Gujarat High Court

Dineshkumar Chhaganbhai Nandani vs Income Tax Officer,Ito Wd ... on 19 June, 2023

Bench: Devan M. Desai

     C/SCA/7863/2022                            JUDGMENT DATED: 19/06/2023




         IN THE HIGH COURT OF GUJARAT AT AHMEDABAD


          R/SPECIAL CIVIL APPLICATION NO. 7863 of 2022


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI
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 ?

=========================================
              DINESHKUMAR CHHAGANBHAI NANDANI
                            Versus
             INCOME TAX OFFICER,ITO WD 2(1)(1), RKT
=========================================
Appearance:
MR B S SOPARKAR(6851) for the Petitioner(s) No. 1
MR KARAN SANGHANI, ADVOCATE for MRS KALPANAK RAVAL(1046)
for the Respondent(s) No. 1
SERVED BY RPAD (N) for the Respondent(s) No. 2
=========================================

    CORAM:HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI
          and
          HONOURABLE MR. JUSTICE DEVAN M. DESAI

                          Date : 19/06/2023

                           ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI)

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

1. Heard learned advocate Mr. B. S. Soparkar for the

petitioner and learned standing counsel Mr. Karan

Sanghani for the respondent - department.

2. This petition is filed under Article 226 of the

Constitution of India in which the petitioner has prayed for

the following reliefs:

                "7(a)    Quash and set aside the
                impugned     assessment     order    dated

25.03.2022 at Annexure `A' to this petition.

(b) Allow the petitioner to file his reply to show cause notice dated 24.3.2022 and direct the respondents to pass the fresh assessment order after considering the reply of the petitioner.

(c) pending the admission, hearing and final disposal of this petition, to stay implementation and operation of the impugned order at Annexure - A to this petition and stay further proceedings of recovery for A.Y. 2013-14"

3. Looking to the issue involved in the petition, learned

advocates appearing for the respective parties jointly

requested that this petition be taken up for final hearing at

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

admission stage. Hence, Rule. Learned Standing Counsel

Mr. Karan Sanghani waives service qua the respondents.

4. Learned advocate for the petitioner submitted that

the petitioner filed return of income for Assessment Year

2013-14 on 6.7.2013 declaring total income of 2,47,640/-.

The said return was processed under Section 143(1) of the

Income Tax Act (hereinafter referred to as `the Act'). It is

further submitted that respondent No.1 has thereafter

issued notice u/S.148 of the Act on 31.03.2021 asking the

petitioner to file return of income of AY 2013-14. Without

prejudice, the petitioner filed his return of income in

compliance of notice u/S.148 of the Act. The said return

was filed on 30.4.2021. Thereafter, respondent issued

notices u/Ss.143(2) and 142(1) of the Act on various

dates, whereby, the petitioner was asked to submit

necessary details. Thereafter, show cause notice dated

15.2.2022 came to be issued u/S. 144 of the Act. The

petitioner filed preliminary objection alongwith all the

supporting evidence and requested to drop the

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

assessment proceedings vide objections dated 23.2.2022.

4.1. It is further submitted that the respondent

passed an order on 3.3.2022 and thereby rejected the

objections submitted by the petitioner. Thereafter show

cause notice dated 24.3.2022 came to be issued whereby

the petitioner was asked to show cause as to why the

proposed variation should not be made. Admittedly

learned counsel has submitted that the said show cause

notice was signed on 12:12 pm on 24.3.2022 and it is

stated in the said notice that the petitioner shall submit

the reply on the very same day by 23:59 pm and thereby

time of less than 12 hours to submit reply was given. It is

submitted that before the petitioner could submit a reply,

the concerned respondent passed the impugned

assessment order u/S.147 read with Section 144(B) of the

Act on 25.3.2022. The petitioner has therefore preferred

the present petition.

5. Learned counsel for the petitioner would mainly

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

submit that the impugned order dated 25.3.2022 is

required to be quashed and set aside on the ground of

violation of principles of natural justice. It is submitted that

less than 12 hours time was given to the petitioner for

submitting his reply to the show cause notice and,

therefore only on this ground, the impugned order be set

aside and matter be remanded back to the concerned

respondent for taking fresh decision after giving

reasonable opportunity of hearing to the petitioner.

6. Learned advocate for the petitioner has placed

reliance upon the following decisions:

(A) Riddhi Steel and Tube Ltd. v. National Faceless Assessment Centre reported in 2022 (145) Taxmann.com 542 (Gujarat) (Relevant paras 7 to 10)

(B) Green Valliey Industries Limited v. Assessment Unit, Income Tax Department reported in 2023 (147) taxmann.com, 295 (Calcutta)

7. On the other hand, learned counsel for the

respondent has opposed this petition and referred the

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

averments made in the affidavit in reply placed on record

at Page 56 of the compilation. It is contended that before

issuing the show cause notice on 24.3.2022, various

notices were issued to the petitioner - assessee in the

years 2021 and 2022, whereby, the petitioner was asked

to supply necessary details. However, the petitioner did

not give any reply to the said notices and, therefore, it is

not open for the petitioner now to contend that only 12

hours time was given to the petitioner to submit reply to

the show cause notice. Learned advocate therefore urged

the Court to dismiss the present petition.

8. We have considered the submissions canvassed by

learned advocates for the parties. We have also perused

the material placed on record and the decisions upon

which the reliance is placed.

9. In the present petition, limited question is raised for

consideration of this court i.e. whether the respondent has

violated the principles of natural justice before passing the

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

impugned order dated 25.3.2022 or not ?

10. It transpires from the record that for the AY 2013-

14, the petitioner submitted a return of income.

Thereafter, various notices were issued u/Ss.143, 142(1)

of the Act by the respondent - revenue to the petitioner

whereby the petitioner was asked to submit necessary

details. Thereafter, the show cause notice dated

15.2.2022 came to be issued to the petitioner to which the

petitioner submitted objections alongwith the supporting

evidence on 23.2.2022. The petitioner requested to drop

the proceedings, however, the concerned respondent

rejected the said objections and issued a show cause

notice dated 24.3.2022, whereby, the petitioner was asked

to show cause why the proposed variations should not be

made. Copy of the said notice is placed on record at Page

58 of the compilation. It is not in dispute that the said

notice was signed on 24.3.2022 at 12:12 pm and the

petitioner was asked to submit reply on the very same day

before 23:59 pm. Thus, the respondent had given less

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

than 12 hours time to petitioner for submitting reply.

However, the petitioner could not submit the reply within

the said time and, therefore, now the impugned order has

been passed on 25.3.2022.

11. At this stage, this Court would like to refer the

decision rendered by this Court in the case of Riddhi

Steel and Tube Ltd. (Supra). This Court observed in

paras 7 to 10 as under:

"7. We have heard the learned advocates appearing for the respective parties and perused the impugned order. The facts are not in dispute as per Annexure-E Page-76 of the petition is an extract from the e-filing portal, wherein, the adjournment details are stated to show that the adjournments request was made on 18thSeptember, 2021 and reason for seeking adjournment is stated "gathering of material from multiple sources requires time" and adjournment was sought up to 5 th October, 2021. Thus, the petitioner sought adjournment on 18thSeptember, 2021, however, without considering the request of the petitioner for adjournment to file reply to the show-cause notice dated 18th September, 2021, the impugned assessment order was passed on 21st September, 2021.

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

8. Section 144B of the Act provides detailed procedure for Faceless Assessment. Section 144B was introduced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 w.e.f. 1st April, 2021. Section 144B(1) starts with a non-obstante clause i.e. "notwithstanding anything to the contrary contained in any other provisions of this Act, the assessment under sub-section (3) of section 143 or under section 144, in the cases referred to in sub-section (2), shall be made in a faceless manner..." as per the procedure prescribed therein.

9. Section 144B(1)(xvi) provides for an opportunity to the assessee, in case any variation prejudicial to the interest of assessee is proposed in the draft assessment order by serving a notice calling upon the assessee to show cause as to why the proposed variation should not be made. Thus, there is a mandatory provision to provide an opportunity of hearing to the assess by issuing a show- cause notice along with the draft assessment order, which in the facts of the case was issued on 18thSeptember, 2021 calling upon the assessee to furnish the reply before 23.59 hours of 21st September, 2021. Though the assessee prayed for adjournment on 18thSeptember, 2021, without considering the same, the impugned assessment order was passed on 21st September, 2021. Thus, there is clear violation of principles of natural justice by the respondent authority contrary to the provisions of Section 144B of the Act.

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

10. It is also pertinent to note that as per Sub-Section (vii) of Section 144B(7), the assessee is also required to be given personal hearing so as to make his oral submissions or present his case before the income-tax authority on request. However, in the facts of the case, the request for adjournment by the petitioner was not at all replied and the impugned assessment order is passed without providing an opportunity of hearing to the assessee so as to enable him to give explanation for proposed addition. Section 144B(1)(xii) provides that on receipt of showcause notice, the assessee may furnish his response to the National Faceless Assessment Centre and as per clause (xiv), the 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. However, the respondent authority without giving any opportunity of hearing to the petitioner by not considering the request for adjournment, passed the impugned assessment order."

12. In the case of Green Valliey Industries Limited

(Supra) Calcutta High Court has observed in paras 6 to 8

as under:

"6. On a perusal of the assessment order, it is seen that the interim reply given by the appellant/assessee has been verbatim extracted in the order and the assessing officer states that the reply of the assessee is not found acceptable. In paragraph 4.5.3

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

of the assessment order, the assessing officer says that the show cause notice was served on 14th September, 2022 and five days were given to the assessee to submit its reply.

7. As pointed out earlier, the assessee had not been given 5 days time and effectively, they had only 48 hours to submit its reply. With regard to the details regarding the GSTR-1 returns of the other parties is concerned, the assessing officer would state that the portal was kept open. However, there was nothing on record to indicate that the assessee was put on notice that the portal was kept open and it could do verification so as to reconcile any discrepancy. Thus, we are fully satisfied that there is total violation of principles of natural justice, which would be a good ground to interfere with the assessment order despite an appellate remedy existing over such an order.

8. In the result, the appeal is allowed and the order passed in the writ petition is set aside. Consequently, the assessment order dated 28th September, 2022 is set aside and the matter is remanded back to the assessing officer for fresh consideration."

13. In view of the aforesaid decisions, it is revealed that

as per the provisions contained in Section 144(B)(vii) of

the Act, the assessee is required to be given personal

hearing so as to make his oral submissions to present his

C/SCA/7863/2022 JUDGMENT DATED: 19/06/2023

case before the Income Tax authority on request.

Similarly, from the decision rendered by the Calcutta High

Court it is revealed that in the said case, the assessee was

given only 48 hours time to submit its reply. The Calcutta

High Court therefore considering the facts of the said case

allowed the petition filed by the concerned assessee.

14. Keeping in view of the aforesaid decisions rendered