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2025 (6) TMI 495 - HC - Income TaxValidity of assessment u/s 144B - violation of the principles of natural justice by not providing the opportunity of hearing as contemplated under Section 144B(1)(vii) - HELD THAT - At the relevant point of time in the year 2021 the proceedings of face less assessment was in a very nascent stage and the respondent-Authorities were under process of being acquainted with conducting the face less assessment proceedings and the assessment orders have been passed by the Assessment Unit without verifying the ITBA portal which is apparent from the facts on record. Taking into consideration the replies submitted by the respondent as per the directions of the Central Board of Direct Taxes (CBDT) and the instructions issued by the Directorate of the systems which is reproduced herein above we are hopeful that the respondents would be careful in passing the Assessment Order and due care for verification of the available data including the adjournment requests made by the petitioners online would be taken so as to adhere to the principles of natural justice as well as the provisions of Section 144B of the Act. In the facts of the case it is not in dispute that the petitioner was not granted the opportunity of personal hearing despite the request was made for adjournment due to Covid-19 pandemic situation on 20th April 2021 hence the impugned Assessment Order is liable to be quashed and set aside. Accordingly the assessment order is hereby quashed and set aside and the matter is remanded to the respondent-Assessment Unit to pass a fresh de novo order after providing an opportunity of hearing to the petitioner in accordance with law.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Violation of principles of natural justice due to non-provision of opportunity of personal hearing Relevant legal framework and precedents: The assessment proceedings were conducted under the Income Tax Act, 1961, specifically under Section 143(3) read with Section 144B which governs faceless assessments. Section 144B(1)(vii) mandates that the assessee be given an opportunity of personal hearing before passing the final assessment order. The principles of natural justice require that no order affecting the rights of a party be passed without giving that party an opportunity to be heard. Court's interpretation and reasoning: The Court noted that the petitioner had repeatedly sought personal hearing and adjournment due to the Covid-19 pandemic and ill health. Notices were issued on multiple occasions, and the petitioner duly responded through the e-filing portal, including registering as a legal heir and requesting extensions. Despite these requests, the Assessing Officer passed the final assessment order without providing the opportunity of personal hearing. Key evidence and findings: The petitioner's requests for adjournment and personal hearing were submitted on the portal, including a specific request dated 20.04.2021 citing Covid-19 infection and home quarantine. The impugned order was passed on 27.04.2021 without taking these requests into account. The order sheets and correspondence indicated that the Assessing Officer was unaware of the adjournment request at the time of passing the order. Application of law to facts: The Court found that the failure to provide an opportunity of hearing despite the petitioner's requests constituted a breach of the principles of natural justice and statutory mandate under Section 144B(1)(vii). Treatment of competing arguments: The respondent argued that the petitioner did not attend the scheduled video conferencing hearing on 22.04.2021 and that the adjournment request was not known to the Assessing Officer at the time of order. However, the Court observed that the faceless assessment system was nascent at the time, and procedural lapses in verifying portal data and adjournment requests occurred. The Court emphasized the importance of adherence to natural justice over technical non-compliance. Conclusions: The impugned order was passed in violation of natural justice principles and was liable to be quashed and set aside. Issue 2: Procedural obligations and timelines under faceless assessment scheme regarding adjournments and responses Relevant legal framework and precedents: The faceless assessment scheme under Section 144B of the Act introduced a mechanism for electronic communication, including issuance of notices, submission of replies, and requests for personal hearings or adjournments through the e-filing portal. The Standard Operating Procedure (SOP) dated 03.08.2022 and instructions from the Directorate of Systems dated 04.03.2025 provide guidelines on timelines for responses, adjournment requests, and personal hearings. Court's interpretation and reasoning: The Court reviewed the affidavit-in-reply filed by the respondent, which clarified the procedural norms. The SOP provides for a normal response time of seven days to show cause notices, with possible curtailment based on assessment timelines. Adjournment requests can be made online, including after the due date, subject to conditions such as not exceeding 15 calendar days from the notice response due date and being within seven days prior to the proceeding limitation date. Key evidence and findings: The respondent's affidavit explained that the Assessing Officer has discretion to accept or reject adjournment requests and that personal hearings are mandatorily provided only at the stage of show cause notice under Section 144B(6)(vii). The SOP mandates that adequate time be given for responses and adjournments up to seven days may be granted suo-motu. Application of law to facts: The Court noted that the petitioner's adjournment request on 20.04.2021 was within the permissible time and conditions but was not considered due to procedural lapses. The faceless assessment system was still evolving, and the respondent's failure to verify portal data before passing the order was a material irregularity. Treatment of competing arguments: The respondent contended that the petitioner did not attend the scheduled video conference and that the adjournment request was not communicated to the Assessing Officer. The Court acknowledged this but underscored the necessity of the Assessing Officer to verify all available data on the portal, especially adjournment requests, before passing orders. Conclusions: The Court emphasized the need for adherence to SOPs and procedural safeguards under the faceless assessment scheme to ensure fairness and compliance with natural justice. Issue 3: Necessity and scope of personal hearing under faceless assessment Relevant legal framework and precedents: Section 144B(6)(vii) of the Act provides for personal hearing opportunity at the stage of show cause notice. The SOP clarifies that personal hearing is not mandatory in all cases but is available upon request at the specified stage. Court's interpretation and reasoning: The Court considered whether mere formal requests for personal hearing oblige the authority to grant it. The Court observed that while the faceless assessment process aims to reduce physical hearings, the statutory mandate to provide personal hearing upon request at the show cause notice stage remains binding. Key evidence and findings: The petitioner had filed detailed submissions and requested personal hearing. The respondent's affidavit confirmed that personal hearing is mandatorily provided only at the show cause notice stage and that the petitioner's request was acknowledged with scheduling of video conferencing. Application of law to facts: The petitioner's failure to attend the scheduled video conference was noted, but the petitioner's subsequent adjournment request due to Covid-19 was not recorded or considered. This procedural lapse was fatal to the validity of the assessment order. Treatment of competing arguments: The respondent argued that the petitioner's non-attendance justified passing the order. The Court balanced this against the petitioner's legitimate health concerns and requests made in good faith via the portal, concluding that the Assessing Officer's failure to consider these requests was unjustified. Conclusions: Personal hearing is a mandatory procedural safeguard at the show cause notice stage, and failure to provide it upon request violates natural justice. 3. SIGNIFICANT HOLDINGS The Court held that:
The Court established the core principle that even under faceless assessment proceedings, the statutory and constitutional mandate to provide an opportunity of hearing upon request must be scrupulously observed to uphold natural justice. Procedural lapses, especially failure to consider adjournment requests and personal hearing applications submitted through the e-filing portal, render the assessment order liable to be quashed. The Court further clarified the procedural framework under the faceless assessment scheme, including timelines for responses, conditions for adjournments, and the limited but mandatory stage for personal hearings, as per the SOP and CBDT instructions. The final determination was to quash the impugned assessment order dated 27.04.2021 and remit the matter for fresh adjudication after providing the petitioner an opportunity of hearing within twelve weeks.
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