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TMI Blog2022 (1) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... the writ applicant may be summarized thus: 2.1 The writ applicant had filed its return of income on 27.10.2018 thereby declaring his total income of Rs.85,03,090/-. The case of the writ applicant was selected for scrutiny under Computer Assisted Scrutiny Selection (hereinafter referred to as 'CASS') in the limited scrutiny category to verify the unsecured loans as well as the personal expenditure made by the applicant during the relevant assessment year. Accordingly, notice under section 143(2) of the Act, came to be served upon the writ applicant on 23.09.2019 followed by notices issued from time to time under Section 142(1) of the Act. 2.2 On 06.04.2021, draft assessment order came to be passed by the respondent authority under Section 144B(xiv) whereby show cause notice was also served as to why the assessment order should not be finalized in terms of draft assessment order. The writ applicant had submitted exhaustive reply against the aforesaid show cause notice on 10.04.2021 thereby raising specific objections that the assessment cannot exceed beyond the scope of limited scrutiny for the purpose of which it has been selected for the assessment. It was further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the due procedure prescribed under Section 144B of the Act, which is famously known as National Faceless Assessment Centre. The learned advocate appearing for the writ applicant has drawn attention of this Court that the impugned order has been passed without providing personal hearing through video conference, more particularly, when the writ applicant vide reply dated 23.04.2021 had specifically requested the respondent authority to provide an opportunity of personal hearing through video conference in terms of Section 144B(7) (vii) and section 144B(7) (xii) sub-clause (h) of the Act. 4. In response to the Notice dated 14.09.2021 issued by this Court, Mr. Varun K. Patel, the learned Standing Counsel has appeared on behalf of the respondent authorities. An affidavitin- reply affirmed by the Deputy Commissioner of Income Tax, Circle - 1(1)(1), Vadodara has been placed on record. At the outset, the learned Standing Counsel for the department has objected on the maintainability of the writ application more particularly, when the final assessment order has been challenged which is appealable by way of efficacious remedy in the form of statutory appeal provided under Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted in accordance with the procedure laid down under this section; (iv) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit in any one Regional Faceless Assessment Centre through an automated allocation system; (v) where a case is assigned to the assessment unit, it may make a request to the National Faceless Assessment Centre for- (a) obtaining such further information, documents or evidence from the assessee or any other person, as it may specify; (b) conducting of certain enquiry or verification by verification unit; and (c) seeking technical assistance from the technical unit; (vi) where a request for obtaining further information, documents or evidence from the assessee or any other person has been made by the assessment unit, the National Faceless Assessment Centre shall issue appropriate notice or requisition to the assessee or any other person for obtaining the information, documents or evidence requisitioned by the assessment unit; (vii) the assessee or any other person, as the case may be, shall file his response to the notice referred to in cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, 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; (xv) the assessment unit shall, while making draft assessment order, provide details of the penalty proceedings to be initiated therein, if any; (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt of draft assessment order referred to in clause (xxx), finalise the assessment within the time allowed under sub-section (13) of section 144C 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; (xxxii) The National Faceless Assessment Centre shall, after completion of assessment, transfer all the electronic records of the case to the Assessing Officer having jurisdiction over the said case for such action as may be required under the Act. (2) The faceless assessment under sub-section (1) shall be made in respect of such territorial area, or persons or class of persons, or incomes or class of incomes, or cases or class of cases, as may be specified by the Board. (3) The Board may, for the purposes of faceless assessment, set up the following Centres and units and specify their respective jurisdiction, namely:- (i) a National Faceless Assessment Centre to facilitate the conduct of faceless assessment proceedings in a centralised manner, which shall be vested with the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authorities, namely:- (a) Additional Commissioner or Additional Director or Joint Commissioner or Joint Director, as the case may be; (b) Deputy Commissioner or Deputy Director or Assistant Commissioner or Assistant Director, or Income-tax Officer, as the case may be; (c) such other income-tax authority, ministerial staff, executive or consultant, as considered necessary by the Board. (5) All communication among the assessment unit, review unit, verification unit or technical unit or with the assessee or any other person with respect to the information or documents or evidence or any other details, as may be necessary for the purposes of making a faceless assessment shall be through the National Faceless Assessment Centre. (6) All communications between the National Faceless Assessment Centre and the assessee, or his authorised representative, or any other person shall be exchanged exclusively by electronic mode; and all internal communications between the National Faceless Assessment Centre, Regional Faceless Assessment Centres and various units shall be exchanged exclusively by electronic mode: Provided that the provisions of this sub-section shall not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment should not be completed as per the such draft or final draft or revised draft assessment order, 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 in any unit; (viii) the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up, may approve the request for personal hearing referred to in clause (vii) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii); (ix) where the request for personal hearing has been approved by the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, such hearing shall be conducted exclusively through video conferencing or video telephony, including use of any telecommunication application software which supports video conferencing or video telephony, in accordance with the procedure laid down by the Board; (x) subject to the proviso to sub-section (6), any examination or recording of the statement of the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (1) or subsection (2), the Principal Chief Commissioner or the Principal Director General in charge of National Faceless Assessment Centre may at any stage of the assessment, if considered necessary, transfer the case to the Assessing Officer having jurisdiction over such case, with the prior approval of the Board. (9) Notwithstanding anything contained in any other provision of this Act, assessment made under sub-section (3) of section 143 or under section 144 in the cases referred to in sub-section (2) (other than the cases transferred under sub-section (8), on or after the 1st day of April, 2021), shall be non-est if such assessment is not made in accordance with the procedure laid down under this section." 7. The Co-ordinate Bench of this Court had an occasion to deal with similar issue. In the case of Agrawal JMC Joint Venture versus Assistant/Joint/Deputy/Assistant Commissioner Income Tax, had looked into the statutory mechanism mandated under section 144B of the act. The relevant observation are as under : "16.5 Clause (vii) of sub-section (7) of Section 144 A provides that where a variation is proposed in the draft assessment order or final draft assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144 B needs at this stage which starts with Non-obstante clause and declares that the assessment made under sub-section (3) of Section 143 or under Section 144 in the cases referred to in subsection (2)other than sub-section(8) on or after the 1st day of April, 2021, shall be non est if such assessment is not made in accordance with the procedure laid down under the said section. Principles of natural juristic writs large in this provision and legislature's instead to avail the opportunity of hearing also is stamped all over. A very strong deterrence issued by the legislature for the revenue to adhere to the detailed requirement of this provision as otherwise the assessment would be non-est. 16.8 In this backdrop, worthwhile would be to refer to the decision of the Delhi High Court rendered in case of Sanjay Aggarwal vs. National Faceless Assessment Centre, Delhi, reported in (2021) 127 taxmann.com 637 (Delhi) where the High Court was considering the challenge to the assessment order and consequential proceedings. While interpreting the word 'may' in section 144 B(vii) according to the Delhi High Court, the provision cannot absolve the revenue from obligation cast upon it to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee by serving a notice calling upon him to show-cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, 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 in any unit; (viii) the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up may approve the request for personal hearing referred to in clause (vi) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii); (xii) the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centres and the unit set up, in automated and mechanised environment, including format, mode, procedure and process in respect of the following, namely: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing to hold that whenever the assessee requests for personal hearing so as to make the oral submissions or to represent the case, the same needs to be approved by the authorities referred to in the provision. The request is covered by sub clause (h) of clause (xii) which empowers the authorities with prior approval of the Board to lay down the standards, procedures and processes for effective functioning of National Faceless Assessment Centre. While so doing, it has relied on the decision of the Delhi High Court. The Court accordingly held the assessment order passed as unsustainable, leaving it open to the authorities to carry forward the process in accordance with Section 144B. Relevant paragraphs would need reproduction. "47. Sum and substance of the submissions on behalf of petitioner is that personal hearing in the present matter is essential to properly appreciate the nature and manner in which the transactions are carried out and intricacies of the same can be better explained and brought forth as well as misconstruction by the authorities can be sorted out with proper understanding of the matter. In personal hearing and by oral submissions various aspects, operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FDAO is prejudicial to the interest of assessee after notice has been served on the assessee. 53. It would be seen that, up to clause (xxii) there is no segregation or distinction in treatment to be given to assessees bifurcating them into two categories viz, 'eligible assessee' and others' (other than eligible assessee). 54. Sub-clause (a) of clause (xxiii) prescribes courses to be adopted by NFAC in the case of non-response to show cause notice by an assessee. Clause (xxiii) purports to treat the assessees according to their categorization under sub-clause (a), items (A) or (B). Clause (xxiii), sub clause (a), item (A) prescribes, in the case DAO or FDAO proposes variation prejudicial to an eligible assessee, to forward DAO or FDAO to the eligible assessee and in the case of others, pursuant item (B) NFAC may finalize DAO or FDAO and serve a copy of assessment order on the assessee. 55. Sub-clause (b) of clause (xxiii), appears to obligate NFAC, irrespective of categorization appearing under sub-clause (a) of clause (xxiii), where response from an assessee is received, to send the same to the AU. 56. If there is response to show-cause notice, sub clause (b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, 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 in any unit;" 60. Plainly reading aforesaid provision would show that whenever assessee requests for personal hearing so as to make oral submissions or to present case, it is before income-tax authority in any unit. Subsection (7), clause (vii) shows that request for personal hearing is to be approved by the authorities referred to therein upon its opinion that the request is covered by sub-clause clause (xii). Clause (xii) empowers authorities with prior approval of the Board to lay down the standards, procedures and processes for effective functioning of National Faceless Assessment Centre and others, inter alia, circumstances in which personal hearing referred to in clause (vii) shall be approved. 61. Legislature is not unwary of situations arising, requiring personal hearing and oral submissions and thus, has provided for the same under the faceless assessment s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce as stipulated." 18. In summation, it can be deduced from the provisions, as also the decisions discussed that Section 144B of the IT Act under heading of the Faceless Assessment provides for the assessment under Section 143 (3) and 144 to be carried out as per the procedure contained in Section 144 B of the IT Act. As noted above, Sub-section (9) of Section 144B of the IT Act in no uncertain term provides that after the 1st day of April, 2021, the assessment made under Section 143 (3) or under Section 144(4) of the IT Act shall be non est, when not made in accordance with the procedure detailed in Section 144B of the IT Act. The opportunity of hearing as envisaged under Section 144B of the IT Act also shall need to be scrupulously adhered to as the principles of natural justice are unfailingly ingrained in this provision. " 8. In light of the aforesaid settled legal position of law vis-avis as laid down by the Delhi High Court in the case of Sanjay Agrawal vs. National faceless Assessment centre, Delhi, reported in (2021) 127taxmann.com 637 (Delhi) and of the Bombay High Court in the case of M/s. Parimal Enterprise Ltd. Vs, Addl. Commissioner of Income tax, reported in (202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing as scheduled could not be conducted and it was thereafter that the Assessing Officer had once again addressed notice dated 04.06.2021 thereby offering opportunity to the writ applicant/assessee to activate the video conference request. Even in the affidavit-in-reply filed by the Deputy Commissioner of Income Tax, Circle - 1(1)(1), Vadodara, the stand of the respondent authority is that the assessee was requested to respond for video conference activation by 09.08.2021 and has further confirmed that the writ applicant had activated the video conference on 09.08.2021 and had requested for hearing on 16.08.2021. 11. Thus, we have no hesitation in holding that inspite of specific request for personal hearing being requested by the writ applicant, the respondent authority without adhering to such request having proceeded to pass final assessment order, is in clear violation of the aforesaid statutory scheme and is therefore, held to be null and void and is hereby quash and set aside. 12. In the result, the writ application succeeds. The matter is remanded back to the Assessing Officer and the Assessing Officer is hereby directed to grant an opportunity of personal hearing to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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