Bharatkumar Rajendraprasad Dave v. Assistant Commissioner Of Income Tax Circle 4(1)(1)Ahmedabad

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 16054 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE N.V.ANJARIA andHONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1Whether Reporters of Local Papers may be allowedto see the judgment ?2To be referred to the Reporter or not ?3Whether their Lordships wish to see the fair copyof the judgment ?4Whether this case involves a substantial questionof law as to the interpretation of the Constitutionof India or any order made thereunder ? ========================================================== BHARATKUMAR RAJENDRAPRASAD DAVE Versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 4(1)(1)AHMEDABAD ==========================================================Appearance: MR KETAN H SHAH(2705) for the Petitioner(s) No. 1MR. AMAN K SHAH(9992) for the Petitioner(s) No. 1 for the Respondent(s) No. 1M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIAandHONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 08/08/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.With request and consent of learned advocatesfor the parties, the petition was taken upfor final consideration today. 2.Rule, returnable forthwith. Learned advocateMr.Karan Sanghani for M.R.Bhatt & Co. waivesservice of Rule. Mr.Karan Sanghani for M.R.Bhatt & Co. waivesservice of Rule. 3.Heard learned advocate Mr. Ketan H. Shah forthe petitioner and learned Senior AdvocateMr. M.R. Bhatt assisted by learned advocateMr.Karan Sanghani for M.R. Bhatt & Co. forthe respondents. 4.By this petition under Article 226 of theConstitution of India, the petitioner hasprayed to set aside assessment order dated23.09.2021 passed under Section 147 read withSection 144B of the Income Tax Act, 1961 (hereinafter mentioned as “the Act”) and alsochallenged the demand notice of even dateissued under section 156 of the Act, whichall related to the Assessment Year 2014-2015. 5.Brief facts of the case are that the petitioner is engaged in the medicalprofession. 5.1) The assessee filed his return ofincome for the Assessment Year 2014-2015 on29.11.2014 declaring total income ofRs.4,44,57,346/-. The Assessing Officerthereafter passed order under section 143(3)of the Act on 29.11.2016 in which totalincome of the assessee was assessed at Rs.4,63,29,342/-. 5.2) The assessee filed appeal before the CIT(Appeals) who deleted the addition made onaccount of disallowance under section 14A read with Rule 8D of the Income Tax Rules ofRs. 16,05,639/- and accordingly revisedincome was computed at Rs. 4,47,23,703/- videorder dated 1.09.2017. 5.3) The assessee had claimed deductionunder section 35(1)(ii) of the Act of Rs.35,00,000/- in the return of income on thebasis of letter received from CBDT dated26,09.2018 renewing the approval to ShriArvindo Institute of Applied ScientificResearch Trust, Pondicherry. The AssessingOfficer however found that as per the record,Shri Arvindo Institute of Applied ScientificResearch Trust is not an approved entityunder section 35(1)(ii)(iii) and therefore,the claim of the assessee was erroneous. 5.4) The Assessing Officer therefore,issued notice under section 148 of the Actdated 31.07.2019 to reopen the assessment. The Assessing Officer also provided reasonsfor such reopening of the assessment videletter dated 27.08.2019. The petitioner vide letter dated 7.10.2019 raised objections which were rejected vide order dated17.10.2019. The petitioner raised furtherobjections vide letter dated 4.03.2020 which came to be rejected by order dated12.03.2020. 5.4) The Assessing Officer therefore,issued notice under section 148 of the Actdated 31.07.2019 to reopen the assessment. The Assessing Officer also provided reasonsfor such reopening of the assessment videletter dated 27.08.2019. The petitioner vide letter dated 7.10.2019 raised objections which were rejected vide order dated17.10.2019. The petitioner raised furtherobjections vide letter dated 4.03.2020 which came to be rejected by order dated12.03.2020. 5.5) Thereafter notice under section143(2) read with section 147 of the Act dated30.09.2020 was issued which was replied bythe petitioner on 11.2.2021. 5.6) The Assessing Officer passed theimpugned order dated 23.09.2021 under section147 read with section 144B of the Act andfurther demand notice under section 156 ofthe Act of even date for Rs.1,61,47,774/- wasissued against the petitioner. 5.7) Being aggrieved by such action of the respondent, the petitioner has preferredthe present petition. 6.Learned advocate Mr. Shah for the petitioner submitted that as per the provisions of section 144B(1) of the Act, National FacelessAssessment Centre (For short NFAC”) shallserve a notice on the assessee under section143(2) of the Act and assessee may fileresponse within a period of 15 days to NFACand in the events referred to in clause (iii) (a),(b) or (c) of section 144B of the Act,NFAC is to intimate the assessee about theassessment. It was further submitted thatunder sub-section(1) of section 144B, uponcompletion of process from clauses (i) to(xiii), the respondent is supposed to make adraft assessment order after taking into account all the material available on record.It was further submitted that as per clause(xvi) of section 144B(1) NFAC would decidethe further course of action regardingfinalisation of draft assessment order. Itwas further submitted that if the draftassessment order or the final assessmentorder is prejudicial to the interest of theassessee, an opportunity should be given tothe assessee to present his case as per sub-clause(b) of clause (xvi) and option shouldbe given to furnish response as per clause(xxii) of section 144B of the Act. 6.1) It was further submitted that sub-clause (a) of clause (xxiii) prescribescourses to be adopted by NFAC in case of nonresponse to the show cause notice by theassessee and sub-clause(b) of clause (xxiii)obligates NFAC to forward the response of theassessee to the assessment unit. It was further submitted that if reply is receivedpursuant to show cause notice, sub-clause(b)of clause (xxiii) comes into operationpursuant to which the matter goes to theAssessing Officer and clause (vii) of sub-section(7)comesintoplaywherebyopportunity of hearing assumes significance. 6.2) Learned advocate Mr. Shah furthersubmitted that in case of variations in draftassessment order and final assessment order,there is further provision for opportunity tothe assessee by serving notice in terms ofclauses (xxii), (xxiv) and (xxv). It wassubmitted that sub-section(7) of section 144Bfor the purpose of faceless assessment underclause (vii) provides that in case wherevariation is proposed in draft assessmentorder, an opportunity is to be provided tothe assessee. 6.3) Referring to the Standard OperatingProcedure under Faceless Assessment Scheme,2019, under circular dated 19.11.2020 andcircular dated 23.11.2020, it was submittedthat personal hearing is to be allowed to theassessee. It was submitted that sub-section(9) of section 144B, declares that assessmentmade under section 143(3) or under section144(4) referable to sub-section(2) other thansub-section(8) on or after 1[st] day of April,2021 shall be non-est, if such assessment isnot made in accordance with procedure laiddown under section 144B of the Act. 6.3) Referring to the Standard OperatingProcedure under Faceless Assessment Scheme,2019, under circular dated 19.11.2020 andcircular dated 23.11.2020, it was submittedthat personal hearing is to be allowed to theassessee. It was submitted that sub-section(9) of section 144B, declares that assessmentmade under section 143(3) or under section144(4) referable to sub-section(2) other thansub-section(8) on or after 1[st] day of April,2021 shall be non-est, if such assessment isnot made in accordance with procedure laiddown under section 144B of the Act. 6.4) Learned advocate further submittedthat the impugned order is in violation ofmandatory provisions of clauses (xiv), (xvi)and (xxii) of sub-section (1) of section 144Bof the Act, 1961. 6.5) It was submitted that as per theScheme of Faceless Assessment as providedunder section 144B of the Act, 1961, draftassessment order is to be provided to theassessee for the proposed addition so as togive an opportunity of hearing. 6.6) It was submitted that the respondent authority has not provided the opportunity ofhearing through video conference as envisagedunder section 144B (7) (vii), (viii) and (ix)of the Act, 1961 and therefore, the impugnedorder is in violation of the principles ofnatural justice. 7.On the other hand, learned Senior AdvocateMr. M.R. Bhatt assisted by learned advocateMr.Karan Sanghani for M.R. Bhatt & Co. forthe respondents has opposed this petition andwould submit that after examining the explanations of the petitioner, the impugnedorder has been passed by the respondent and,therefore, no interference is required bythis Court. He, therefore, would submit thatthe present petition be dismissed. 8.We have heard learned advocates appearing forthe respective parties and perused theimpugned order as well as gone through relevant provisions of law. In order to adjudicate the issue involved with regard toproviding opportunity of hearing, it would begermane to refer to the relevant provisionsof section 144B of the Act, 1961 which readsas under : “144B. (1) Notwithstanding anything to thecontrary contained in any other provisionsof this Act, the assessment under sub-section (3) of section 143 or under section144, in the cases referred to in sub-section(2), shall be made in a faceless manner asper the following procedure, namely:— xxx (xiv) the assessment unit shall, aftertaking into account all the relevantmaterial available on the record make inwriting, a draft assessment order or, in acase where intimation referred to in clause(xiii) is received from the NationalFaceless Assessment Centre, make in writing,a draft assessment order to the best of itsjudgment, either accepting the income or sumpayable by, or sum refundable to, theassessee as per his return or makingvariation to the said income or sum, andsend a copy of such order to the NationalFaceless Assessment Centre; (xv) the assessment unit shall, while makingdraft assessment order, provide details ofthe penalty proceedings to be initiatedtherein, if any; (xvi) the National Faceless AssessmentCentre shall examine the draft assessmentorder in accordance with the risk managementstrategy specified by the Board, includingby way of an automated examination tool,whereupon it may decide to— (a) finalise the assessment, in case novariation prejudicial to the interest ofassessee is proposed, as per the draftassessment order and serve a copy of suchorder and notice for initiating penaltyproceedings, if any, to the assessee, alongwith the demand notice, specifying the sumpayable by, or refund of any amount due to,the assessee on the basis of suchassessment; or (b) provide an opportunity to the assessee,in case any variation prejudicial to theinterest of assessee is proposed, by servinga notice calling upon him to show cause asto why the proposed variation should not bemade; or (a) finalise the assessment, in case novariation prejudicial to the interest ofassessee is proposed, as per the draftassessment order and serve a copy of suchorder and notice for initiating penaltyproceedings, if any, to the assessee, alongwith the demand notice, specifying the sumpayable by, or refund of any amount due to,the assessee on the basis of suchassessment; or (b) provide an opportunity to the assessee,in case any variation prejudicial to theinterest of assessee is proposed, by servinga notice calling upon him to show cause asto why the proposed variation should not bemade; or (c) assign the draft assessment order to areview unit in any one Regional FacelessAssessment Centre, through an automatedallocation system, for conducting review ofsuch order; xxx (xxii) the assessee may, in a case whereshow-cause notice has been served upon himas per the procedure laid down in sub-clause(b) of clause (xvi), furnish his response tothe National Faceless Assessment Centre onor before the date and time specified in thenotice or within the extended time, if any; xxx 144B(7) For the purposes of facelessassessment- xxx (vii) in a case where a variation isproposed in the draft assessment order orfinal draft assessment order or reviseddraft assessment order, and an opportunityis provided to the assessee by serving anotice calling upon him to show cause as towhy the assessment should not be completedas per the such draft or final draft orrevised draft assessment order, the assesseeor his authorised representative, as thecase may be, may request for personalhearing so as to make his oral submissionsor present his case before the income-taxauthority in any unit; (viii) the Chief Commissioner or theDirector General, in charge of the RegionalFaceless Assessment Centre, under which theconcerned unit is set up, may approve therequest for personal hearing referred to inclause (vii) if he is of the opinion that the request is covered by the circumstancesreferred to in sub-clause (h) of clause(xii); (ix) where the request for personal hearinghas been approved by the Chief Commissioneror the Director General, in charge of theRegional Faceless Assessment Centre, suchhearing shall be conducted exclusivelythrough video conferencing or videotelephony,includinguseofanytelecommunication application software whichsupports video conferencing or videotelephony, in accordance with the procedurelaid down by the Board;” 9.Section 144B of the Act, 1961 provides detailed procedure for Faceless Assessmentintroduced by the Taxation and Other Laws(Relaxation and Amendment of CertainProvisions) Act, 2020 with effect from 1[st]April, 2021. Section 144B(1) starts with anon-obstante clause i.e. “notwithstandinganything to the contrary contained in anyother provisions of this Act, the assessmentunder sub-section (3) of section 143 or undersection 144, in the cases referred to in sub-section (2), shall be made in a facelessmanner...” as per the procedure prescribed therein. 10.The above-referred clause of section144B(1) and 144B(7) deals with the procedureto be adopted by the National FacelessAssessment Centre on receipt of draft orderfrom the assessment unit who has prepared thedraft after providing opportunity to theassessee by serving a notice upon him to showcause as to why the assessment should not becompleted as per such draft or final draft orrevised draft assessment order. Therefore,such personal hearing in era of Facelessassessment is to be provided through videoconferencing. 11.It is not in dispute that in facts ofthe case no draft assessment along with showcause notice as required under section144B(1) and section 144B(7) is given to thepetitioner so as to enable the petitioner to give explanation for proposed addition duringthe hearing before the National Faceless 11.It is not in dispute that in facts ofthe case no draft assessment along with showcause notice as required under section144B(1) and section 144B(7) is given to thepetitioner so as to enable the petitioner to give explanation for proposed addition duringthe hearing before the National Faceless Assessment Centre. Section 144B(1)(xii) provides that on receipt of show cause notice, assessee may furnish his response tothe National Faceless Assessment Centre andas per clause (xiv), assessment unit shall make a revised draft assessment order afterconsidering the response of the assessee andsend it to the National Faceless AssessmentCentre. As per the provisions of section144B(7) in case of variation prejudicial tothe assessee as proposed in the draftassessment order, the assessee is entitled torequest for personal hearing and upon suchrequest, the personal hearing may be providedby the authority, if the case of the assesseeis covered by circumstances provided thereinin exercise of powers under sub-clause (h) ofclause (xii) of section 144B(7) of the Act,1961. 12.In view of above, it can be safely besaid that the impugned order was passed bythe respondent in violation of principles ofnatural justice without affording anopportunity of personal hearing by notfollowing the prescribed procedure laid downas per the provisions of section 144B of theAct, 1961 for Faceless assessment. 13.In the result, this petition succeedsand is accordingly allowed. The impugnedorder of assessment passed by the respondentunder Section 147 read with Section 144B ofthe Income Tax Act, 1961 dated 23.09.2021and demand notice under section 156 of theAct of even date are quashed and set aside.The respondent/Revenue will be at liberty toproceed with assessment under the provisionsof section 144B of the Act, 1961 as permissible under the law after issuance of show cause notice-cum-draft assessment orderso as to provide an opportunity of hearing tothe petitioner. The petitioner shall be given an opportunity of hearing as per theprovisions of section 144B of the Act, 1961. Such exercise shall be completed within 12 weeks from the date of receipt of copy of this order. 14.Rule is made absolute to the aforesaid extent. Direct service is permitted. 15.It is made clear that we have not examined the merits of the case. (N.V.ANJARIA, J) RAGHUNATH R NAIR (BHARGAV D. KARIA, J)