The requirement of giving an assessee under the Income Tax Act a reasonable opportunity of a personal hearing is mandatory and the provision of the Faceless Assessment Scheme does not mean that no personal hearing can be granted, the Delhi High Court ruled.
A Division Bench of Justices Manmohan and Navin Chawla said that the Court failed to understand how the grant of a person would either frustrate or defect the concept and purpose of the Faceless Assessment Scheme.
Factual Background
The petitioner had challenged the impugned final assessment order under Section 143(3) of the Income Tax Act, 1961 and the impugned notice under Section 156, for the Assessment Year 2018-2019.
The counsel for the petitioner contended that there had been a violation of principles of natural justice and mandatory procedure as show cause notice was issued proposing “Null or Nill” variation. The same was confirmed by the petitioner. However, later it was alleged that the respondent took a complete turnaround and issued the draft assessment order proposing variations for which no Show Cause Notice was ever issued to the petitioner.
Further, he contended that no opportunity for a personal hearing was provided to the petitioner even after requesting under Section 144 B (7).
Case of the Respondent
Counsel for the respondents contended that there was no violation of principles of natural justice as none of the two categories under the natural justice principle as fulfilled. He claimed that the petitioner was allowed written replies, and a personal hearing is just a discretionary opportunity, in addition to the written replies. Furthermore, granting of personal hearing would frustrate the concept of “faceless assessment”.
Observation of the Court
The Court observed that despite “Nil” or “Null” variation proposed in the show cause notice, additions had been made to the assessed income in the draft Assessment Order and the final Assessment Order. Further, it was observed by the Court that not serving the Show Cause notice was violative of Section 144B (1) (xvi).
“We here an action entails civil consequences, like in the present matter, observance of natural justice would be warranted and unless the law specially excludes the application of natural justice, it should be taken as implanted into the scheme”, the Court said.
Reliance was placed on Raghunath Thakur v. State of Bihar and Ors., to state that the opportunity to provide a hearing before making any decision is considered to be a basic requirement in Court proceedings. A pre-decisional hearing is necessary to assess a situation, especially in the absence of an express provision that rules it out. Besides, since the assesses has vested right to a personal hearing, the same has to be given if the assessee asks for it.
Accordingly, the Court set aside the impugned order and notice and remanded the matter back to the Assessing Officer.
Case Details
Before: Delhi High Court
Case Title: Bharat Aluminum Company Ltd. v. Union of India and Ors.
Coram: Hon’ble Mr. Justice Manmohan and Justice Navin Chawla
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