Case Law Details
Satish Kumar Bansal HUF Vs National Faceless Assessment Centre Nafac And Another (Allahabad High Court)
Section 144B requires the Assessing Officer to provide an opportunity of hearing upon issuing a show-cause notice and, if requested by the assessee, to grant a personal hearing. The court interpreted Section 144B to imply that the grant of a personal hearing is not discretionary but rather a rule to be followed in assessment proceedings.
The case at hand pertains to a challenge against an ex parte assessment order dated March 23, 2024, issued under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for the assessment year 2022-23. The petitioner, Satish Kumar Bansal HUF, contested the validity of the assessment order on the grounds that it was passed without affording a reasonable opportunity of hearing.
The petitioner argued that the assessment order was issued without granting sufficient time to respond to the show-cause notice and without providing a genuine opportunity to participate in the assessment proceedings. The initial notice for assessment was sent via email on March 11, 2024, with the hearing scheduled for March 15, 2024. Due to the short notice, the petitioner requested an adjournment, which was granted, and the hearing was rescheduled for March 17, 2024. However, this date fell on a Sunday, and despite this, the Assessing Officer proceeded to finalize the assessment order on March 23, 2024, without granting any further opportunity for hearing.
The revenue, represented by counsel, contended that the petitioner had participated in the assessment proceedings initially but failed to cooperate towards the end, leading to the finalization of the assessment order. The revenue argued that statutory remedies were available to the petitioner against the assessment order, rendering the petition unnecessary.
The court, after considering arguments from both parties and examining the relevant legal provisions, emphasized the importance of affording the petitioner a genuine opportunity of hearing as mandated by Section 144B of the Income Tax Act. It noted that the Section 144B requires the Assessing Officer to provide an opportunity of hearing upon issuing a show-cause notice and, if requested by the assessee, to grant a personal hearing.
The court interpreted the provisions to imply that the grant of a personal hearing is not discretionary but rather a rule to be followed in assessment proceedings. It emphasized that the opportunity for a personal hearing is crucial, especially in cases involving disputed questions of facts and law. Written submissions alone may not adequately convey the nuances of the assessee’s case, and oral hearings are essential for effective communication and understanding.
Furthermore, the court highlighted the significance of recorded reasons in assessment orders, particularly when they entail adverse findings against the assessee. The absence of recorded reasons deprives the assessee of the opportunity to understand the basis for the decision and to make an informed choice regarding further recourse, such as filing an appeal.
In light of these considerations, the court set aside the assessment order dated March 23, 2024, and directed the petitioner to submit a reply to the show-cause notice within one week. If the Assessing Officer intends to accept the petitioner’s explanation, a consequential order may be passed without further hearing. However, if the explanation is rejected, the Assessing Officer must provide a date for a hearing with at least 15 days’ notice.
In conclusion, the court emphasized the importance of procedural fairness and adherence to principles of natural justice in assessment proceedings, and it directed that the assessment process be conducted in accordance with the law.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Shubham Agarwal, learned counsel for the petitioner and Sri Manu Ghildyal, learned counsel for the revenue.
2. Present petition has been filed to challenge the ex parte assessment order dated 23.03.2024 passed in the case of the petitioner under Section 143(3) read with Section 144B of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) for A.Y. 2022-23.
3. At the outset, objection has been raised as to existence of statutory alternative remedy of appeal. That has been met by learned counsel for the petitioner on the strength of his submission that ex parte assessment order has been passed practically without allowing for any opportunity of hearing to the petitioner less so reasonable opportunity of hearing. Neither the petitioner was given enough time to furnish its written reply to the shown-cause notice dated 11.03.2024 nor it was granted any real opportunity to be heard during assessment proceedings. The first notice for assessment was issued to the petitioner through e-mail mode on 11.03.2024 fixing the date 15.03.2024. In view of short time granted, the petitioner could not appear on the date fixed. However, he moved an adjournment application on the next date i.e. 16.03.2024. On that application, the Assessing Officer fixed the next/second and the final date of hearing on 17.03.2024. That was a Sunday. It is in such circumstances that the Assessing Officer passed the impugned assessment order on 23.03.2024 without allowing for any real opportunity of hearing to the petitioner to participate in the assessment proceedings.
4. Learned counsel for the revenue submits, the assessment proceedings had been initiated earlier. The petitioner was participating in the same. At the fag end of the proceedings, the petitioner did not cooperate. Accordingly, the assessment order has been finalised. Statutory remedies are available to the petitioner against the assessment order, therefore, the petition may not be entertained.
5. Having heard learned counsel for the parties and having perused the record, Section 144B of the Act [by virtue of sub-Section 6(vii) and (viii)] mandates opportunity of hearing to be given to the petitioner upon show-cause notice issued to show-cause why assessment may not be completed as proposed. Further, if at the time of submission of his reply to the show-cause notice, the assessee “requests” for opportunity of personal hearing, the same is necessary to be provided in terms of Section 144B(6)(viii). Reading of the two provisions does not suggest that grant of opportunity of personal hearing is optional at the discretion of the Assessing Officer. On the contrary in the context of rights in dispute before the Assessing Officer and under the Scheme of the Act, providing for opportunity of personal hearing appears to be the Rule and its waiver an exception to be exercised by the assessee. Wherever the assessee makes a specific request in terms of Section 144B(vii), that would be enforced on the Assessing Authority through National Faceless Assessment Centre in accordance with Section 144B(6)(viii). However, the provision cannot be read to mean that opportunity of personal hearing may be granted only where the assessee specifically requests for the same.
6. There is no warrant to interpret that the processual law prescribes that opportunity of personal hearing may not be granted by the Assessing Authority unless specifically requested for by the petitioner, in writing. To do that would be to give meaning to the word “request” used under Section 144B(6)(vii) and (viii), larger and much wider than intended by the legislature. Under the general Scheme of the Act, assessment orders are to be passed after giving opportunity to the assessee to present his case. To that extent, the revenue does not dispute the contention of the assessee and it does not claim a right to frame ex parte assessment orders. It contends, the opportunity for personal hearing is not inherent in the right to participate in the assessment proceedings. The assessee may participate in the assessment proceedings by furnishing his written reply. If however he seeks to avail opportunity of personal hearing, he may necessarily make a specific request, in that regard.
7. That may never be accepted. Assessment proceedings by very nature, often involve disputed question of facts and law. By merely submitting written explanations, facts and law may not become clear, on their own. Both with respect to computation of taxable receipts as also with respect to expenditure incurred and allowances and exemptions claimed, facts and explanations thereto are not only required to be pleaded and noted but are necessary to be discussed. It is not uncommon that in the course of a judicial or quasi judicial proceeding the written document may be read in more than one way. That is also true of all explanations and replies. Also, language and writing are a mode of communication. They vary from person to person. Often same or similar thoughts are expressed differently by different persons depending upon their own skill and preferred use of expressions and method of writing. Therefore, what may be intended to be communicated by an assessee by submitting his written reply, may be received differently by the Assessing Officer on a simple ex parte reading of the same.
8. Therefore, for the purpose of an effective discussion to arise and a reasoned conclusion to be drawn thereafter by the Assessing Officer, oral hearing remains an important and near about mandatory requirement to be fulfilled to ensure both, the requirement to pass a just and proper judicial or quasi judicial order and also to preserve the faith in the adjudicatory authorities.
9. Seen from another perspective, if the assessee is to be taxed at a rate or at income higher than he has returned, he deserves to know the reasons for the same. The reasons may not be drawn ex parte i.e. on the strength of an ex parte opinion of the Assessing Officer. Rather, there must be recorded reasons to deal with the explanation that the assessee may have furnished to the tentative opinion of the Assessing Officer. Only after such reasons are drawn and recorded in the assessment order, the assessee may have opportunity to know the mind of the Assessing Officer. He may then make an informed decision to either accept the reasoning and pay up the tax or approach the appeal forum.
10. Here, we may also take note of an earlier amendment made to Section 251 of the Act whereby the power of the first appeal authority to “set aside” a defective assessment order and to remit the matter to the Assessing Officer, has been done away. At present, the first appeal authorities may either “confirm” or “reduce” or “enhance” or “annul” an assessment order. In absence of power to remit the matter to the assessing authority to make a fresh assessment, in the case of an ex parte order wrongly drawn on ex parte basis, the appeal power would remain seriously restricted. The appeal authority would be forced to entertain the appeal on all merit issues and exercise the powers of the Assessing Officer. While it is not in doubt that the appeal authority has all powers of Assessing Officer, at the same time, it is not the Scheme of the Act to require the job of the Assessing Authority to be routinely performed by the First Appeal Authority. If the opportunity of personal hearing is to be declined by the Assessing Officer by way of a normal practice, we foresee such situations are bound to arise in the normal course of things. In any case, the assessee would have lost one opportunity and tier of appeal, for no fault on its part.
11. Therefore, the word “request” used under Section 144B(6) (vii) and (viii) only imply, where an assessee may furnish his written reply to the show-cause notice but not opt to avail opportunity of personal hearing, it may not be mandatory for the Assessing Officer to grant such opportunity of personal hearing if he intends to accept the explanation furnished. He may pass appropriate ex parte order accepting the explanation furnished by the assessee. If however, on reading the explanation furnished, the Assessing Officer maintains his tentative opinion to pass the assessment order as proposed, that may be adverse to the assessee, he would necessarily fix a date for personal hearing and communicate the same to the assessee, through electronic mode (as provided under the Act). Thereafter, it would be for the assessee to avail that opportunity. If the assessee fails to avail that opportunity, the Assessing Officer may proceed in accordance with law.
12. Seen in that light, the facts of the present case are glaring. The first notice proposing to make the variation was issued on 11.03.2024 and not earlier. Only three days’ time was granted to the petitioner to respond to the same. At the same time, no assessment order came to be passed on the date fixed i.e. 15.03.2024. Rather, the Assessing Officer entertained the adjournment application moved by the petitioner on 16.03.2024 and fixed another date. However, for reasons not known to the Court and reasons that may never be speculated but in circumstance that do not admit of any valid reasons to exist, the Assessing Officer fixed the proceedings for very next date i.e. 17.03.2024. That was a Sunday. Therefore, it was obligatory without fail for the Assessing Officer to have fixed another date before he may have proceeded to pass the final order. Seen in that light, the written instructions received by Sri Ghildyal in compliance of the last order do not bring out any just fact explanation to the course adopted by the assessing authority. Copy of the written instructions have been marked as ‘X’ and retained on record. In light of the above, no useful purpose may be served in keeping the present petition pending or calling for a counter affidavit or to relegate the petitioner to the forum of appeal. As discussed above, that appeal if filed will only require the Appeal Authority to function as the Assessing Authority in light of the amendment made in Section 251 of the Act. That a part on first principle – where rules of natural justice have been completely violated, we may never allow such an order to stand.
13. Accordingly, the order dated 23.03.2024 is set aside. The petitioner may treat that order as final show-cause notice and submit its reply thereto within a period of one week and not later. Thus, written reply, if any, may be filed by the petitioner by 04.05.2024. If the Assessing Officer is inclined to accept the explanation furnished by the assessee, in entirety, he may pass the consequential order without fixing any further date for hearing as the petitioner has not “requested” for the same. If however, he proposes to reject the explanation furnished by the petitioner, he would necessarily fix a date for hearing with at least 15 days prior notice. It may be communicated through prescribed mode. The petitioner undertakes to appear before the Assessing Authority in the manner prescribed on that date.
Thereafter, assessment proceeding may be carried on and be completed in accordance with law.
14. With the aforesaid observation, present petition is allowed. No order as to cost.
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