2025 (7) TMI 1058 - HC - Income Tax

Validity of Assessment Order issued u/s 143(3) r.w.s.144B - request of personal hearing through video conferencing not allowed - maxim of Audi Alteram Partem HELD THAT - It is not in dispute that there was a specific request to provide video conferencing to the petitioner which was not acceded to. It is also not in dispute that the petitioner was not given an opportunity of personal hearing through video conferencing. In view of the same there is a clear cut breach of principles of natural justice. It is a fundamental proposition of law that the other side should be heard before any order is passed. The maxim of Audi Alteram Partem is broad enough to include the rule against bias since a fair hearing is must for it to be unbiased hearing. The essential ingredients of fair hearing is that a person should be served with a proper notice and should be given a proper right to defend his case. In the instant case despite the request being made by the petitioner for personal hearing through video conferencing the same was not acceded to. In view of the same the impugned Assessment Order issued u/s 143(3) r/w Sec.144B and Demand Notice issued u/s 156 are not tenable and hence required to be quashed and set aside - Decided in favour of assessee.

Summary

ISSUES:

• Whether the Assessment Order issued under Sec. 143(3) read with Sec. 144B of the Income Tax Act, 1961 and the Demand Notice under Sec. 156 can be sustained where the assessee was not provided an opportunity of personal hearing through video conferencing despite a specific request.
• Whether the Assessing Officer is obliged to consider and deal with each document and explanation furnished by the assessee and provide a reasoned order rejecting or accepting such submissions.
• Whether the time limit provided to the assessee to respond to the show-cause notice under Sec. 69A read with Sec. 115BBE is reasonable and in accordance with principles of natural justice.
• Whether the reopening of assessment under Sec. 148 was justified on the basis of undisclosed deposits and whether proper procedure was followed.

RULINGS / HOLDINGS:

• The impugned Assessment Order and Demand Notice are not tenable as the petitioner was denied the opportunity of personal hearing through video conferencing, constituting a breach of the principles of natural justice.
• The Assessing Officer failed to consider the documents and replies filed by the petitioner and did not provide a reasoned order addressing the petitioner's explanations before making a substantial addition of Rs. 3,01,65,010/-, which is against the duty to pass a reasoned order.
• The time limit provided to the petitioner to respond to the show-cause notice was not reasonable and contrary to the ratio laid down by this Court that a three-day period is inadequate for filing a response.
• The reopening of assessment under Sec. 148 was based on the petitioner's undisclosed deposits with SRMMSUCCSL, and requisite approval was obtained; however, procedural lapses in hearing rendered the final order unsustainable.

RATIONALE:

• The Court applied the fundamental principle of natural justice embodied in the maxim Audi Alteram Partem, emphasizing that a person must be given a proper notice and a fair opportunity to defend their case, including the right to personal hearing.
• The Court relied on established jurisprudence requiring Assessing Officers to deal with each averment and document submitted by the assessee and to pass a reasoned order explaining acceptance or rejection of explanations.
• The Court referred to prior decisions holding that a three-day time frame to respond to show-cause notices under the Income Tax Act is inadequate and violates principles of natural justice.
• The Court noted the procedural requirements under the Faceless Assessment Scheme and the Standard Operating Procedure (SOP) dated 3.8.2022, mandating compliance with due procedure before finalizing assessment orders.
• The judgment reflects a doctrinal reinforcement of natural justice in tax proceedings, particularly emphasizing the necessity of providing personal hearing opportunities through video conferencing in faceless assessments.