Opportunity of hearing to be provided to the assessee in case of variation in demand order

[CA Bimal Jain]

The Hon’ble High Court of Gujarat in MAP REFOILS INDIA LIMITED VERSUS NATIONAL E-ASSESSMENT CENTRE, DELHI - 2023 (1) TMI 94 - GUJARAT HIGH COURT quashed and set aside the demand notice and the assessment order making an addition of INR 92.42 crores without providing the opportunity of hearing to the assessee. Held that, the Revenue Department should make assessments following the provisions of Section 144B of the Income Tax Act, 1961 (“the IT Act”) in order to provide an opportunity of hearing to the assessee.

Facts:

Map Refoils India Limited (“the Petitioner”) is engaged in the business of refining and trading of different kinds of edible oil. The Petitioner had filed a Return of Income (“ROI”) declaring a total income of INR 1,97,88,000/-. The ROI of the Petitioner was taken under Scrutiny Assessment under the E-assessment Scheme, 2019 (“the Scheme”) and a notice under Section 143(2) of the IT Act was also issued. Further, another notice under Section 142(1) of the IT Act was also issued. The Petitioner has replied to all such notices.

A Show Cause Notice (“SCN”) on May 12, 2021 along with a draft assessment order wherein an addition of INR 1,17,05,44,981/- was proposed. The Petitioner had submitted a detailed reply to the SCN on May 25, 2021 and had requested for a personal hearing.

After the personal hearing, the Assessing Officer (“AO” / “the Respondent”) enquired further and issued notices under Section 133(6) of the IT Act to one Kunal Exports and Infrastructures and Gurdas Agro Private Limited on September 8, 2021 and September 15, 2021, respectively, seeking confirmation on various documents. The AO had also issued notice to the State Bank of India (“SBI”) to verify the genuineness of the bank statement.

The Respondent passed the Final Assessment Order dated September 23, 2021 (“the Impugned Order”) making an addition of INR 92,42,86,979/- without providing the opportunity of hearing to the Petitioner.

The Petitioner contended that he submitted all the details as required by the AO. The AO did not provide the opportunity of hearing to the after the enquiry following the draft assessment order and therefore there was breach of the principles of natural justice.

The Respondent on the other hand contended that the Petitioner was given numerous opportunities during the issue of the notices and hence the principles of natural justice was followed. The Petitioner was also provided with the right to fair hearing and reasonable opportunity to be heard. The replies given by the Petitioner to the notices were also duly considered and incorporated in the assessment order. Additionally, the planned additions in the Impugned Order was less than the draft assessment order.

Issue:

Whether the Impugned Order passed by the Respondent is violative of the principles of natural justice?

Held:

The Hon’ble Gujarat High Court in MAP REFOILS INDIA LIMITED VERSUS NATIONAL E-ASSESSMENT CENTRE, DELHI - 2023 (1) TMI 94 - GUJARAT HIGH COURT held as under:

• Analysed Section 144B of the IT Act and noted that on receipt of SCN, the assessee may furnish his response to the National Faceless Assessment Centre and assessment unit shall make a revised draft assessment order after considering the response of the assessee and send it to the National Faceless Assessment Centre.
• Further noted that, in case of variation prejudicial to the assessee as proposed in the draft assessment order, the assessee is entitled to request for personal hearing and upon such request, the personal hearing may be provided.
• Observed that, no draft assessment along with the SCN as required under Section 144B(1) and Section 144B(7) of the IT Act was provided to the Petitioner in order to allow the Petitioner to provide with an explanation.
• Held that, the Impugned Order passed by the Respondent is violative of the principles of natural justice, as the petitioner was not provided with the opportunity of personal hearing as per the provisions of Section 144B of the IT Act.
• Quashed and set aside the Impugned Order and the SCN.

Relevant Provision:

Section 144B of the Act:

“Faceless Assessment.

(1) Notwithstanding anything to the contrary contained in any other provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:-

…………………..

 (ix) the assessment unit shall serve upon such assessee, as referred to in clause (viii), a notice, through the National Faceless Assessment Centre, under section 144, giving him an opportunity to show-cause on a date and time as specified in such notice as to why the assessment in his case should not be completed to the best of its judgment;

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(xii) the assessment unit shall, after taking into account all the relevant material available on the record, prepare, in writing,-

(a) an income or loss determination proposal, where no variation prejudicial to assessee is proposed and send a copy of such income or loss determination proposal to the National Faceless Assessment Centre; or

(b) in any other case, a show cause notice stating the variations prejudicial to the interest of assessee proposed to be made to the income of the assessee and calling upon him to submit as to why the proposed variation should not be made and serve such show cause notice, on the assessee, through the National Faceless Assessment Centre;

(6) For the purposes of faceless assessment-

…………….

(vii) in a case where a variation is proposed in the income or loss determination proposal or the draft order, and an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per such income or loss determination proposal, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority of the relevant unit;

(viii) where the request for personal hearing has been received, the income-tax authority of relevant unit shall allow such hearing, through National Faceless Assessment Centre, which shall be conducted exclusively through video conferencing or video telephony, including use of any telecommunication application software which supports video conferencing or video telephony, to the extent technologically feasible, in accordance with the procedure laid down by the Board;”

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