Gujarat High Court
Shree Ganesh Intermediary ... vs National Faceless Assessment ... on 19 August, 2023
Bench: Biren Vaishnav
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 16260 of 2021
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE DEVAN M. DESAI
==========================================================
1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
SHREE GANESH INTERMEDIARY PRIVATE LIMITED
Versus
NATIONAL FACELESS ASSESSMENT CENTRE, DELHI
==========================================================
Appearance:
MR HARDIK V VORA(7123) for the Petitioner(s) No. 1
MR M R BHATT & CO.(5953) for the Respondent(s) No. 1
MR KARAN SANGHANI, ADVOCATE FOR MRS KALPANA K RAVAL(1046)
==========================================================
CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE DEVAN M. DESAI
Date : 19/08/2023
CAV ORDER
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. The present petition has been filed praying for a writ
of certiorari or writ, order or direction in the nature of
certiorari quashing/setting aside the assessment order
passed under section 144 read with section 263 read with
section 144B of the Act for the assessment year 2015-16
making addition of Rs.85,36,152/-.
2. Facts in brief would indicate that the petitioner is
engaged as an intermediary, agent, advisor, stockist,
distributor, consultant to deal in all sorts of raw
materials, finished, processed or in any other form and
other allied materials. The petitioner had filed return of
income declaring total loss of Rs.33,78,626/-.
2.1 The case of the petitioner was selected for limited
scrutiny for issue regarding large increase in unsecured
loans in comparison to high loans/advances/investment in
shares. The Assessing Officer made a disallowance of
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
Rs.41,044/- under Section 14A read with Rule 8D of the
Income Tax Act, 1961 and Income Tax Rules in the
aseessment order dated 08.02.2017.
2.2 Subsequently, notice under section 263 of the Act
came to be issued invoking the provisions of Section 2(22)
(e) of the Act on the ground that the assessment order
dated 08.12.2017 was passed which was erroneous and
prejudicial to the interest of revenue. The order was
passed on 16.03.2020. Being aggrieved by the order
passed by the revisionary authority, the petitioner filed an
appeal on 31.03.2021 before the ITAT.
2.3 It is the case of the petitioner that in pursuance of
the order dated 16.03.2020, notices were issued on
08.09.2021 and 21.09.2021 asking for various details.
Since the notices went to an old authorized
representative on his email address, it is the case of the
petitioner that he could not represent on 28.09.2021. A
draft assessment order was passed proposing to make an
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
addition of Rs.85,36,152/- under section 2(22)(e) of the
Act. The show-cause notice and the draft assessment
order required the petitioner to comply with the same on
or before 29.09.2021. In response to the show-cause
notice, the petitioner with the help of a new authorized
representative on 28.09.2021 filed a response to the
show-cause notice taking various contentions.
2.4 It is the case of the petitioner that without
considering these objections, the respondent on
30.09.2021, completed the assessment proceedings ex-
parte under section 144 read with section 263 of the Act.
3. Mr. Hardik Vora, learned advocate appearing for the
petitioner has challenged this order on various grounds:
(I) Mr. Vora would submit that the order has not
considered the detailed submissions point wise made by
the petitioner in his reply dated 28.09.2021. He would
submit that the first notice was issued on 08.09.2021,
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
second on 21.09.2021 and the final show-cause notice on
28.09.2021. A short time to file reply was given
especially when the time limit to complete the assessment
was expiring on 30.09.2021. He would submit that it was
apparently unfair and unreasonable for the respondents
to work out a schedule of responding to the notices at the
fag end of the last month i.e. September 2021 when the
proceedings would be time barred on 30.09.2021.
(II) Mr. Vora would submit that the notice was issued just
two days before the limitation was to expire and only a
days' time was provided which deprived the petitioner of
reasonable opportunity of being heard.
(III) Mr. Vora would further submit that despite the fact
that the petitioner did manage to file a reply on the same
date i.e. on 28.09.2023 along with necessary documents,
however, an ex-parte order was passed simply stating
that 'submission filed by the assessee is verified, no
further modifications in this regard'.
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
(IV) Mr. Vora would rely on clause xxiv of Section 144B
of the Act which requires that the assessment shall be
completed only after taking into account the response
furnished by the assessee which was not done and
therefore the assessment order violates the principles of
natural justice.
3.1 Mr. Vora, learned advocate for the petitioner in
support of his submissions would rely on the following
decisions:
(a) Tin Box Company vs. CIT [MANU/SC/0849/2001]
(b) Dineshkumar Chhaganbhai Nandani vs ITO
2023:GUJHC:2993-DB
(c) Sharmila Vikram Mahurkar vs ACIT [[2023] 149
taxmann.com 375 (Gujarat)]
(d) Dipak Natwarlal Dholakiya vs ACIT [[2023] 149
taxmann.com 151 (Gujarat)]
(e) M/s. Advance Realty Developers vs NeAC [ 2021 :
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
GUJHC:53030-DB]
(f) Dharamshil Agencies vs. Union of India [2021 :
GUJHC: 26807-DB
(g) MMG Constructions LLP vs. Union Of India & Ors.
Writ Petition No. 21638 of 2021 (T-IT) at High Court of
Karnataka
taxmann.com 517 (Gujarat)]
taxmann.com 411 (Delhi)]
(j) K.K. Wine vs. NeAC [[2022] 143 taxmann.com 411
(Delhi)
(k) Lamba Techno Flooring Solutions (P.) Ltd. vs. NFAC,
Delhi [[2021] 127 taxmann.com 194 (Delhi)]
(l) Pankaj vs. NeAC [[2022] 135 taxmann.com 361
(Bombay)
taxmann.com 47 (Himachal Pradesh)
(n) Divya Capital One (P) Ltd. vs. ACIT [[2022] 139
taxmann.com 461 (Delhi)
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
(o) Tata Capital Financial Services Ltd. vs. ACIT [[2022]
137 taxmann.com 315 (Bombay)]
4. Mr. Karan Sanghani, learned advocate appearing for
the respondent submitted that the impugned assessment
order was pursuant to the order passed under Section
263 of the Act which is not under challenge. During the
proceedings under Section 263 of the Act, the petitioner
was afforded adequate opportunity. He would draw the
attention of the court to the order sheet entry dated
29.09.2021 and submit that the FAO has considered the
submission filed by the petitioner on 29.09.2021 and after
considering the same, order under section 144 of the Act
was passed on 30.09.2021.
4.1 Mr. Sanghani has further submitted that the said
issue was also discussed by the FAO in para 13 of the
assessment order dated 30.09.2021. He would draw the
attention of the court to the observations made in the
assessment order dated 30.09.2021 which reads as
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
under:
"13. A show cause notice dated 28/09/2021 was
issued to the assessee for proposing to
complete the assessment u/s. 144 r.w. section
263 as above and invited assessee objection if
any. Assessee has submitted its reply and some
of the documents. Submission filed by the
assessee is verified, no further modifications in
this regard. As the assessee has not produced
the document in response to letter dated
08/09/2021 and 21/09/2021, the assessment is
completed u/s. 144 of the act. All other details
as per return and as records are verified."
4.2 Mr. Sanghani has submitted that in view of the
above, there is no reason to entertain the petition and the
same deserves to be dismissed.
5. Having heard learned advocates for the respective
parties, the facts would indicate that the order under
Section 263 of the Act was passed by the PCIT-4 on
16.03.2020. No action was taken thereafter for over a
period of 17 months. At the fag end of the schedule
when the time limit to complete the assessment was to
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
come to an end, the department on 08.09.2021 and
21.09.2021 issued first and second notices respectively
which was issued to the petitioner on the old consultant's
email id. Thereafter, a show-cause notice was issued
asking the petitioner to submit a response on the very
next date. Without considering the submissions, an order
was passed on 30.09.2021.
5.1 As contended by the learned counsel for the
petitioner, what is apparent and evident is that without
working out a schedule so as to give a reasonable
opportunity to the petitioner, particularly when the
assessment is faceless, the respondents giving only a day
for the petitioner to respond so as to save the limitation
period, obviously created a situation where the petitioner
lost an adequate opportunity to submit a response.
6. Mr. Hardik Vora, learned counsel for the petitioner
has cited several decisions on the issue of inadequate
opportunity as a result of such an exercise at the hands of
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
the authorities. In the case of Dineshkumar
Chhaganbhai Nandani (supra), the co-ordinate bench of
this court was faced with a case where a show-cause
notice was issued on 29.03.2022 to show cause as to why
the proposed variation should not be made. The show-
cause notice was sent at 11.41 am on 29.03.2022 and it
was stated in the said notice that the petitioner shall
submit reply by 23.59 pm on the very same day i.e. on
29.03.2022 and thereby time of 12 hours was given.
6.1 The facts of the case in the present are similar to the
one in the case of Dineshkumar Chhaganbhai
Nandani (supra) inasmuch as the notice of 28.09.2021
called upon the petitioner to file a response by
29.09.2021 at 11.59 pm. On the very next date, since the
assessment was getting time-barred, an order of
assessment was passed only for the compliance of the
provisions and depriving the petitioner of a reasonable
opportunity of being heard. The Division Bench in the
case of Dineshkumar Chhaganbhai Nandani (supra)
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
has considered several decisions of this court on the issue
of reasonable opportunity of being heard in context of
Section 144B of the Act. Paras 11 to 14 of the decision
read as under:
"11. In the aforesaid factual aspect of the
present case, the decisions relied on by the
learned advocates appearing for the parties are
required to be examined.
12. In the case of Gandhi Realty (India)(P) Ltd.
(supra), it was the case of the concerned
petitioner that a show cause notice-cum-draft
assessment order was not issued to the
concerned assessee, and therefore, in the facts
of the said case, this Court held that though
earlier various notices were issued to the
concerned assessee, the respondent was
required to issue show cause notice-cum-draft
assessment order, which is mandatory
requirement for faceless assessment. However,
we are of the view that the aforesaid decision
would not be applicable to the facts of the
present case because in the present case, show
cause notice-cum-draft assessment order was
issued to the petitioner.
13. In the case of Agrawal JMC Joint Venture
(supra), similar type of objection was raised by
therespondents in the affidavit-in-reply. The
contention was raised in the said case that
petitioner is having alternative efficacious
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
remedy of filing an appeal before the Appellate
Authority and therefore petition may not be
entertained. However, the Division Bench of
this Court, after considering various aspects
and after considering the submissions
canvassed by learned advocates appearing for
the parties, observed in para 18 and 19 as
under:
"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.
19. Reverting to the facts on the matter on
hands, it is quite clear that the notice
along with the draft assessment order was
given to the petitioner on 04.04.2021, the
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
response to the same was given within two
days by the petitioner in the mode as
prescribed under the Law. It also filed
further reply to the said notice on
08.04.2021 as well as on 15.04.2021 in
continuation of the first reply of
06.04.2021. It is also a matter of record
that there is no reference of the request
made on 07.04.2021 in a subsequent reply
made in continuity on the part of the
petitioner of 08.04.2021 as well as
15.04.2021. However, that would not in
any manner question his conduct of
requesting for the personal hearing in as
much as that aspect is neither disputed
nor belied from the material which is
available from the eportal of the Income
Tax Department. In fact in the affidavit-in-
reply itself there is a reference of such a
request made by the petitioner which
according to the respondent-revenue is
impermissible as he has not exercised the
option while responding to the notice and
the draft assessment order on
06.04.2021."
13.1.In the case of Dipak Natwarlal
Dholakiya (supra), the Court observed in
para 5 and 6 as under:
"5. We have heard, learned advocate
Mr. S. N. Divatia for the petitioner
who has vehemently urged before the
Court that the impugned order
passed under Section 143(3) read
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
with Section 263 with Section 144B
of the Act and consequential notice of
demand and penalty, are in gross
violation of the principles of natural
justice and statutorily, it was
mandatory for the respondent to
issue a showcause notice cum draft
assessment order whenever there is
variation from the returned income
as provided under Section 144B(1)
(xiv) of the Act. Therefore, he has
urged that notice was uploaded on
17.03.2022 at 12:41 IST and asked
the petitioner to comply before 6:00
p.m. on 18.03.2022. Thereby, the
petitioner was allowed hardly a time
of 12 hours to comply to the aforesaid
notice. Further, 18.03.2022 was a
holiday on account of Dhuleti and yet
the petitioner uploaded all the
possible and available details with
him. There was gross violation of the
principles of natural justice and the
entire action of the respondent of
completing the assessment was not in
consonance with the legislative
intent. Heavy reliance was placed on
the decisions in Calcutta Discount Co.
Ltd. v. ITO, 41 ITR 191 (SC) and in
Radhakishan Industries v. State of
Himachal Pradesh and Others, (2021)
6 SCC 771. The addition made herein
of Rs.39,87,750/- allowing less than
four hours to make necessary
calculations and collect the details is
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
next to impossible task and hence,
the order is sought to be interfered
with.
6. Having thus heard both the sides,
on the ground of non-compliance of
mandatory statutory provisions and
for grant of less than four hours to
respond to the notice on 29.03.2022,
interference is desirable. We could
notice that the final show-cause
notice cum draft assessment order
proposing huge additions
aggregating Rs.39,87,750/- was
issued at 17:22 IST on 29.03.2022,
which was to be responded to by
23:59 IST on the very day. This,
surely, is in gross violation of the
principles of natural justice as to ask
some one to respond to the same in
less than four hours, amounts to
nearly achieve impossible. When it is
being terms as violation of principles
of natural justice, it is mild
expression to the conduct of the
respondent. The least that could have
been done was to regard the
objective and very purport of
introducing service of show-cause
notice cum draft assessment order
under Section 144B of the Act. Such
Faceless Assessment Scheme 2019
has been incorporated under the Tax
regime vide Taxation and Other Laws
(Relaxation and Amendment of
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
Certain Provisions) Act, 2020,
whereby, Section 144B was inserted
from 1st April 2021. The circular of
Central Board of Direct Taxes (CBDT)
deals with the procedure of faceless
assessment, scope of work to be done
by different units such as assessment
unit, verification unit, technical unit
etc. Non-compliance of subsection (9)
of Section 144B of the Act would
render the issue non est. Our
attention is drawn that the provisions
of sub-section (9) of Section 144B of
the Act though have been omitted
from the statute book, there is no
running away from the fact that the
time given is in no manner can be
said to be in due compliance of the
statutory provisions or in satisfaction
of fulfilling the objectives of newly
introduced provisions.
13.2.In the aforesaid case, less than five
hours time was given to the concerned
assessee for filing reply and this Court
observed that the respondent had failed to
grant reasonable opportunity of hearing to
the concerned assessee and therefore it
was held that it is the case of gross
violation of principles of natural justice.
14. In the present case, as discussed
hereinabove, it is the specific case of the
petitioner that a show cause notice-cum-
draft assessment order was issued on
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
29.03.2022 and petitioner was asked to
submit his reply within less than 12 hours.
Though the petitioner submitted reply, it is
the specific case of the petitioner that the
respondents have failed to grant adequate
opportunity of hearing/ an opportunity to
defend was not given to the petitioner
assessee. We have gone through the reply
dated 29.03.2022 submitted by the
petitioner, copy of which is placed on
record at page 82 of the compilation. A
specific request was made by the
petitioner to the respondent that
particular documents/details be supplied
for cross verification and an opportunity to
crossexamine one Mr. Saurabh Kathwadia
be given to the petitioner. However, it is
not in dispute that the said documents as
asked for by the petitioner were not
supplied to him nor any opportunity of
crossexamination of the aforesaid person
was granted to the petitioner. Even
otherwise, within less than 12 hours, it is
difficult for the petitioner to submit
complete reply to the respondents."
6.2 In the case of M/s. Advance Reality Developers
(supra), the Division Bench of this court considering the
provisions of Section 144B of the Act held as under:
"11. Wherever, there is a clear breach in
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
following the procedure under this provision,
assessment made under Section 143 (3) or
under Section 144 (other than those
transferred under Section 144(8) after
01.04.2021) would be non-est. In the matter on
hand, as is quite apparent by not providing the
opportunity to the assessee when huge
variation/addition was proposed by the
authority, would naturally and obviously prove
prejudicial to the interest of the assessee. The
least expected of the respondent is to provide
an opportunity, and that would mean that a
reasonable time period would be necessary for
responding to the final notice and the Draft
Assessment Order. Mere service can never
make revenue complacent. It is a case where
only a day's time was provided, which by no
stretch of reasons could be said to be a
reasonable time period. Even when no time
period is stipulated for seeking the response
from the petitioner/assessee, the minimum
reasonable time could be of 15 days where the
parties can examine the details and can
respond again during that period if there is a
request that comes, the least that the authority
can do is to respond to the same just because
there is no human agency that would not mean
that the National Faceless Centre would not
respond to the request.
11.1 Once the statute provides that there is an
opportunity to be availed to the assessee when
there is a variation prejudicial to its interest is
proposed, his request for adjournment as well
as for the hearing also needs to be responded
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
to. It is a completely unacceptable and
unpalatable proposition that once a request
come from the assessee, the respondent
chooses not to respond to the same and go
ahead with the framing of the assessment, that
too when the time period was not expiring.
Even if the time period expires, it is for the
respondent to workout a schedule in the
manner as expected particularly when there is
no human agency and when the assessee also
has no one to turn to but to send a request
through the e-portal."
6.3 In the case of Darshan Enterprise (supra), once
again the Division Bench of this court, in paras 4, 19 &
20 held as under:
"4. The second submission of Mr. Shah is that
the impugned assessment order is an exact
reproduction of the draft assessment order. It
fails to consider any of the details/information
furnished by the writ applicant with respect to
the specific queries raised by the Investigating
Officer. Mr. Shah would submit that it is just a
mechanical exercise undertaken by the
Assessing Officer and the same would frustrate
the very object with which Section 144B came
to be introduced in the Act with effect from
01.04.2021. Mr. Shah laid much emphasis on
the subclause (9) to Section 144B which starts
with a nonobstante clause. Sub-section (9) to
Section 144B provides that notwithstanding
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
anything contained in any other provision of the
Act, the assessment made under sub-section (3)
of Section 143 or under Section 144 in the
cases referred to in sub-section (2) would be
treated as non-est if such assessment is found
to be not in accordance with the procedure laid
down under Section 144B of the Act.
19. The relevant aspects as pointed out by the
assessee cannot be said to have been looked
into from a proper perspective. We don't find
any discussion in the impugned assessment
order. This is the reason why we are saying that
the procedure as contemplated under Section
144B cannot be said to have been duly followed
in the case on hand.
20. In view of the aforesaid, we are left with no
other option but to quash and set aside the
impugned assessment order and remit the
entire matter to the Assessing Officer for de
novo consideration. On remand, we expect the
Assessing Officer to meaningfully look into all
the relevant aspects as highlighted by the
assessee including the observations made by
this Court in this order and even if the
Assessing Officer still deems fit to reject the
stance of the assessee, he shall to do so by
assigning cogent reasons."
7. For the aforesaid reasons therefore, the assessment
order passed under Section 144B read with Section 263
of the Act for the assessment year 2015-16 is quashed
NEUTRAL CITATION
C/SCA/16260/2021 CAV ORDER DATED: 19/08/2023
undefined
and set aside. The matter is remitted to the Assessing
Officer so as to enable the petitioner to be heard in light
of the detailed submissions made by the petitioner on
28.09.2021 so as to meaningfully look into the aspects
highlighted by the assessee. Petition is accordingly
allowed.
(BIREN VAISHNAV, J)
(D. M. DESAI,J)
DIVYA
