Income Tax Case

WP-342-21 -RJ.DOC Santosh IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO. 342 OF 2021 Goa Industrial Development Corporationthrough its Managing Director, age 33 years, Mekala Chaityan, having office at Plot NO.13A-2, EDC Complex, Next to Passport Office, Patto Plaza, Panaji, Goa 403 001. Versus …Petitioner. 1) Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, National Faceless Assessment Centre, Delhi. 2) Union of India, through the Finance Secretary, New Delhi. …Respondents. Mr. Pramod Vaidya with Mr. Hanumant Naik, Advocatesfor the Petitioner. Mr. Y.V. Raviraj, Senior Central Government StandingCounsel for the Respondents. CORAM :SMT. SADHANA S. JADHAV &REVATI MOHITE DERE, JJ. Reserved on : 20/12/2021Pronounced on 23/12/2021 JUDGMENT : (SMT. SADHANA S. JADHAV) 1.Heard learned Counsel for the parties. 2.Rule. Rule is made returnable forthwith with the consentof the parties and is taken up for final hearing. 3.The Petitioner-Goa Industrial Development Corporation(for the sake of brevity, referred to as the ‘GSIDC’), seeks tochallenge the notice of demand under Section 156 of the IncomeTax Act, 1961 (for short ‘IT Act’) dated 17/8/2021 issued by theIncome Tax, National Faceless Assessment Centre, Delhi, whereby anotice was issued to the Petitioner for the Assessment Year 2018-19,seeking a demand of 18,92,96,072/-. The notice contemplated₹that if the amount of the tax was not paid within 30 days from thedate of service of the notice, the Petitioner would be liable to payinterest on the said amount towards penalty. It was alsocontemplated that upon failure of the Petitioner to pay the amountwithin the specified period, action would be taken in accordancewith Sections 222 to 227, 229 and 232 of the Act. 4. It is the case of the Petitioner that the Petitioner had filed 20[th] December 2021 WP-342-21 -RJ.DOC return of income for the year 2018-19, declaring gross income tothe tune of 37,22,49,259/-. As per the return, the net income was₹NIL. The case was selected for scrutiny under the ComputerAssisted Scrutiny Selection (CASS). A notice was issued by theRespondent No.1 under Section 143(2) of the IT Act on16/9/2019, a reply to which was filed on 28/9/2019. RespondentNo.1 had issued a notice under Section 142(1) calling for certaindetails and the Petitioner had complied with the said notice andfiled the requisite documents online through e-filing portal. ThatRespondent No.1 issued a show cause notice, and according toRespondent No.1, the assessment of the Petitioner could not beconsidered as a charitable trust as defined under Section 2(15) of theAct and, therefore, the notice was issued to that effect and insteadthe income was to be computed under the head “income frombusiness”. 5.On 16/4/2021, the Income Tax Officer National e-Assessment Centre had issued a show cause notice to the Petitionerand had opined that the claim of the Petitioner under Section 12Aas being a charitable trust, cannot be considered since the CIT,Panaji had withdrawn 12A registration granted to the assessee vide 20[th] December 2021 WP-342-21 -RJ.DOC order under Section 12AA(3)dated 27/12/2011 w.e.f. AssessmentYear 2009-10 in view of the amendment to Section 2(5). 6.The claim of the Petitioner, as a charitable trust and theregistration of the same under Section 12A, has been decided by thisCourt vide Judgment and Order dated 4/2/2020 in Tax AppealNo.2/2013, by which the orders passed by the CIT & ITAT, werequashed and the registration under Section 12A was directed to berevived. It is in view of that, an order was passed under Section143(3), read with Section 144B of the Act. 20[th] December 2021 WP-342-21 -RJ.DOC order under Section 12AA(3)dated 27/12/2011 w.e.f. AssessmentYear 2009-10 in view of the amendment to Section 2(5). 6.The claim of the Petitioner, as a charitable trust and theregistration of the same under Section 12A, has been decided by thisCourt vide Judgment and Order dated 4/2/2020 in Tax AppealNo.2/2013, by which the orders passed by the CIT & ITAT, werequashed and the registration under Section 12A was directed to berevived. It is in view of that, an order was passed under Section143(3), read with Section 144B of the Act. 7.It is the case of the Petitioner that the AssessmentAuthorities had not issued a notice, calling upon the Petitioner toshow cause as to why the assessment should not be completed as perthe draft or final draft and the same has caused prejudice to thePetitioner. In fact, in the course of processing under Section 143(1)(a) on 15/10/2019, the Assistant Commissioner of Income Tax hadpassed an order to the effect that pursuant to the Judgment passedby the High Court dated 4/2/2020, the assessment had beenmodified by giving suitable benefits as per Section 11 of the IT Actand hence, the assessment was complete by accepting the return of income that was shown by the Assessee. 8.The Petitioner submits that the income from the houseproperty could not have been taken into consideration as rentalincome at reduced amount is reflected in Part-B-TI-Statement ofIncome at Sl.No.13(i). The main contention is that the principles ofnatural justice have not been followed and no opportunity was givento the Petitioner for personal hearing, as contemplated under Section 144 clause (vii), which reads under : “(vii) in a case where a variation is proposed in the draft assessmentorder or final draft assessment order or revised draft assessmentorder, and an opportunity is provided to the assessee by serving anotice calling upon him to show cause as to why the assessmentshould not be completed as per such draft or final draft or reviseddraft assessment order, the assesseee or his authorised representativeas the case may be, may request for personal hearing so as to makehis oral submissions or present his case before the income taxauthority in any unit.” 9.It is submitted that without taking into consideration thesaid order dated 15/10/2019, the Income Tax Officer had issued thedemand under Section 156 of the Act. 10.The main contention of the Petitioner appears to be that WP-342-21 -RJ.DOC the Petitioner has been denied the opportunity of personal hearingbefore passing the assessment order on 17/8/2021 under Section143(3), read with Section 144B of the IT Act. That there is nocompliance under Section 144B of the IT Act. In other words,Section 144B contemplates that in case of variation prejudicial tothe assessee as proposed in the draft assessment order, the right isconferred on the assessee to request a personal hearing and theconcerned authority is required to consider such a request. 11.It would be trite to refer to the Judgment of BombayHigh Court in the case of Golden Tobacco Ltd. vs. The NationalFaceless Assessment Centre and others, reported in [2021] 132taxmann.com 296 (Bombay dtd. [28-10-21] wherein the Court waspleased to consider the object of Section 144B of the IT Act and hasheld that the objective of faceless assessment is to promote efficienteffective tax administration, interface to increase accountability andintroduce team-based assessment and, therefore, the procedureprescribed under Section 144B is intended to be mandatory andneglect of any procedural safeguard, would render the assessmentnon-est. 11.It would be trite to refer to the Judgment of BombayHigh Court in the case of Golden Tobacco Ltd. vs. The NationalFaceless Assessment Centre and others, reported in [2021] 132taxmann.com 296 (Bombay dtd. [28-10-21] wherein the Court waspleased to consider the object of Section 144B of the IT Act and hasheld that the objective of faceless assessment is to promote efficienteffective tax administration, interface to increase accountability andintroduce team-based assessment and, therefore, the procedureprescribed under Section 144B is intended to be mandatory andneglect of any procedural safeguard, would render the assessmentnon-est. 12.Learned Counsel has placed reliance upon the judgmentof the Bombay High Court in the case of Parimal EnterprisesLimited vs. Addl./Jt./Dy./Asstt, Commissioner of IncomeTax/Income Tax Officer, Delhi, reported in [2021] 129taxmann.com 18 (Bombay), wherein the High Court, after takinginto consideration various judgments, has held that Section 144B ofthe Act captioned “Faceless Assessment” commences vide its sub-section (1) with a non-obstante clause and compulsively requiresassessment under Section 143(3) and 144 shall be by prescribedprocedure contained in sub-section (1) of Section 144B in the casesreferred to in sub-section (2) thereof. 13.Reliance is also placed on the Judgment of Bombay HighCourt in Chander Arjandas Manwani vs. The National FacelessAssessment Centre and ors. – Writ Petition No.3195 of 2021,wherein it is held that the Faceless Assessment Scheme, 2019provides that where a modification is proposed, the National e-Assessment Centre shall provide an opportunity to the assessee byserving a notice calling upon him to show cause as to why theassessment should not be completed as per draft assessment order,hence, where assessee’s request for personal hearing had been WP-342-21 -RJ.DOC ignored. The Court further held that the order having been passedwithout following requirements of Faceless Assessment Scheme, 20-19, being non est was quashed and set aside. 14.The Respondent No.1 has filed an affidavit contendingtherein that in fact, the order under Section 143(3) read with 144 ispassed by the authorities only after giving adequate opportunity tothe Assessee and after considering the submissions made by thePetitioners. It is submitted that the Petitioner had declared theincome to the tune of 37,22,49,259/- and therefore, cannot claim₹that the assessment order is erroneous. 15.According to the Respondent, the gross total income asper the return was 37,22,49,260/- , to which an additional income₹of 13,28,11,253 from the house property, was taken into₹consideration and hence, the total income assessed was ₹50,50,60,513/-. 16.It is submitted that in fact, the Petitioner had made anoral request for personal hearing. However, the said request wasturned down without assigning any reason. It is, in thesecircumstances and to comply with Section 144B of the IT Act, the 20[th] December 2021 WP-342-21 -RJ.DOC Petition deserves to be allowed and remitted back to the Respondent No.1. 17.In view of the same, the following order is passed : (I)Assessment Order dated 17/8/2021, passed under Section143(3) r/w Section 144B of the Income Tax Act, 1961 passed by theNational Faceless Centre is, hereby, quashed and set aside. (II) The matter is remanded to the Respondent No.1 tocomplete the assessment proceedings by following due procedure ascontemplated by Section 144B of the the Income Tax Act, 1961. (III) The Respondent shall give opportunity to the Petitionerof personal hearing (through Video-Conferencing). (IV) The Respondent shall give 15 days advance notice beforethe date of hearing through video-conferencing. (V) The assessment proceedings shall be completed within 3months from the date of receipt of this order or from the date onwhich the order is uploaded, whichever is earlier. 18.Rule is made absolute in the aforesaid terms. The Petition stands disposed of accordingly. There shall, however, be no order asto costs. (II) The matter is remanded to the Respondent No.1 tocomplete the assessment proceedings by following due procedure ascontemplated by Section 144B of the the Income Tax Act, 1961. (III) The Respondent shall give opportunity to the Petitionerof personal hearing (through Video-Conferencing). (IV) The Respondent shall give 15 days advance notice beforethe date of hearing through video-conferencing. (V) The assessment proceedings shall be completed within 3months from the date of receipt of this order or from the date onwhich the order is uploaded, whichever is earlier. 18.Rule is made absolute in the aforesaid terms. The Petition stands disposed of accordingly. There shall, however, be no order asto costs. 19.All parties to act on an authenticated copy of this order. REVATI MOHITE DERE, J. SMT. SADHANA S. JADHAV, J.