Gujarat State Financial Services Ltd v. Additional/Joint/Deputy Assistant Commissioner Of Incometax/Income-Tax Officer

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 9766 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE A.J.DESAI andHONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1Whether Reporters of Local Papers may be allowedto see the judgment ?to see the judgment ?2To be referred to the Reporter or not ?3Whether their Lordships wish to see the fair copyof the judgment ?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 ?of law as to the interpretation of the Constitutionof India or any order made thereunder ? ========================================================== GUJARAT STATE FINANCIAL SERVICES LTD. Versus ADDITIONAL/JOINT/DEPUTY ASSISTANT COMMISSIONER OF INCOMETAX/INCOME-TAX OFFICER ==========================================================Appearance:MR MANISH J SHAH(1320) for the Petitioner(s) No. 1MR MUNJAAL M. BHATT FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1,2 ========================================================== CORAM:HONOURABLE MR. JUSTICE A.J.DESAI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 13/06/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE A.J.DESAI) 1. Rule. Learned advocate Mr. Munjaal Bhatt waivesservice of rule on behalf of the respondents.With the consent of learned advocates appearingfor the respective parties, the present petitionis taken up for final disposal today itself. service of rule on behalf of the respondents.With the consent of learned advocates appearingfor the respective parties, the present petitionis taken up for final disposal today itself. 2. By way of the present petition under Article 226of the Constitution of India, the petitioner -assessee has prayed as under :- of the Constitution of India, the petitioner -assessee has prayed as under :- "(A)This Hon'ble Court be pleased tocall for the records of the proceedings,look into them and be pleased to issue awrit of certiorari or any other appropriatewrit, order or direction quashing theassessment order passed by Respondent u/s.143 (3) r.w.s. 144B dated 8.6.2022 atAnnexure - N and demand notice u/s.156 ofeven date at Annexure O. (B) This Hon'ble Court be pleased tocall for the records of the proceedings,look into them and be pleased to issue awrit of mandamus or any other appropriatewrit, order or direction directing theRespondent to grant complete stay of demandarising out of assessment order passed u/s.143 (3) r.w.s. 144 B dated 8.6.2021 atAnnexure N. (C)Pending the hearing and finaldisposal of this application, this Hon'bleCourt be pleased to stay operation andimplementation of assessment order passedu/s. 143(3) r.w.s. 144B dated 8.6.2021 atAnnexure N and further stay the recovery ofdemand in pursuance of notice issuedu/s.156 at Annexure O." 3. In response to the notice issued by this Court,the respondents have filed affidavit-in-replydated 22.9.2021, to which affidavit-in-rejoinderdated 20.10.2021 has been filed by thepetitioner. 4.1The petitioner is a Company engaged inthe business of providing financial assistanceto various enterprises of Government of Gujaratand is being regularly assessed at PANNo.AAACG5581B under the Income Tax Act, 1961(hereinafter referred to as 'the Act, 1961'). 4.2 The petitioner filed its return ofincome for the Assessment Year 2018-2019declaring total income of Rs.172,99,73,890/- on30.10.2018. 4.3The case of the petitioner was selectedfor scrutiny assessment and for the saidpurpose, notice u/s.143 (2) was issued on22.9.2019 by the respondent. 3. In response to the notice issued by this Court,the respondents have filed affidavit-in-replydated 22.9.2021, to which affidavit-in-rejoinderdated 20.10.2021 has been filed by thepetitioner. 4.1The petitioner is a Company engaged inthe business of providing financial assistanceto various enterprises of Government of Gujaratand is being regularly assessed at PANNo.AAACG5581B under the Income Tax Act, 1961(hereinafter referred to as 'the Act, 1961'). 4.2 The petitioner filed its return ofincome for the Assessment Year 2018-2019declaring total income of Rs.172,99,73,890/- on30.10.2018. 4.3The case of the petitioner was selectedfor scrutiny assessment and for the saidpurpose, notice u/s.143 (2) was issued on22.9.2019 by the respondent. 4.4The petitioner vide letter dated5.10.2019 responded to the above notice andsubmitted the explanations/details called for bythe department. Thereafter, the petitionerreceived notice dated 10.1.2020 u/s. 142(1) fromthe respondent asking for certain details/ clarifications. The petitioner submitted itsresponse vide reply dated 27.1.2020 andfurnished the details / explanations called for.The petitioner also addressed yet another letterdated 13.2.2020 to respondent no.2 furnishingfurther details. 4.5Meanwhile, the Income Tax Departmentintroduced National Faceless Assessment Schemefrom 13.8.2020 and accordingly, the assessmentof the petitioner was transferred to National e-Assessment Centre, Delhi. Thereafter, therespondent No.1 issued a notice dated 27.11.2020u/s.142 (1) asking the petitioner to provide thedetails of investment and expenditure incurredfor earning income from investment. Thepetitioner submitted its response vide letterdated 11.12.2020. Respondent No.1 once againissued notice u/s.142 (1) dated 9.12.2020 askingthe petitioner to submit further details, towhich the petitioner responded to vide letterdated 23.12.2020. 4.6Thereafter, show-cause notice dated1.4.2021 was issued to the petitioner. Thepetitioner vide letter dated 12.4.2021 furnisheddetailed reply to the said show-cause notice andrequested the respondent to provide opportunityof personal hearing. The petitioner receivedassessment order dated 8.6.2021 passed u/s.143(3) r.w.s. 144B of the Act, 1961 making addition C/SCA/9766/2021 JUDGMENT DATED: 13/06/2022 of Rs.175,45,38,914/- to the returned income ofthe petitioner and thereby, assessing the incomeof the petitioner at Rs.348,45,12,804/-. Hencethis petition. 5. Learned advocate Mr. Manish J. Shah appearingfor the petitioner submitted that the impugnedorder passed under section 143(3) read withsections 254 and 144B of the Act, 1961 is inviolation of mandatory provisions of clauses(xiv), (xvi) and (xxii) of sub-section (1) ofsection 144B of the Act, 1961. It was submittedthat as per the Scheme of Faceless Assessment asprovided under section 144B of the Act, 1961,draft assessment order is to be provided to theassessee for the proposed addition so as to givean opportunity of hearing. It was submittedthat the respondent authority has not providedthe opportunity of hearing through videoconference as envisaged under section 144B (7)(vii), (viii) and (ix) of the Act, 1961 andtherefore, the impugned order is in violation ofthe principles of natural justice. 6. In support of his submissions, Mr. Shah hasrelied upon the decision of Bombay High Court inthe case of Golden Tobacco Limited v. NFAC andothers, rendered in Writ Petition No.1282 of2021 dated 28.10.2021, Mantra Industries Limitedv. National Faceless Assessment Centre (NFAC orNeAC) reported in [2021] 131 TAXMANN.COM 165 6. In support of his submissions, Mr. Shah hasrelied upon the decision of Bombay High Court inthe case of Golden Tobacco Limited v. NFAC andothers, rendered in Writ Petition No.1282 of2021 dated 28.10.2021, Mantra Industries Limitedv. National Faceless Assessment Centre (NFAC orNeAC) reported in [2021] 131 TAXMANN.COM 165 (Bombay), decision of this Court in the case ofGandhi Realty (India) Private Limited v.Asst/Jt./Dy./ACIT/ITO rendered in Specail CivilApplication No.7662 of 2021 dated 5.10.2021 anddecision of this Court in the case of IndexIndia Private Limited v. Addl./Jt./Dy./ACIT/ITOrendered in Special Civil Application No.16690of 2021 dated 14.12.2021. He, therefore, wouldsubmit that the present petition be allowed andthe impugned order be quashed and set aside. 7. On the other hand, Mr. Munjaal M. Bhatt, learnedadvocate appearing for M. R. Bhatt & Co. for therespondents has opposed this petition and wouldsubmit that after examining the explanations ofthe petitioner, the impugned order has beenpassed by the respondents and, therefore, nointerference is required by this Court. He,therefore, would submit that the presentpetition be dismissed.advocate appearing for M. R. Bhatt & Co. for therespondents has opposed this petition and wouldsubmit that after examining the explanations ofthe petitioner, the impugned order has beenpassed by the respondents and, therefore, nointerference is required by this Court. He,therefore, would submit that the presentpetition be dismissed. 8. We have heard learned advocates appearing forthe respective parties and perused the impugnedorder as well as gone through relevantprovisions of law. In order to adjudicate theissue involved with regard to providingopportunity of hearing, it would be germane torefer to the relevant provisions of section 144Bof the Act, 1961 which reads as under :the respective parties and perused the impugnedorder as well as gone through relevantprovisions of law. In order to adjudicate theissue involved with regard to providingopportunity of hearing, it would be germane torefer to the relevant provisions of section 144Bof the Act, 1961 which reads as under : “144B. (1) Notwithstanding anything to thecontrary contained in any other provisionscontrary contained in any other provisions of 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 (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 (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 the concerned unit is set up, may approve therequest for personal hearing referred to inclause (vii) if he is of the opinion thatthe 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 detailedprocedure for Faceless Assessment introduced bythe Taxation and Other Laws (Relaxation andAmendment of Certain Provisions) Act, 2020 witheffect from 1[st] April, 2021. Section 144B(1)starts with a non-obstante clause i.e.“notwithstanding anything to the contrarycontained in any other provisions of this Act,the assessment under sub-section (3) of section143 or under section 144, in the cases referredto in sub-section (2), shall be made in afaceless manner...” as per the procedureprescribed therein. 10.The above-referred clause of section 144B(1) and144B(7) deals with the procedure to be adoptedby the National Faceless Assessment Centre onreceipt of draft order from the assessment unit 9. Section 144B of the Act, 1961 provides detailedprocedure for Faceless Assessment introduced bythe Taxation and Other Laws (Relaxation andAmendment of Certain Provisions) Act, 2020 witheffect from 1[st] April, 2021. Section 144B(1)starts with a non-obstante clause i.e.“notwithstanding anything to the contrarycontained in any other provisions of this Act,the assessment under sub-section (3) of section143 or under section 144, in the cases referredto in sub-section (2), shall be made in afaceless manner...” as per the procedureprescribed therein. 10.The above-referred clause of section 144B(1) and144B(7) deals with the procedure to be adoptedby the National Faceless Assessment Centre onreceipt of draft order from the assessment unit who has prepared the draft after providingopportunity to the assessee by serving a noticeupon him to show cause as to why the assessmentshould not be completed as per such draft orfinal draft or revised draft assessment order.Therefore, such personal hearing in era ofFaceless assessment is to be provided throughvideo conferencing. 11.It is not in dispute that in facts of thecase no draft assessment along with show causenotice as required under section 144B(1) andsection 144B(7) is given to the petitioner so asto enable the petitioner to give explanation forproposed addition during the hearing before theNational Faceless Assessment Centre. Section144B(1)(xii) provides that on receipt of showcause notice, assessee may furnish his responseto the National Faceless Assessment Centre andas per clause (xiv), assessment unit shall makea revised draft assessment order afterconsidering the response of the assessee andsend it to the National Faceless AssessmentCentre. As per the provisions of section 144B(7)in case of variation prejudicial to theassessee as proposed in the draft assessmentorder, the assessee is entitled to request forpersonal hearing and upon such request, thepersonal hearing may be provided by theauthority, if the case of the assessee iscovered by circumstances provided therein in C/SCA/9766/2021 JUDGMENT DATED: 13/06/2022 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 be saidthat the impugned order was passed by therespondent in violation of principles of naturaljustice without affording an opportunity ofpersonal hearing by not following the prescribedprocedure laid down as per the provisions ofsection 144B of the Act, 1961 for Facelessassessment. Ratio laid down by the Bombay HighCourt as well this Court in the followingdecisions would squarely be applicable to thefacts of this case : 1)Golden Tobacco Limited v. The NationalFaceless Assessment Centre and others(judgment dated 28.10.2021 in Writ PetitionNo.1282/2021) 2)Mantra Industries Ltd. v. NationalFaceless Assessment Centrereported in(2021) 131 taxmann.com 165(Bombay). 3)Gandhi Reality (India) Private Limitedv. Assistant/Joint/Deputy / AssistantCommissioner of Income tax/Income TaxOfficer (Order dated 05.10.2021 in SpecialCivil Application No.7662/2021) 4)Idex India Private Limited v.Additional/Joint/Deputy/AssistantCommissioner of Income Tax/Income TaxOfficer (order dated 14.12.2021 in SpecialCivil Application No. 16690/2021). C/SCA/9766/2021 JUDGMENT DATED: 13/06/2022 1)Golden Tobacco Limited v. The NationalFaceless Assessment Centre and others(judgment dated 28.10.2021 in Writ PetitionNo.1282/2021) 2)Mantra Industries Ltd. v. NationalFaceless Assessment Centrereported in(2021) 131 taxmann.com 165(Bombay). 3)Gandhi Reality (India) Private Limitedv. Assistant/Joint/Deputy / AssistantCommissioner of Income tax/Income TaxOfficer (Order dated 05.10.2021 in SpecialCivil Application No.7662/2021) 4)Idex India Private Limited v.Additional/Joint/Deputy/AssistantCommissioner of Income Tax/Income TaxOfficer (order dated 14.12.2021 in SpecialCivil Application No. 16690/2021). C/SCA/9766/2021 JUDGMENT DATED: 13/06/2022 13.In the result, this petition succeeds and isaccordingly allowed. The impugned order ofassessment passed by the respondent undersection 143(3) read with section 144B dated08.06.2021 at Annexure-N and demand notice undersection 156 of the even date at Annexure-O arequashed and set aside. The respondent/Revenuewill be at liberty to proceed with assessmentunder the provisions of section 144B of the Act,1961 as permissible under the law after issuanceof show cause notice-cum-draft assessment orderso as to provide an opportunity of hearing tothe petitioner. The petitioner shall be given anopportunity of hearing as per the provisions ofsection 144B of the Act, 1961. Such exerciseshall be completed within 12 weeks from the dateof receipt of copy of this order. Rule is made absolute to the aforesaid extent.Direct service is permitted. It is made clear that we have not examined themerits of the case. (A.J.DESAI, J) RAGHUNATH R NAIR (BHARGAV D. KARIA, J)