Dediyasan Industrial Co Op Credit Society Limited v. Additional/ Joint/ Deputy/ Assistant Commissioner Of Incometax/ Income Tax Officer

C/SCA/14691/2021 JUDGMENT DATED: 20/06/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14691 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE A.J.DESAI sd/- andHONOURABLE MR. JUSTICE BHARGAV D. KARIA sd/- ========================================================== 1Whether Reporters of Local Papers may be allowedNoto see the judgment ?to see the judgment ?2To be referred to the Reporter or not ?No3Whether their Lordships wish to see the fair copyNoof the judgment ?3Whether their Lordships wish to see the fair copyNoof the judgment ? 4Whether this case involves a substantial questionNoof law as to the interpretation of the Constitutionof India or any order made thereunder ?of law as to the interpretation of the Constitutionof India or any order made thereunder ? ========================================================== DEDIYASAN INDUSTRIAL CO OP CREDIT SOCIETY LIMITED Versus ADDITIONAL/ JOINT/ DEPUTY/ ASSISTANT COMMISSIONER OF INCOMETAX/ INCOME TAX OFFICER ========================================================== Appearance: MR B S SOPARKAR(6851) for the Petitioner(s) No. 1 for the Respondent(s) No. 1 MR M.R.BHATT, LD.SENIOR COUNSEL WITH MR MUNJAAL BHATT, LD.ADVOCATE WITH MR KARAN SANGHAVI, LD.ADVOCATE FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE A.J.DESAIand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 20/06/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE A.J.DESAI) 1. rule on behalf of the respondent. Rule. Learned advocate Mr. Munjaal Bhatt waives service of With the consent of learned advocates appearing for therespective parties, the present petition is taken up for final disposal todayitself. 2. By way of the present petition under Articles 226, 19(1)(g)and 114 of the Constitution of India, the petitioner - assessee has prayedas under :- "7. This Hon'ble Court be pleased to issue a writ ofmandamus or a writ in the nature of mandamus or a writ ofcertiorari or a writ in the nature of certiorari or any otherappropriate writ, direction or order and be pleased to : (a)quash and set aside the impugned order dated18.08.2021 at Annexure-’A’ to this petition; (b)pending the admission, hearing and final disposal ofthis petition, to stay implementation and operation of theorder at Annexure- ‘A’ to this petition, notice of penalty atAnnexure ‘I’ to this petition and stay recovery of tax forA.Y.2018-19; (c) any other and further relief deemed just and properbe granted in the interest of justice; (d)to provide for the cost of this petition.” 3.In response to the notice issued by this Court, the respondenthas filed affidavit-in-reply dated 16.06.2022. 4.Brief facts of the case are as under :- 4.1 The petitioner, a cooperative credit society, registered underGujarat Co-operative Society Act engaged in business of providing creditfacilities to its members, filed its return of income for AY 2018-19 on23.09.2018 offering Nil income after claiming deduction ofRs.2,79,77,018/- under 80P of the Income Tax Act, 1961 (hereinafterreferred to as 'the Act, 1961'). 4.2 The case of the petitioner was selected for scrutiny underCASS to verify some issues and for the said purpose, Show Cause Noticewas issued on 05.04.2021 by the respondent producing draft assessmentorder therein. 4.3 The petitioner vide letter dated 10.04.2021 responded to theabove notice and sought personal hearing through video conference andalso requested for directions u/s 144A to be issued by the Range Head tothe AO. 4.1 The petitioner, a cooperative credit society, registered underGujarat Co-operative Society Act engaged in business of providing creditfacilities to its members, filed its return of income for AY 2018-19 on23.09.2018 offering Nil income after claiming deduction ofRs.2,79,77,018/- under 80P of the Income Tax Act, 1961 (hereinafterreferred to as 'the Act, 1961'). 4.2 The case of the petitioner was selected for scrutiny underCASS to verify some issues and for the said purpose, Show Cause Noticewas issued on 05.04.2021 by the respondent producing draft assessmentorder therein. 4.3 The petitioner vide letter dated 10.04.2021 responded to theabove notice and sought personal hearing through video conference andalso requested for directions u/s 144A to be issued by the Range Head tothe AO. 4.4The Video Conference for personal hearing was scheduledon 26.04.2021 at 11:30 AM. He had difficulty for appearing and thereforehe requested to adjourn the video conference to 23.04.2021. However, thepetitioner received no response to such request. Thereafter, such videoconference was scheduled on 26/04/2021, but the password for themeeting was received by the petitioner at 2:57 PM on 26.04.2021. Thepetitioner even attempted to join the meeting after receipt of the passwordand waited till 5:30 PM but the meeting did not take place. Thereafter, the petitioner addressed communication dated 27.04.2021 to the respondentand asked for a personal hearing one more time. Eventually on30.04.2021, much after the date fixed for virtual hearing, the petitionerreceived a response against the grievance filed by the petitioner on23.04.2021. 4.5Thereafter, the petitioner received notice dated 27.07.2021 at6:00 PM seeking more details and scheduling personal hearing on29.07.2021. On 29.07.2021 the petitioner requested that they havereceived notice only on 27.07.2021 along with requirement of submittingsome details and therefore requested for time till 02.08.2021 to file theinformation asked for. The petitioner attempted to join the videoconference on 29.07.2021 at given time but the petitioner was not sent thepassword through SMS on registered mobile number. The petitionerwaited till 4:30 but no SMS was received. The petitioner also submittedthe reply response to the information asked for vide letter dated02.08.2021. 4.6One more show cause notice was issued on 30.07.2021 inwhich offer was made to the petitioner that he could still avail thepersonal hearing through video conference. Time was given till06.08.2021 to comply with the notice. On 06.08.2021, the petitioner wrote to respondent No.2explaining that the earlier conference could not be joined due to non-receipt of the password and further that Video Conference is still desired. 4.7The petitioner however received the impugned Assessmentorder dated 18.08.2021 without providing the desired video conference.In the said assessment order, nothing is mentioned about letters dated02.08.2021 or 06.08.2021 or the request for Video Conference. Thereafter, Show Cause Notice under section 270A of theIncome-Tax Act was issued on 26/08/2021 to initiate penalty proceedingsagainst the petitioner. Hence this petition. 5. Learned advocate Mr.B.S.Soparkar appearing for thepetitioner submitted that the impugned Show Cause Notice under section270A of the Act, 1961 is in violation of mandatory provisions of clauses(xiv), (xvi) and (xxii) of sub-section (1) of section 144B of the Act, 1961.It was submitted that as per the Scheme of Faceless Assessment asprovided under section 144B of the Act, 1961, draft assessment order isto be provided to the assessee for the proposed addition so as to give anopportunity of hearing. It was submitted that the respondent authority hasnot provided the opportunity of hearing through video conference asenvisaged under section 144B (7) (vii), (viii) and (ix) of the Act, 1961and therefore, the impugned order is in violation of the principles ofnatural justice. 5. Learned advocate Mr.B.S.Soparkar appearing for thepetitioner submitted that the impugned Show Cause Notice under section270A of the Act, 1961 is in violation of mandatory provisions of clauses(xiv), (xvi) and (xxii) of sub-section (1) of section 144B of the Act, 1961.It was submitted that as per the Scheme of Faceless Assessment asprovided under section 144B of the Act, 1961, draft assessment order isto be provided to the assessee for the proposed addition so as to give anopportunity of hearing. It was submitted that the respondent authority hasnot provided the opportunity of hearing through video conference asenvisaged under section 144B (7) (vii), (viii) and (ix) of the Act, 1961and therefore, the impugned order is in violation of the principles ofnatural justice. 6. In support of his submissions, Mr.Soparkar has relied uponthe decision of Bombay High Court in the case of Golden TobaccoLimited v. NFAC and others, rendered in Writ Petition No.1282 of2021 dated 28.10.2021, Mantra Industries Limited v. NationalFaceless Assessment Centre (NFAC or NeAC) reported in [2021] 131TAXMANN.COM 165 (Bombay), decision of this Court in the case ofGandhi Realty (India) Private Limited v. Asst/Jt./Dy./ACIT/ITOrendered in Special Civil Application No.7662 of 2021 dated 5.10.2021and decision of this Court in the case of Index India Private Limited v.Addl./Jt./Dy./ACIT/ITOrendered in Special Civil ApplicationNo.16690 of 2021 dated 14.12.2021. He, therefore, would submit that thepresent petition be allowed and the impugned order be quashed and setaside. 7. On the other hand, Mr.M.R.Bhatt, learned advocateappearing for M. R. Bhatt & Co. for the respondent has opposed thispetition and would submit that after examining the explanations of thepetitioner, the impugned order has been passed by the respondent and,therefore, no interference is required by this Court. He, therefore, wouldsubmit that the present petition be dismissed. 8. We have heard learned advocates appearing for therespective parties and perused the impugned order as well as gonethrough relevant provisions of law. In order to adjudicate the issueinvolved with regard to providing opportunity of hearing, it would begermane to refer to the relevant provisions of section 144B of the Act,1961 which reads as under : “144B. (1) Notwithstanding anything to the contrarycontained in any other provisions of this Act, the assessmentunder subsection (3) of section 143 or under section 144, inthe cases referred to in sub-section (2), shall be made in afaceless manner as per the following procedure, namely:— xxx (xiv) the assessment unit shall, after taking into account allthe relevant material available on the record make inwriting, a draft assessment order or, in a case whereintimation referred to in clause (xiii) is received from theNational Faceless Assessment Centre, make in writing, adraft assessment order to the best of its judgment, eitheraccepting the income or sum payable by, or sum refundableto, the assessee as per his return or making variation to thesaid income or sum, and send a copy of such order to theNational Faceless Assessment Centre; (xv) the assessment unit shall, while making draftassessment order, provide details of the penalty proceedingsto be initiated therein, if any; (xvi) the National Faceless Assessment Centre shall examinethe draft assessment order in accordance with the riskmanagement strategy specified by the Board, including byway of an automated examination tool, whereupon it maydecide to— (a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, asper the draft assessment order and serve a copy ofsuch order and notice for initiating penaltyproceedings, if any, to the assessee, along with thedemand notice, specifying the sum payable by, orrefund of any amount due to, the assessee on the basisof such assessment; or (xv) the assessment unit shall, while making draftassessment order, provide details of the penalty proceedingsto be initiated therein, if any; (xvi) the National Faceless Assessment Centre shall examinethe draft assessment order in accordance with the riskmanagement strategy specified by the Board, including byway of an automated examination tool, whereupon it maydecide to— (a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, asper the draft assessment order and serve a copy ofsuch order and notice for initiating penaltyproceedings, if any, to the assessee, along with thedemand notice, specifying the sum payable by, orrefund of any amount due to, the assessee on the basisof such assessment; or (b) provide an opportunity to the assessee, in case anyvariation prejudicial to the interest of assessee isproposed, by serving a notice calling upon him toshow cause as to why the proposed variation shouldnot be made; or (c) assign the draft assessment order to a review unitin any one Regional Faceless Assessment Centre,through an automated allocation system, forconducting review of such order;xxx (xxii) the assessee may, in a case where show-cause noticehas been served upon him as per the procedure laid down insub-clause (b) of clause (xvi), furnish his response to theNational Faceless Assessment Centre on or before the dateand time specified in the notice or within the extended time,if any;xxx 144B(7) For the purposes of faceless assessment-xxx (vii) in a case where a variation is proposed in the draftassessment order or final draft assessment order or reviseddraft assessment order, and an opportunity is provided tothe assessee by serving a notice calling upon him to showcause as to why the assessment should not be completed asper the such draft or final draft or revised draft assessmentorder, the assessee or his authorised representative, as thecase may be, may request for personal hearing so as tomake his oral submissions or present his case before theincome-tax authority in any unit; (viii) the Chief Commissioner or the Director General, incharge of the Regional Faceless Assessment Centre, underwhich the concerned unit is set up, may approve the requestfor personal hearing referred to in clause (vii) if he is of theopinion that the request is covered by the circumstancesreferred to in sub-clause (h) of clause (xii); (ix) where the request for personal hearing has beenapproved by the Chief Commissioner or the DirectorGeneral, in charge of the Regional Faceless Assessment Centre, such hearing shall be conducted exclusively throughvideo conferencing or video telephony, including use of anytelecommunication application software which supportsvideo conferencing or video telephony, in accordance withthe procedure laid down by the Board;” 9. Section 144B of the Act, 1961 provides detailed procedurefor Faceless Assessment introduced by the Taxation and Other Laws(Relaxation and Amendment of Certain Provisions) Act, 2020 with effectfrom 1st April, 2021. Section 144B(1) starts with a non-obstante clausei.e. “notwithstanding anything to the contrary contained in any otherprovisions of this Act, the assessment under sub-section (3) of section143 or under section 144, in the cases referred to in sub-section (2), shallbe made in a faceless manner...” as per the procedure prescribed therein. 10. The above-referred clause of section 144B(1) and 144B(7)deals with the procedure to be adopted by the National FacelessAssessment Centre on receipt of draft order from the assessment unit whohas prepared the draft after providing opportunity to the assessee byserving a notice upon him to show cause as to why the assessment shouldnot be completed as per such draft or final draft or revised draftassessment order. Therefore, such personal hearing in era of Facelessassessment is to be provided through video conferencing. 10. The above-referred clause of section 144B(1) and 144B(7)deals with the procedure to be adopted by the National FacelessAssessment Centre on receipt of draft order from the assessment unit whohas prepared the draft after providing opportunity to the assessee byserving a notice upon him to show cause as to why the assessment shouldnot be completed as per such draft or final draft or revised draftassessment order. Therefore, such personal hearing in era of Facelessassessment is to be provided through video conferencing. 11. It is not in dispute that in facts of the case no draftassessment along with show cause notice as required under section144B(1) and section 144B(7) is given to the petitioner so as to enable thepetitioner to give explanation for proposed addition during the hearingbefore the National Faceless Assessment Centre. Section 144B(1)(xii)provides that on receipt of show cause notice, assessee may furnish hisresponse to the National Faceless Assessment Centre and as per clause (xiv), assessment unit shall make a revised draft assessment order afterconsidering the response of the assessee and send it to the NationalFaceless Assessment Centre. As per the provisions of section 144B(7) incase of variation prejudicial to the assessee as proposed in the draftassessment order, the assessee is entitled to request for personal hearingand upon such request, the personal hearing may be provided by theauthority, if the case of the assessee is covered by circumstances providedtherein in exercise of powers under sub-clause (h) of clause (xii) ofsection 144B(7) of the Act, 1961. 12. In view of above, it can be safely be said that the impugnedorder was passed by the respondent in violation of principles of naturaljustice without affording an opportunity of personal hearing by notfollowing the prescribed procedure laid down as per the provisions ofsection 144B of the Act, 1961 for Faceless assessment. Ratio laid downby the Bombay High Court as well this Court in the following decisionswould squarely be applicable to the facts of this case : 1) Golden Tobacco Limited v. The National FacelessAssessment Centre and others (judgment dated 28.10.2021in Writ Petition No.1282/2021) 2) Mantra Industries Ltd. v. National FacelessAssessment Centre reported in (2021) 131 taxmann.com165(Bombay). 3) Gandhi Reality (India) Private Limited v.Assistant/Joint/Deputy / Assistant Commissioner ofIncome tax/Income Tax Officer (Order dated 05.10.2021 inSpecial Civil Application No.7662/2021) 4)IdexIndiaPrivateLimitedv.Additional/Joint/Deputy/Assistant Commissioner ofIncome Tax/Income Tax Officer (order dated 14.12.2021in Special Civil Application No. 16690/2021). 13. In the result, this petition succeeds and is accordinglyallowed. The impugned order of assessment dated 18.08.2021 passed bythe respondent as well as notice dated 26.08.2021 under section 270A ofthe Income Tax Act,1961 are hereby quashed and set aside. Therespondent/Revenue will be at liberty to proceed with assessment underthe provisions of section 144B of the Act, 1961 as permissible under thelaw after issuance of show cause notice-cum-draft assessment order so asto provide an opportunity of hearing to the petitioner. The petitioner shallbe given an opportunity of hearing as per the provisions of section 144Bof the Act, 1961. Such exercise shall be completed as early as possibleand preferably within a period of of twelve weeks from the date of receiptof copy of this order. It is made clear that we have not examined themerits of the case. Rule is made absolute to the aforesaid extent. Direct service is permitted. sd/-(A.J.DESAI, J) sd/- (BHARGAV D. KARIA, J) DIPTI PATEL