Gujarat High Court

Mukeshbhai Babarbhai Desai vs Income Tax Department Assessment Unit ... on 7 October, 2025

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                           C/SCA/11346/2023                               JUDGMENT DATED: 07/10/2025

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                                    IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                     R/SPECIAL CIVIL APPLICATION NO. 11346 of 2023


                      FOR APPROVAL AND SIGNATURE:


                      HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                      and
                      HONOURABLE MR. JUSTICE PRANAV TRIVEDI
                      ==========================================================

                                   Approved for Reporting                Yes            No
                                                                                    ✔
                      ==========================================================
                                      MUKESHBHAI BABARBHAI DESAI
                                                Versus
                       INCOME TAX DEPARTMENT ASSESSMENT UNIT NATIONAL FACELESS
                                       ASSESSMENT CENTRE & ANR.
                      ==========================================================
                      Appearance:
                      MR SUDHIR M MEHTA(2058) for the Petitioner(s) No. 1
                      MS SHAILEE S MEHTA(5873) for the Petitioner(s) No. 1
                      MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1,2
                      ==========================================================

                         CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                               and
                               HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                                                     Date : 07/10/2025

                                            ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)

1. Heard learned advocate Mr. Sudhir Mehta for

for the petitioner and learned Senior Standing

Counsel Ms. Maithili Mehta for the respondent.

2. Rule returnable forthwith. Learned Senior

Standing Counsel Ms. Maithili Mehta, waives

service of notice of rule for and on behalf of

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the respondent.

3. Having regard to the controversy involved in

this petition, which is in a narrow compass and

with the consent of the learned advocates for the

respective parties, the matter is taken up for

final hearing.

4. By this petition under Article 226 / 227 of

the Constitution of India, the petitioner has

challenged and prayed for quashing and setting

aside of the impugned notice dated 29.7.2022

under Section 148 of the Income Tax Act, 1961

(for short 'the Act') and consequential

Assessment Order dated 19.5.2023 passed by

Respondent under Section 147 read with Section

144B of the Act for the Assessment Year 2017-18.

5. The brief facts of this case are as under:

5.1 The petitioner had filed its return of income

for Assessment Year 2017-18. A search under

Section 132 of the Act was carried out in the

case of Shri Jignesh Shah and Shri Sanjay Shah at

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Ahmedabad. During the course of search, it was

found out that both the persons were managing and

controlling multiple Companies and concerns,

which were not carrying out any business activity

and were providing accommodation entries of

various kinds such as unsecured loans, share

premium, bogus gains, etc. Subsequently,

information in case of assessee was flagged on

the Insight Portal. On the basis of the

information available, it was found that the

petitioner being assessee was one of the

beneficiaries who had taken accommodation entries

to the tune of Rs.90,19,964/-.

5.2 The respondent issued show-cause notice under

Section 148A(b) of the Act on 26.5.2022. The

respondent derived approval on 28.7.2022 under

Section 151 of the Act on 28.7.2022 and order

under Section 148A(d) of the Act was passed on

29.7.2022, subsequent to the direction of the

Hon'ble Apex Court in case of Union of India v.

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Ashish Agrawal and others in Civil Appeal No.

3005/2022.

5.3 As a consequence of passing of order under

Section 148A(d) of the Act, notice under Section

148 of the Act was issued on 29.7.2022.

Subsequent to the notice, the respondent issued

notice under Section 142(1) of the Act on

5.1.2023 as well as on 20.1.2023 calling for

certain information with respect to the

assessment proceeding. On 22.4.2023, the

respondent issued a show-cause notice as to why

the proposed variation should not be made and the

assessment should not be completed in the ongoing

assessment proceedings in the case of the

petitioner for Assessment Year 2017-18. The

petitioner responded by filing reply / objections

on 26.4.2023 and simultaneously requested to

provide video-conferencing as prescribed under

Section 144B(7) of the Act. It is the case of the

petitioner that the respondent passed assessment

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order under Section 147 read with Section 144B of

the Act without providing video-conferencing to

the petitioner, which is impugned in the present

writ-petition.

6. Learned advocate Mr. Sudhir Mehta for the

petitioner submitted that the assessment

proceedings are dehors the principles of natural

justice. The consideration of documents and reply

filed by the petitioner giving explanation have

been completely kept at bay. Mr. Mehta submitted

that request for providing personal hearing

through video conferencing was not acceded to by

the Assessing Officer which aspect is mandatory

in view of ratio laid down by this Court in the

case of Gandhi Realties Pvt Ltd vs. ACIT.,

reported in (2021) 133 Taxmann.com 83. In wake of

such submissions, Mr. Mehta learned advocate for

the petitioner has prayed to allow the present

writ-petition and to quash and set aside the

impugned Assessment Order.

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7. Per Contra, learned Senior Standing Counsel

Ms. Maithili Mehta was not in a position to

dispute the fact that the opportunity of hearing

through video conferencing was not granted to the

present petitioner. On the basis of the

affidavit-in-reply filed by the respondent, it

was submitted by Ms. Mehta that the fact is not

in dispute that opportunity of personal hearing

through video-conferencing was not granted to the

petitioner.

8. Having heard learned advocates for the

respective parties and having perused the

material on record, the limited question for

consideration is with regard to procedure of

service of notice under the Faceless Assessment

provisions under Section 144B of the Act. The

Government of India, Ministry of Finance has come

up with Standard Operating Procedure (SOP) dated

03.08.2022 for faceless assessments. Clause G.3

relates to the Centralised Communication to

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improve compliance of notice under Section 142(1)

of the Act.

9. On bare perusal of the Standard Operating

Procedure, it can be interpreted that the

respondent was required to give notice for

Faceless Assessment. Further, the respondent was

also required to give notice for video

conferencing. It is not in dispute that the

petitioner was not heard before passing of the

Assessment Order. Therefore, it is fundamental

proposition of law that other side should be

heard before any order is passed. The maxim of

Audi Alteram Partem is broad enough to include

the rule against bias since a fair hearing is

must for it to be unbiased hearing. The essential

ingredients of fair hearing is that a person

should be served with a proper notice and should

be given a right to hearing.

10. Considering the fact and the documents on

record it is noticed that though hearing through

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video conferencing was sought by the assessee,

the same was not responded before passing the

order of assessment under section 143(3) read

with Sections 147 and 144B of the Act, which in

our opinion is in breach of Section 144B(7)(vii)

(2) of the Act, and violative of principles of

natural justice.

Moreover, in the decision dated 16.04.2024 in

the case of Panchmahal Steel Limited V/s.

Additional/Joint/Deputy/ Assistant Commissioner

of Income Tax/ Income Tax Officer reported in

(2024) Taxman.com 326 (Gujarat)), Co-ordinate

Bench of this Court has held as under: -

"6. We have heard learned advocate for the respective parties and have gone through the material produced on record and the orders passed by the authorities below.

7. Considering the submissions made by learned advocates for the respective parties and having gone through the material produced on record, the question that falls for consideration of

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this Court is whether the impugned order dated 28.3.2022 can be said to be legal and justified?

8. So as to decide the aforesaid question, in our considered opinion, the undisputed facts are required to be taken note of. It is the say of the petitioner that while passing the reassessment order, the effective opportunity of hearing was not given during the course of argument. Learned advocate Mr.Raval for the revenue could not dispute the said fact by filing any affidavit along with the concrete material and/or falsify the statement made by learned advocate for the petitioner. Meaning thereby, contention raised by the learned advocate for the petitioner that no effective opportunity of hearing was given, remained uncontroverted. Keeping in mind the aforesaid fact, the relevant provision of Section 144B deserves to be taken note of, which can be quoted as under :

"Section 144B(7) : For the purpose of faceless asssessment :

(i) xxx xxx xxx

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(ii) xxx xxx xxx

(iii) xxx xxx xxx

(iv) xxx xxx xxx

(v) xxx xxx xxx

(vi) xxx xxx xxx

(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;"

9. On perusal of the aforesaid provision, it is the duty cast upon the authorities in faceless assessment, if there is a demand for personal hearing, the same deserve to be granted. Keeping

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in mind the mandatory provision, if the facts of the present case is considered, indisputably, the request made by the petitioner for personal hearing through video conferencing at that stage was acceded to, however, intimation thereof was sent after the time of hearing was scheduled. Admittedly, on the second time, the request of the petitioner for granting personal hearing through video conferencing, intimation thereof was to be given one day advance, was not either acceded to or taken care of by the revenue authorities and straightway, the impugned order was passed. Thus, in our considered opinion, while passing the impugned order, the provision of Section 144B of the Act was not complied with by the revenue authorities and thereby, the order passed cannot be sustained in eye of law. Without going further into merits of the case, it would be in the fitness of thing that the petition is allowed solely on the ground of violation of principle of natural justice, without adverting to anything on merits."

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11. In the instant case, despite the request

being made by the petitioner for personal hearing

through video conferencing, the same was not

acceded to. In view of the same, impugned notice

dated 29.7.2022 under Section 148 of the Act as

well as the assessment order dated 19.5.2023

under Section 147 read with Section 144B of the

Act for the Assessment Year 2017-18 are not

tenable and hence are required to be quashed and