Andhra Pradesh High Court - Amravati

Shri Mudar Sudheer vs Union Of India on 28 February, 2022

     HONOURABLE SRI JUSTICE C. PRAVEEN KUMAR

                                    And

         HONOURABLE SMT. JUSTICE V. SUJATHA

                Writ Petition No.25113 of 2021

ORDER:    (Per Hon‟ble Smt. Justice V. Sujatha)


      Challenging the action of the 2nd respondent in passing

the impugned final assessment order in DIN: ITBA/AST/S/

143(3)/2021-22/1036001622(1) dated 29.09.2021 issued

under Section 143 (3) of the Income Tax Act, 1961, the

present writ petition is filed.

2. The case of the petitioner, in brief, is that the petitioner

is assessed to tax vide PAN No.ACAPM9587E under the

jurisdiction of the 2nd respondent. For the Assessment Year

2015-16, the petitioner filed his returns on 29.09.2015

declaring the total income at Rs.3,94,84,810/-, after claiming

exemption of Rs.1,22,34,821/- under Section 10AA of the

Income Tax Act, 1961. Thereafter, the petitioner filed his

revised returns on 31.10.2015 declaring the total income at

Rs.3,94,84,810/-. The assessment under Section 143 (3) of

the Act was completed on 21.04.2017 determining the

assessed income at Rs.3,99,40,410/-. Thereafter, the said

assessment order dated 21.04.2017 was set aside by the

Principal Commissioner of Income Tax, Tirupathi vide his

orders F.No.263/Pr.CIT/TPT/2019-20, dated 13.03.2020

directing the Assessment Officer to re-assess the assessment

de novo in accordance with law after making necessary 2 CPK, J & VS, J

W.P.No.25113 of 2021

examination and verification with regard to the issue.

Pursuant to the said directions, a notice under Section 142(1)

of the Act along with a questionnaire was issued to the

petitioner on 08.02.2021 calling for his explanation. In

response thereto, the petitioner has submitted a detailed

reply on 18.02.2021. Thereafter, the petitioner was issued a

show cause notice as to why the assessment should not be

completed as per the assessment order dated 26.09.2021 and

directing him to file his objections, if any, on or before

27.09.2021. It is the further case of the petitioner that though

he specifically requested for personal hearing through video

conferencing, the impugned order of assessment dated

29.09.2021 came to be passed under Section 143 (3) read

with Section 263 read with Section 144B of the Income Tax

Act, 1961 without affording any opportunity of being heard

through video conferencing. The same is challenged in this

writ petition as illegal, arbitrary and violative of principles of

natural justice.

3. The 2nd respondent filed his counter admitting that the

petitioner was not given opportunity of personal hearing

through video conferencing as sought by him, but, however,

contended that he was given sufficient opportunities in

accordance with the principles of natural justice, which were

not availed of by the petitioner. The petitioner has not made 3 CPK, J & VS, J

W.P.No.25113 of 2021

out any, prima facie, case seeking interference of this court,

and as such sought for dismissal of the writ petition.

4. Before proceeding further, it would be appropriate to

refer to Section 144B (7) (vii) and (ix) of the Act, which reads

as under:

"144B Faceless Assessment:

(7) For the purposes of faceless assessment-

(i) xxxxx

(ii) xxxxx

(iii) xxxxx

(vi) xxxxx

(v) xxxxx

(vi) xxxxx

(vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment 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 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) xxxxxx

(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;

A reading of the above provision makes it clear that in a

case where a variation is proposed in the draft assessment

order or final draft assessment order or revised draft

assessment order, an opportunity would be 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 4 CPK, J & VS, J

W.P.No.25113 of 2021

such draft or final draft or revised draft assessment order.

The assessee or his authorised officer may request for

personal hearing so as to make his oral submissions. It

further makes it clear that if a request for personal hearing is

provided 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, in accordance with the procedure laid

down by the Board.

In the case on hand, the counter of the 2nd respondent

clearly indicates that though a request is made by the

petitioner for being heard personally through video

conferencing, the same was not granted to him, but, however,

it is contended that the petitioner was given sufficient

opportunity in accordance with the principles of natural

justice. It does not anywhere indicate that the petitioner was

given an opportunity of being heard through video conference

in accordance with the provisions of Section 144B (7) of the

Act. It is a settled principle of law that no man should be

condemned unheard and it is incumbent upon the

Department to accord a personal hearing to the assessee

where such a request is made under Section 144B (7) and

failure to do so would amount to violation of principles of 5 CPK, J & VS, J

W.P.No.25113 of 2021

natural justice and also the mandatory procedure prescribed

in the Faceless Assessment Scheme under Section 144B of

the Act. A quasi judicial body must normally grant a personal

hearing as no assessee or litigant should get a feeling that he

was never given opportunity or deprived of an opportunity to

clarify the doubts of the Assessing Officer or decision maker.

In support of his contention, the learned counsel for the

petitioner relied upon a judgment in Bharat Aluminium

Company Ltd., v. Union of India (W.P.(C) No.14528 of 2021

and CM APPL.45702 of 2021, rendered by the High Court of

Delhi at New Delhi), where in similar circumstances the High

Court of Delhi, while holding that an assessee has a vested

right to personal hearing, if an assessee asks for it, set aside

the impugned final assessment order and remitted the matter

back to the Assessing Officer for passing a reasoned order

after affording a reasonable opportunity of hearing.

In Sanjay Aggarwal v. National Faceless Assessment

Centre (2021 (6) TMI 336), the Delhi High Court held that

as no standards, procedures and process in terms of sub-

clause (h) of Section 144B (7)(xii) read with Section 144B (7)

(viii) of the Act had been framed, it was incumbent upon

Revenue to accord personal hearing to the petitioner. The

Court emphasised that the aforesaid finding given by this

court was due to Revenue counsel not producing the

standard procedure and process framed by the Revenue. It 6 CPK, J & VS, J

W.P.No.25113 of 2021

was further held that the Standard Operating Procedure for

personal hearing through video conference under the Faceless

Assessment Scheme, 2019 was issued by CBDT vide Circular

F.No.Pr.CCIT/NeAC/SOP/2020-21, dated 23.11.2020 and

that CBDT vide order F.No.187/3/2020-ITA-1, dated

31.03.2021 extended the Circulars/notifications issued under

Faceless Assessment Scheme to the Faceless Assessment

under Section 144B of the Act and therefore, the SOP

contained in the circular dated 23.11.2020 was equally

applicable to the proceedings under Section 144B of the Act

also.

In Piramal Enterprises Limited v. Additional/Joint/

Deputy Assistant Commissioner of Income-Tax/Income

Tax Officer & others (2021 SCC Online Bombay 1534), the

High Court of Bomay, while interpreting Section 144B and

the principles of natural justice, categorically held that when

hearing has been envisioned and incorporated, it is

imperative to observe principles of natural justice as

stipulated. It is further held that when an assessee

approaches with response to a show cause notice, the request

made by an assessee, as referred to in clause (vii) of sub-

section 7 of Section 144B, would have to be taken into

account and it would not be proper, looking at the prescribed

procedure with strong undercurrent to have hearing on a

request after notice, to say that petitioner would have 7 CPK, J & VS, J

W.P.No.25113 of 2021

opportunity pursuant to Section 144C, which would intercept

the operation of the scheme contained under Section 144B.

In Swadeshi Cotton Mills v. Union of India1, the

Supreme Court held that where there has been non-

compliance with the implied requirement of the audi alteram

partem rule of natural justice at the pre-decisional stage, the

impugned order could be struck down as invalid on that score

alone. But in view of the commitment/concession that a

hearing would be afforded to the Company, the case is

remitted to the concerned authority to give a full, fair and

effective hearing. The Supreme Court held as follows:

".......the phrase „natural justice‟ is not capable of a static and precise definition. It cannot be imprisoned in the straight-jacket of a cast-iron formula. Rules of natural justice are not embodied of such rules. It was held that two fundamental maxims of natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind as pre-eminently necessary to ensure that the law is applied impartially objectively and fairly. These twin principles are (i) audi alteram partem is a highly effective rule devised by the Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power. Its reach should not be narrowed and its applicability circumscribed......"

In Bharat Aluminium Company Ltd., v. Union of

India and others (stated supra), the High Court of Delhi held

as follows:

"The non-obstante clause and the use of expression „shall be made‟ in Section 144B (1) creates a mandatory obligation upon the respondent/Revenue to follow the prescribed procedure. This Court is also of the view that the use of the expression "may" in

1981 AIR 818 (SC) 8 CPK, J & VS, J

W.P.No.25113 of 2021

Section 144B (7)(viii) is not decisive. It is settled law that having regard to the context, the expression "may" used in a statute has varying significance. In some context, it is purely permissive, whereas in others, it may make it obligatory upon the person invested with the power to exercise it. The word "may" is capable of meaning "must" or "shall" in the light of the context. In fact, where a discretion is conferred upon a quasi judicial authority whose decision has civil consequences, the word "may" which denotes discretion should be construed to mean a command.

".......This Court is further of the view that a quasi judicial body must normally grant a personal hearing as no assessee or litigant should get a feeling that he never got an opportunity or was deprived of an opportunity to clarify the doubts of the assessing officer/decision maker. After all confidence and faith of the public in the justness of the decision making process which has serious civil consequences is very important and that too in an authority/forum that is the first point of contact between the assessee and the Income Tax Department. The identity of the assessing officer can be hidden/protected while granting personal hearing by either creating a blank screen or by decreasing the pixel/density/resolution.

Consequently, this Court is of the view that the word "may" in Section 144B(viii) should be read as "must" or "shall" and requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory.

Having regard to the facts and circumstances of the

case and considering the submissions made by the counsel,

this court is of the view that the 2nd respondent passed the

impugned assessment order in terms of Sections 143 (3) read

with 263 read with 144B of the Income Tax, without affording

an opportunity of hearing through video conferencing to the

petitioner, though a specific request was made by the 9 CPK, J & VS, J

W.P.No.25113 of 2021

petitioner for personal hearing through video conferencing in

terms of Section 144B (7) (vii) (ix), which is not only in

violation of principles of natural justice, but also in violation

of the mandatory provisions as contemplated under Section