E-assessment Proceeding: Assessment order is bad if there is a failure to comply with the principles of Natural Justice.
There is a landmark judgment by Delhi High court in the case of Civitech Developers Private Limited Vs National E-Assessment Centre wherein it has been held that personal hearing, if prayed, should be allowed else E-assessment order vitiates for non-compliance of statutory provisions & Principles of Natural Justice.
It has further been held that the scheme of faceless E- Assessment provides for personal hearing in certain circumstances. In case where the request for personal video link was not enabled inspite of repeated requests, the assessee could not explain the complex issues to the Assessing Officer and thus the assessment order passed u/s 143(3) read with Section 144B of the Income Tax Act is not sustainable in Law.
The Delhi High Court in W.P.(C) 6669/2021 in the case of Civitech Developers Pvt. Ltd. vs National E- Assessment Centre, New Delhi dealt with this issue vide it’s order dated 22nd July, 2021.
In the present case, the Petitioner filed a detailed reply/objections along with documents and again sought a personal hearing through video-conferencing to explain the issue to the Assessing Officer in correct perspective along with supporting documents.
However, despite repeated requests & attempts, the personal hearing/Video Conference link was not enabled and the petitioner brought this to the notice of the Department on 16th April, 2021 and again requested for enabling of the Video Conference Link but the same was not enabled and the Petitioner was not given a personal hearing and as a consequence of which the Assessing Officer could not understand the complex issue nor appreciate the written submissions filed by the Petitioner.
The court observed that a careful perusal of clause (vii) of Section 144B (7) would show that liberty has been given to the assessee, if his/her income is varied, to seek a personal hearing in the matter.
Therefore, the usage of the word ‘may’, to our minds, cannot absolve the respondent/revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides this, under sub-clause (h) of Section 144B (7)(xii) read with Section 144B (7) (viii), the respondent/revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua the same.
In several matters, we have asked the counsels for the revenue as to, whether any standards, procedures and processes have been framed for dealing with such requests. The response, which we have got from the standing counsels including Mr. Chandra, is that, to the best of their knowledge, no such standards, procedures as also processes have been framed, as yet.
Therefore, in our view, given the aforesaid facts and circumstances, it was incumbent upon the respondent/revenue to accord a personal hearing to the petitioner. As noted above, several requests had been made for personal hearing by the petitioner, none of which were dealt with by the respondent/revenue.
The net impact of this infraction would be that, the impugned orders will have to be set aside. It is ordered accordingly.” The Court held that due to technical glitches the Petitioner could not request for personal hearing on the e-portal and set aside the impugned assessment order and penalty notice with a direction to grant an opportunity of personal hearing to the petitioner by way of Video Conferencing and thereafter pass a reasoned order in accordance with law.
Although it was not pleaded on behalf of the Petitioner, the assessment order is also bad on account of failure to comply with the principles of Natural Justice. The principle of Audi alteram partem is fully applicable in Taxation Proceedings. The rule of fair hearing or the rule that no one should be condemned unheard is the basic concept of principle of natural justice which implies that a person must be given full opportunity to defend himself. This rule covers various stages through the administrative adjudication process starting from notice to the final determination of Tax liability.
The copy of the complete landmark order is as under:
Delhi High Court
Civitech Developers Private Limited Vs National E-Assessment Centre
W.P(C) No. 6669/2021
Order Dated 22/07/2021
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The petition has been heard by way of video conferencing.
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Present writ petition has been filed challenging the assessment order dated 22nd April, 2021 passed by the Respondent under Section 143(3) read with Section 144B of the Income Tax Act, 1961 ( for short “the Act”) for Assessment Year 2018-2019.
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Learned counsel for the Petitioner states that the Petitioner is in the business of real estate projects and during the assessment year 2018-19, the case of the Petitioner was selected for scrutiny through CASS to examine the issue “Income from Real Estate Business”.
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She states that the Petitioner replied to all the notices issued by the Respondent and submitted the evidence. However, subsequently, a show cause notice dated 24th February, 2021, proposing to make addition of Rs. 1,46,34,047/-(Rupees One Crore Forty Six Lakhs Thirty Four Thousand and Forty Seven Only) was served to which the Petitioner filed a response and sought personal hearing through video conferencing.
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She points out that another notice dated 10th March, 2021 was served with the draft assessment order reducing the addition to Rs. 1,23,12,479/- (Rupees One Crore Twenty Three Lakhs Twelve Thousand Four Hundred and Seventy Nine) to which the Petitioner filed a detailed reply with documents and again sought a personal hearing through video conferencing to explain the issue to the Assessing Officer in correct perspective with the layout plan and the disputed land and the Towers which were still incomplete.
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She states that the petitioner was asked to request for personal hearing through a video link which would be enabled. However, despite repeated attempts, the personal hearing/Video Conference link was not enabled and option was not available and the petitioner brought this to the notice of the Respondent on 16th April, 2021 and requested to enable the Video Conference Link but the same was not enabled and the Petitioner did not get a personal hearing. She emphasises that in the absence of the personal hearing, the Assessing Officer did not understand the complex issue or the written submissions filed by the Petitioner.
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Issue notice.
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Mr. Zoheb Hossain, learned counsel for respondent accepts notice. He states that though the respondent repeatedly requested the petitioner to submit its request for personal hearing through the e-portal, yet no formal request for personal hearing was placed on the e-portal. In support of his contention, he relies upon the orders dated 15th April, 2021 and 19th April, 2021 passed by the respondent.
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Having heard learned counsel for the parties, this Court is of the view that Section 144B (7) provides an opportunity for a personal hearing, if requested by the assessee. The relevant portion of Section 144B (7) and 144B (9) are reproduced hereinbelow: –
“144B. Faceless assessment –
(1)
(7) For the purposes of faceless assessment—
(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) the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up, may approve the request for personal hearing referred to in clause (vii) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii);
(xii) the Principal Chief Commissioner or the Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centres and the unit set up, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely: —
(h) circumstances in which personal hearing referred to clause (viii) shall be approved;….”
(9) Not with standing anything contained in any other provision of this Act, assessment made under sub-section (3) of section 143 or under section 144 in the cases referred to in sub-section (2) [other than the cases transferred under sub-section (8)], on or after the 1st day of April, 2021, shall be non est if such assessment is not made in accordance with the procedure laid down under this section.”
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The learned Predecessor Division Bench in Sanjay Aggarwal v. National Faceless Assessment Centre Delhi in W.P. (C) 5741/2021, while interpreting the aforesaid Sections has held that it is incumbent upon the respondent/revenue to accord a personal hearing to the petitioner. The relevant portion of the said judgment is reproduced hereinbelow: –
“11.4. A careful perusal of clause (vii) of Section 144B (7) would show that liberty has been given to the assessee, if his/her income is varied, to seek a personal hearing in the matter. Therefore, the usage of the word ‘may’, to our minds, cannot absolve the respondent/revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides this, under sub-clause (h) of Section 144B (7)(xii) read with Section 144B (7) (viii), the respondent/revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua the same.
11.5. In several matters, we have asked the counsels for the revenue as to, whether any standards, procedures and processes have been framed for dealing with such requests. The response, which we have got from the standing counsels including Mr. Chandra, is that, to the best of their knowledge, no such standards, procedures as also processes have been framed, as yet.
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Therefore, in our view, given the aforesaid facts and circumstances, it was incumbent upon the respondent/revenue to accord a personal hearing to the petitioner. As noted above, several requests had been made for personal hearing by the petitioner, none of which were dealt with by the respondent/revenue.
12.1. The net impact of this infraction would be that, the impugned orders will have to be set aside. It is ordered accordingly.”
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This Court is of the view that as the option to opt for personal hearing was not enabled, the petitioner due to technical glitches could not request for personal hearing on the e-portal. Consequently, it cannot be said that the petitioner did not opt for personal hearing in the present case.
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Keeping in view the aforesaid, the impugned assessment order dated 22nd April, 2021 along with the consequential demand and penalty notice is set aside and the matter is remanded back to the Assessing Officer, who shall grant an opportunity of personal hearing to the petitioner by way of Video Conferencing and thereafter pass a reasoned order in accordance with law.
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With the aforesaid direction, the present writ petition along with pending applications stand disposed of.
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The order be uploaded on the website forthwith. Copy of the order be also forwarded to the learned counsel through e-mail
Tags: Faceless Assessment, high court judgments, Inder Chand Jain, section 143(3)
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Name: Inder Chand Jain
Qualification: Post Graduate
Company: Anupam Housing Group of Group
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2 Comments
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SRSUBRAMANIAN says:
In the case of property apartment
Pocession taken, rented, tax paid on rental income, then after 5 years resold it, invested in LTCG- deposit accounts and applied for NOC to close the LTC deposit and for which income department denies unless tax paid for construction cost because it is not registered.
Registeration act differs from state to state.
In this case the apartment booked during construction time, it’s not like that we are land owners and entered JDA joint development agreement for construction of apartment.
In this case the assessing questioning the year of registration 2010, now why construction should not be registered in registration act which is different act to income tax act or on any other laws..
The registration act comes state levy and it’s not central act
Year 2010 is of retrospective periods where any new laws or regulations act amendments can’t be applied for prior periods.
it’s the years 2008 in which apartment booked with the builders.
Year 2010 year of completion of construction of apartment and registered for UDS land portion under karnataka stamp act and regulations act.
At that point of time under karnataka stamp act there was no provision to add on any construction value to the property and karnataka stamp act determines stamp duty and registration fees based on govt guidelines value prescribed from time to time and changes are made once in two years subject to prevailing conditions of the market rates, areas infrastructural development and facilities that are made to the areas etc
Construction cost is the money spent out of money saved which was earned as income of salary which has been taxed in the previous years and taxes were paid on those salary income earnings returns filed etc and the income tax authorities cannot charge taxes on the expenses of construction cost incurred or paid out.
When income tax authorities to access the income and to access the expenditures incured in any manner investment in property or business etc etc …
I think taking this case as example you should write an artcles in TaxGuru, tax magazine and papers social media etc etc. and to draw attention of the CBDT chairman and members and finance minister and all members under secretaries, law bar association, practising advocate association on all india basis.
Actually authrities are misusing powers vested indirectly unlawfully espicialy on individuals honesty tax payers and straight forwarding people who highly educative in various services fields other than taxes and law subjects etc etc
If this matter happened to any corporate companies or any business promoters who are business promotions etc they allocate cost of litigations funds and number of Advocates seniour counsels and other legal consultant firms group of people trying to support and protect them assessee company categories and whatever money spent on legal through out the years its allowed as deductions on legal expenses 100% inspite of the fact whether the business people are corporate management companies win over the cases or lost the cases dragging out years to gether from lower authorities and courts to highcourt, supremecourts and 3member bench, 5 member bench and many more commissions etc
Whereas cases similar situations and individuals status people salary class assessee where they will go for justifications, who will bear the burden of litigation and legal cost and who have time that much to fight out the matter throughout their life.. without certainty of outcome positive results in favour to taxpayers.
Reply
August 22, 2021 at 12:42 pm
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SRSUBRAMANIAN says:
Department must not take advantage of ignorance of assessee administrator March 1, 2016 Income Tax 1 Comment
CBDT Circular No. 14 (XL-35) dated 11/04/1955-Department must not take advantage of ignorance of assessee to collect more tax than what is legitimately due
Central Board of Direct Taxes
Circular No. 14 (XL-35)
Miscellaneous—Refund and reliefs due to assessees—Departmental attitude towards
Dated: 11/04/1955
ASSESSMENT SECTIONS 143,
The Board have issued instructions from time to time in regard to the attitude which the Officers of the Department should adopt in dealing with assessees in matters affecting their interest and convenience. It appears that these instructions are not being uniformly followed.
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Complaints are still being received that while ITO’s are prompt in making assessments likely to result into demands and in effecting their recovery, they are lethargic and indifferent in granting refunds and giving reliefs due to assessees under the Act. Dilatoriness or indifference in dealing with refund claims (either under s. 48 or due to appellate, revisional, etc., orders) must be completely avoided so that the public may feel that the Government are actually prompt and careful in the matter of collecting taxes and granting refunds and giving reliefs.
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Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :—
(a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other;
(b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs.
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Public Relations Officers have been appointed at important centres, but by the very nature of their duties, their field of activity is bound to be limited.
Time Out Table Tennis Academy
The following examples (which are by no means exhaustive) indicate the attitude which officers should adopt :—
(a) Sec. 17(1) : While dealing with the assessment of a non-resident assessee the officer should bring to his notice that he may exercise the option to pay tax on his Indian income with reference to his total world income if it is to his advantage.
(b) Sec. 18(3), (3A), (3B) and (3D) : The officer should in every appropriate case bring to the assessee’s notice the possibility of obtaining a certificate authorising deduction of income-tax at a rate less than the maximum or deduction of super tax at a rate lower than the flat rate, as the case may be.
(c) Secs. 25(3) and 25(4) : The mandatory relief about exemption from tax must be granted whether claimed or not; the other relief about substitution, if not time barred, must be brought to the notice of a taxpayer.
(d) Sec. 26A : The benefit to be obtained by registration should be explained in appropriate cases. Where an application for registration presented by a firm is found defective, the officer should point out the defect to it and give it an opportunity to present a proper application.
(e) Sec. 33A : Cases in which the ITO or the Asstt. Commissioner thinks that an assessment should be revised, must be brought to the notice of the CIT.
(f) Sec. 35 : Mistakes should be rectified as soon as they are discovered without waiting for an assessee to point them out.
(g) Sec. 60(2) : Cases where relief can properly be given under this sub-section should be reported to the Board.
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While officers should, when requested, freely advise assessees the way in which entries should be made in various forms, they should not themselves make any in them on their behalf. Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions. This equally applies to the Public Relation Officers.
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The intention of this circular is not that tax due should not be charged or that any favour should be shown to anybody in the matter of assessment, or that where investigations are called for, they should not be made. Whatever the legitimate tax it must be assessed and must be collected. The purpose of this circular is merely to emphasise that we should not take advantage of an assessee’s ignorance to collect more tax out of him than is legitimately due from him
