Addl. ITO [1972] 83 ITR 508 (Ker.), Mathew J., dealing with a case arising under the Income Tax Act, held that the failure to conform to the principles of natural justice would make a judicial or quasi-judicial order void, and such an order cannot be validated by the appellate or revisional orders. This is a landmark decision on the question of exercise of jurisdiction and effect of non-compliance to the principles of natural justice. In this case, there is comprehensive discussion about a void and voidable order. The decision in Ponkunnam Traders was confirmed in appeal by a Division Bench of the High Court in Addl. ITO v. Ponkunnam Traders [1976] 102 ITR 366 (Ker.). In State of Kerala v. Shaduli Grocery Dealer (K.T.) AIR 1977 SC 1627, the Supreme Court observed that the tax authorities entrusted with the power to make assessment of tax discharge quasi-judicial functions and they are bound to observe the principles of natural justice in reaching their conclusions. The Court held that although the Officer ‘is not fettered by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a court of law but that cannot deviate him from the principles of natural justice’. It was held that when the assessment was based on information collected from the books of a third party, necessary opportunity must be given for cross examination, if specifically requested for, when such information formed the sheet anchor of evidence to frame the assessment. In this case, the assessment was declared as void, confirming the decision of the Kerala High Court, for not affording opportunity for cross examination of the third party.
Denning L.J. in Barnard v. National Dock Labour Board [1953] 2 QB 18/1 All ER 1113 (CA), which are as follows: “So where a decision is null by reason of want of jurisdiction, it cannot be cured by any appellate proceedings; failure to take advantage of this somewhat futile remedy does not affect the nullity inherent in the challenged decision. The party affected by the decision may appeal but he is not bound to do so, because he is at liberty to treat the act as void.”
Satyabir Singh v. UOI AIR 1986 SC 555, the Supreme Court observed as under: “The principles of natural Justice must be confined within their proper limits and not allowed to run wild. The concept of natural justice is a magnificent thoroughbred on which this nation gallops forwards towards its proclaimed and destined goal of JUSTICE, social, economic and political. This thoroughbred must not be allowed to turn into a wild and unruly horse, careering off where it lists, unsaddling its rider, and bursting into fields where the sign no pasaran is put up.”
K. L. Tripathi v. State Bank of India AIR 1984 (SC) 273, it was observed as under: “The basic concept is fair play in action administrative, judicial or quasi-judicial. The concept of fair play in action must depend upon the particular lis, if there be any, between the parties. If the credibility of a person who has testified or given some information is in doubt, or if the version or the statement of the person who has testified, is, in dispute, right of cross-examination must inevitably form part of fair play in action but where there is no lis regarding the facts but certain explanation of the circumstances there is no requirement of cross examination to be fulfilled to justify fair play in action. When on the question of facts there was no dispute, no real prejudice has been caused to a party aggrieved by an order, by absence of any formal opportunity of cross-examination per se does not invalidate or vitiate the decision arrived at fairly. This is more so when the party against whom an order has been passed does not dispute the facts and does not demand to test the veracity of the version of the credibility of the statement. The party who does not want to controvert the veracity of the evidence from or testimony gathered behind his back cannot expect to succeed in any subsequent demand that there was no opportunity of cross-examination specially when it was not asked for and there was no dispute about the veracity of the statements. Where there is no dispute as to the facts, or the weight to be attached on disputed facts but only an explanation to the acts, absence of opportunity to cross-examination does not create any prejudice in such cases. The principles of natural justice will, therefore, depend upon the facts and circumstances of each particular case.
Smt. Maneka Gandhi v. Union of India AIR 1978 SC 597, 624.- The principle is that unless a hearing is statutorily excluded, an administrator taking a decision affecting the rights of a citizen is bound to hear him
Supreme Court in Swadeshi Cotton Mills Co. Ltd. v. Union of India [1981] 51 Comp. Cas. 210/AIR 1981 SC 818, 831 has held as follows: “Conversely, if the statute conferring the power is silent with regard to the giving of a pre-decisional hearing to the person affected and the administrative decision taken by the authority involves civil consequences of a grave nature, and no full review or appeal on merits against that decision is provided, courts will be extremely reluctant to construe such a statute as excluding the duty of affording even a minimal hearing, shorn of all its formal trappings and dilatory features at the pre-decisional stage, unless, viewed pragmatically, it would paralyse the administrative process or frustrate the need for utmost promptitude. In short, this rule of fair play ‘must not be jettisoned save in very exceptional circumstances where compulsive necessity so demands. The court must make every effort to salvage this cardinal rule to the maximum extent possible, with situational modifications.” The above principle has been followed in the case of Dy. CIT v. Muthoottu Mini Kuris [2003] 128 Taxman 240 (Ker.).
The Assessing Officer cannot gather material or evidence at the back of the assessee and use it unilaterally. Evidence has to be tested on cross examination. Failure to afford opportunity to the assessee to cross-examine a third party whose evidence is sought to be utilised would make the assessment void as held in the cases of Kishinchand Chellaram v. CIT [1980] 4 Taxman 29 (SC), Sona Electric Co. v. CIT [1984] 19 Taxman 160 (Delhi), Nathu Ram Prem Chand v. CIT [1963] 49 ITR 561 (All). In the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC), the Apex Court observed that not allowing the assessee to cross-examine the witness whose statement has been relied upon to frame the order is a serious flaw. This makes the order a nullity
Adjudication cannot go beyond allegations in SCN; Commissioner v. Transpek Industries Ltd. [2002 (140) E.L.T. A97 (S.C)]
Charges must be made known – Kaur & Singh vs. CCE, New Delhi [1997 (94) E.L.T. 289 (S.C.)]
In a case of Punjab National Bank vs All India Bank Employees Federation, AIR 1960 SC 16. the notice contained certain charges but the penalty was imposed on the charges which were not mentioned in the notice. Therefore the Court held notice was improper, and eventually the imposition of penalty was held invalid.
| 1 | DELHI HIGH COURT
RKKR FOUNDATION VERSUS NATIONAL FACELESS ASSESSMENT CENTRE DELHI (EARLIER NATIONAL E-ASSESSMENT CENTRE DELHI) & ANR.- No.- W.P.(C) 5277/2021 Dated.- May 12, 2021
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Scheme of faceless assessment – Maintainability of petition – Jurisdiction of High court – Return of income selected for scrutiny and notice under Section 143(2) of the Act was issued – the time given to the petitioner to show cause was virtually of three days only – Principle of natural justice – HELD THAT:- As enquired from the counsel for the respondents once the respondents have introduced the scheme of faceless assessment through the respondent no. 1 National Faceless Assessment Centre at Delhi, how can the respondents object to the jurisdiction of this Court being invoked, irrespective of the locate/situate of the assessee.
Attention of the counsel for the respondents is drawn to Kusum Inglots & Alloys Ltd. Vs. Union of India [2004 – SUPREME COURT] where it was held that petition under Article 226 of the Constitution of India against an order or a finding of a Court or Tribunal or executive authority situated at Delhi, is maintainable at Delhi, though this Court, in exercise of discretion under Article 226 of the Constitution of India and invoking the doctrine of forum non conveniens, may refuse to entertain the same and ask the petitioner to approach the appropriate Court. It was further held that when the original authority is constituted at one place and the appellate authority is constituted at another, a writ petition would be maintainable at both the places. It was yet further held that as the order of the appellate authority (in that case) constitutes a part of cause of action, a writ petition would be maintainable in the High Court within whose jurisdiction it is situate, having regard to the fact that the order of the appellate authority is also required to be set aside and as the order of the original authority merges with that of the appellate authority. In the recent judgment in Maharashtra Chess Association Vs. Union of India [2019 – SUPREME COURT] also, the argument that the jurisdiction under Article 226 of the High Court of Bombay stood ousted because of the parties having agreed to the jurisdiction of the Courts at Chennai, was rejected and it was held that once the High Court of Bombay had jurisdiction, merely because another High Court also had jurisdiction and the parties had agreed to the jurisdiction of that High Court, was only a factor to be considered in the exercise of discretion, whether to entertain the writ petition in that High Court or not. It is deemed appropriate that rather than this Bench, which does not have taxation matters on its roster, hearing and deciding the said question, the matter be considered by the Roster Bench dealing with taxation matters, so that there is a consistency of opinion inasmuch as the question is likely to arise in many cases and if we proceed and take a view and the Roster Bench is of a different view, the need for referring the matter to a larger Bench, delaying the disposal of the matter, may arise. Subject to the orders of Hon’ble the Chief Justice, list this petition before the Roster Bench, on 17th May, 2021. |
| 2 | DELHI HIGH COURT
RENEW POWER PRIVATE LIMITED VERSUS NATIONAL E-ASSESSMENT CENTRE, DELHI- No.- W.P.(C) 5235/2021 Dated.- May 10, 2021 |
Order passed before the time prescribed for filing the reply – Validity of assessment – violation of principles of natural justice – petitioner’s claim that the respondent, in breach of its own timeline, passed an assessment order under Section 143(3) read with Section 144B – petitioner placed its grievance before the revenue via the e-filing portal on 22.04.2021, in which, it, inter alia, stated that although at about 22:00 hours, it had tried to upload a response to the aforementioned show cause notice-cum-draft assessment order, the same could not be uploaded – HELD THAT:- Since Revenue, seeks an accommodation to revert with instructions, list the matter on 19.05.2021.
In the meanwhile, there shall be a stay on the operation of the impugned assessment order dated 22.04.2021, as well as the notice of demand issued under Section 156 and the notice initiating penalty proceedings under Section 270A of the Act. This order will operate till further orders of the court. |
| 2 | MADRAS HIGH COURT
EKAMBARAM SUKUMARAN VERSUS THE INCOME TAX OFFICER No.- W.P. No.10433 of 2021 & WMP Nos.11029 & 11032 of 2021 Dated.- April 27, 2021 |
Order passed before the time prescribed for filing the reply – Validity of assessment – violation of principles of natural justice – faceless assessment scheme – Pre-assessment notice was issued calling upon the petitioner to show cause why assessment should not be completed in line with the draft assessment order – HELD THAT:- In conclusion, the petitioner was called upon to submit his response by 23:59 hours of 23.03.2021.However, even prior to the elapse of time granted, the impugned order of assessment has come to be passed on the same day, i.e., 23.03.2021, one assumes during the working hours. Hence, there is a violation of principles of natural justice writ large of the document.
One need hardly refer to the decision of the learned single Judge of this Court in the case of S.Velupalandar V. Deputy Commercial Tax Officer [1971 – MADRAS HIGH COURT] wherein this Court has stated that it was incumbent upon an Officer to wait till the end of the working day when the matter had been posted to finalize proceedings. This is an even better case than in the matter of Velupalandar (supra), since the Assessing Officer had himself granted time till 23:59 hours on 23.03.2021. The impugned order is thus set aside. The petitioner will file its response to show cause notice dated 19.03.2021 within a period of two weeks from today and the assessment shall be completed de novo within a period of six (6) weeks from today, after hearing the petitioner |
| 4 | MADRAS HIGH COURT
ANTONY ALPHONSE KEVIN ALPHONSE VERSUS THE INCOME TAX OFFICER, THE INCOME TAX OFFICER, NON-CORPORATE WARD-4 (1) , COIMBATORE No.- W.P.No. 8379 of 2021 And W.M.P.Nos. 8932 & 8934 of 2021 Dated.- April 1, 2021 |
Order passed before the time prescribed for filing the reply – faceless assessment scheme – HELD THAT:- Since the impugned order has been passed before the time prescribed for filing the reply, it is evident that the impugned order has been passed with pre-set mind. In any event, the order has been passed without considering the reply received from the petitioner. Therefore, this Court is inclined to grant the relief sought for by the petitioner as there is a manifest violation of business of justice while passing the impugned order.
Under these circumstances, the impugned order stands quashed and the case is remitted back to the second respondent to pass a speaking order on merits in accordance with law after considering the reply filed by the petitioner on 15.03.2021. |
| 5 | MADRAS HIGH COURT
SMT. KANAGAVALLI VERSUS ASSISTANT COMMERCIAL OF INCOME TAX No.- Writ Petition No.728 of 2020 And WMP. Nos.3354 & 881 of 2020 Dated.- February 11, 2021 |
Violation of principles of natural justice – show cause notice has been issued on 11.12.2019 listing the matter for personal hearing on 16.12.2019. However, the same has been served only subsequent to the time of personal hearing and there has been no opportunity of hearing extended to the petitioner – HELD THAT:- It is only if the records of assessment specifically reveal the position that the petitioner was in receipt of show cause notice dated 11.12.2019 crystallising the issues proposed to be dealt with in the assessment and replies have been put forth by the petitioner to the aforesaid proposals, that it could be assumed that the show cause notice, sent through email, has been taken note of and responded to by the petitioner.
Learned Senior Standing Counsel today confirms, on a perusal of the records, that there is nothing in the record to indicate that the proposals in the show cause notice had been discussed in the course of hearing on 12.12.2019. The benefit of doubt, in the above circumstances, should be extended to the petitioner. It is also admitted that the show cause notice has been received by the petitioner on the date of hearing and beyond the time of hearing. The impugned order is also passed on the same date of hearing proposed in the show cause notice, i.e., 16.12.2019. The impugned order is set aside. Since the assessments are now to be conducted in terms of the faceless assessment scheme, I refrain from fixing a date of hearing afresh and merely direct that proceedings for assessment be completed after hearing the petitioner within a period of six (6) weeks from today. |
| 6 | GUJARAT HIGH COURT
SUMANDEEP VIDYAPITH VS. CIT(EXEMPTION) No.- R/SPECIAL CIVIL APPLICATION NO. 11623 of 2020 Dated.- January 22, 2021
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Transfer of the proceedings u/s 127(2)(a) – Centralization of case under search – Faceless Assessment – whether the authority concerned committed an error in passing the order of transfer under Section 127 ? – jurisdiction of the Assessing Officer as per section 124 – HELD THAT:- It appears from the materials on record that the main purpose of transfer on the ground of centralization of cases is to investigate the dubious transactions of the writ-applicant with various related entities during the relevant period. At this stage, we may refer to the reasons assigned by the Commissioner of Income Tax (Exemption) for centralization while disposing of the objections raised by the writ-applicant.
The transfer order passed under Section 127 of the Act is more in the nature of an administrative order rather than a quasi-judicial order and the assessee cannot have any right to choose his Assessing Authority, as no prejudice can be said to have been caused to the assessee depending upon which authority of the department passes the Assessment Order. The assessee can only be concerned with getting an opportunity of hearing before the concerned Assessing Authority and adduce his evidence and make his submissions before the concerned Assessing Authority. The Income Tax department has recently introduced a scheme of Faceless Assessments with a view to avoid personal hearing and physical interaction of the assessee and the Assessing Authority altogether. The assessee need not even know the name of the Assessing Authority who will deal with his case. We have also looked into the judgments relied upon by Mr.Darshan Patel, the learned counsel appearing for the writ-applicant. However, none of the judgments are of any avail to the writ-applicant. We are convinced that no case is made out for interference. |
| 7 | MADRAS HIGH COURT
NADIMUTHUPATHAR SUNDARAPANDIAN ELAVARMAN VS. ACIT No.- W.P.(MD)No.3999 of 2020 And W.M.P.(MD).Nos. 3394 And 3395 of 2020 Dated.- December 9, 2020
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Validity of order u/s 144 – ex parte assessment order – Violation of principles of natural justice as not affording sufficient opportunity to the petitioner to raise all his contentions available to him under law – HELD THAT:- As seen from the impugned assessment order passed under Section 144 of the Income Tax Act, 1961, the petitioner has not participated in the said proceedings and the order is in the nature of ex parte assessment order.
The grounds raised by the petitioner, namely, the cash amount deposited under the Pradhan Mantri Garib Kalyan Yojana Scheme, 2016, on 31.03.2017 has not been taken into consideration under the impugned assessment order. Contention of the petitioner that since he has has availed the benefit of Pradhan Mantri Garib Kalyan Yojana Scheme, 2016, the cash amount cannot be treated as an unexplained money under Section 69 (A) has not been considered by the respondent in accordance with law. Similarly, the contention of the petitioner that amendment made to Section 115BBE in the year 2020, will not apply to the assessment year 2017-2018, has also not been considered by the respondent in the impugned assessment order. The respondent has also not considered the petitioner’s contention in this Writ Petition that the amendment to Section 143 (3A) of the Income Tax Act, 1961, was proposed only in the Budget 2020 to include Section 144 proceedings also under the e-proceedings and therefore, for the assessment year 2017-2018, the same is not attracted. Though in the counter affidavit, the respondent has given reasons for each and every contention of the petitioner in this writ petition, the same is not reflected in the impugned assessment order. no personal hearing has been afforded to the petitioner. It is also not clear that whether such an opportunity was given by the respondent to the petitioner or not. All these aforementioned factors will clearly indicate that the respondent has violated the principles of natural justice while passing the impugned assessment order by not affording sufficient opportunity to the petitioner to raise all his contentions available to him under law. Thus the impugned assessment order is hereby quashed and the matter is remanded back to the respondent for fresh consideration. |
| 8 | DELHI HIGH COURT
ALCATEL-LUCENT INDIA LIMITED VS. NATIONAL E-ASSESSMENT CENTRE & ANR. No.- W.P.(C) 4981/2021 and CM APPL. 15268/2021 Dated.- April 26, 2021
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Violation of the provisions of the Act – final assessment order passed erroneously, even while the title of the order reads as “Draft Assessment Order u/s 143(3) r.w.s. 144C – HELD THAT:- Prima facie, we are of the view that the petitioner appears to be correct in its contention, that there is a violation of the provisions of the Act.
Assessing Officer was perhaps required to pass, in the first instance, an order under Section 144 C (1) of the Act, which would have enabled the petitioner to file, if so aggrieved, its objections with the Dispute Resolution Panel. Mr. Zoheb Hossain, who appears on advance notice, contends that for the moment, he does not have instructions in the matter. He, however, says that the timeline for passing the draft assessment order, as of now, expires on 30.06.2021.In the aforesaid circumstances, issue notice, both in the writ petition and the interlocutory application. Mr. Hossain accepts service on behalf of the respondent/revenue. In the interregnum, there shall be a stay on the operation of the impugned order. |
| 9 | MADRAS HIGH COURT
SMT. G. ZAINAB BANU VS. ACIT No.- W.P(MD)No.8036 of 2021 Dated.- April 19, 2021 |
Denial of natural justice – petitioner state that no opportunity was given either to her son or the petitioner, to inspect the records and take copies of the documents, by considering the representation of the petitioner’s son dated 06.11.2019 and therefore, an opportunity should have been given to the petitioner to inspect the documents – HELD THAT:- In view of the same, the respondent is directed to dispose of the representation of the petitioner’s son, dated 06.11.2019, on merits and in accordance with law, by affording an opportunity of hearing to the petitioner, within a period of six weeks from the date of receipt of a copy of this order. |
| 10 | [2021] 127 taxmann.com 194 (Delhi)-
HIGH COURT OF DELHI- KBB Nuts (P.) Ltd. v. National Faceless Assessment Centre Delhi (Earlier National E-Assessment Centre Delhi) W.P.(C) 5234 OF 2021 AND CM NOS. 16065-16067 OF 2021 MAY 10, 2021 |
Show-cause notice, along with draft assessment order was served on petitioner by National Faceless Assessment Centre, whereby, petitioner was called upon to file its response by 23:59 hours on 21-4-2021. However, show cause notice was received by petitioner via e-mail on 20-4-2021 at 03:06 hours and since time for compliance was short, petitioner filed an application via e-portal, seeking a day’s adjournment, i.e., till 22-4-2021. But, petitioner claims that no response was received by it with respect to request for adjournment.
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| 11 | [2021] 127 taxmann.com 177 (Bombay)
HIGH COURT OF BOMBAY Praful M. Shah v. National Faceless Assessment WRIT PETITION (L) NO. 11143 OF 2021 MAY 6, 2021 |
Notice was to be issued to revenue upon writ petition filed by assessee-company assailing assessment order passed in faceless manner. In view of submissions of assessee that impugned order was passed without jurisdiction and in gross violation of principles of natural justice and hence, same was bad in law and fact that assessee apprehended that action in pursuance of impugned order would be taken, further action pursuant to impugned order was to be kept in abeyance till next date. |
| 12 | DJ SURFACTANTS vs. NeAC, Delhi (Delhi High Court) W.P.(C) 4814/2021 & CM APPL. No.14848/2021 & 14847/2021 | A breach of the principles of natural justice, and therefore, the impugned assessment order deserves to be quashed. The AO has not taken into account the explanation and the material placed before him by the petitioner, along with its reply dated 12.03.2021. There shall be a stay on the operation of the impugned assessment order till further orders of the Court.. List the matter on 02.06.2021 |
| 13 | K L TRADING CORPORATION vs. NeAC, DELHI (Delhi High Court) (W.P.(C) 4774/2021 & CM APPL. NO.14723/2021) | The petitioner has been able to set up a prima facie case for issuance of notice and grant of an interim order. Variation made to Declared Income, without issue of Show Cause Notice So the operation of the assessment order dated 31.03.2021 shall remain stayed till the next date of hearing (21st May 2021) |
| 14 | M/S SAS FININVEST LLP vs. NeAC, DELHI (Delhi High Court) (W.P.(C) 5087/2021) | No show-cause notice was issued to the petitioner-assessee.. In the meanwhile, there shall be a stay on the operation of the impugned assessment order dated 31.03.2021
List the matter on 10.08.2021. |
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Antony Alphonse Kevin Alphonse vs. NeAC, Delhi (Madras High Court) (W.P.NO. 8379 OF 2021 & W.M.P.NOS. 8932 & 8934 OF 2021) | The impugned order has been passed before the time prescribed for filing the reply, it is evident that the impugned order has been passed with pre-set mind.. The impugned order stands quashed and. The case is remitted back to the second respondent to pass a speaking order on merits in accordance with law after considering the reply filed by the petitioner on 15.03.2021 |
| 15 | DELHI HIGH COURT
CLH GASEOUS FUEL APPLICATIONS PVT. LTD. VERSUS NATIONAL E-ASSESSMENT CENTRE, DELHI No.- W.P.(C) 5272/2021 Dated.- May 12, 2021 |
Notice under Section 142(1) – Faceless Assessment – breach of the principles of natural justice – assessee not given a fair opportunity to explain his position on the proposed additions/disallowances – As submitted AO was required to issue a show-cause notice qua each of the additions/disallowances made to the petitioner’s declared income – HELD THAT:- As each of the notices issued by the AO, under Section 142(1) of the Act, was replied. This is evident upon a perusal of paragraph 2 of the impugned assessment order.
Broadly, the purpose of issuance of notice under Section 142(1) of the Act is, to gather information from the assessee. However, before an addition is made, it evident that the CBDT instruction, dated 29.12.2015, requires issuance of a show-cause notice and an opportunity to be given to the noticee, i.e., the assessee to respond to the same. This step, it appears, at least at this stage, was not taken by the AO qua the petitioner. Therefore, according to us, the matter requires further examination. Accordingly, issue notice. |
| 16 | KBB Nuts (P.) Ltd. v. NFAC Delhi – [2021] 127 taxmann.com 194 (Delhi) | HC sets aside order as National Faceless Assessment Centre didn’t consider objection filed in response to SCN
INCOME TAX : Show-cause notice, along with draft assessment order was served on petitioner by National Faceless Assessment Centre, whereby, petitioner was called upon to file its response by 23:59 hours on 21-4-2021. However, show cause notice was received by petitioner via e-mail on 20-4-2021 at 03:06 hours and since time for compliance was short, petitioner filed an application via e-portal, seeking a day’s adjournment, i.e., till 22-4-2021. |
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Very good efforts. Thank you