Delhi HC: Faceless assessment does not take away the right to personal hearing
Fact and Issue of the case
Present writ petition has been filed by the petitioner challenging the action of Income Tax Department in passing the impugned final assessment order dated 27th November, 2021 under Section 143(3) of the Income Tax Act, 1961 and the disputed notice dated 27th November, 2021 under Section 156 of the Act for Assessment Year 2018-19.
Observation of the Court
The Court is of the opinion that a faceless assessment scheme does not mean no personal hearing. It is not understood as to how grant of Signature Not Verified Digitally Signed Signing Date:14.01.2022 22:05:44 personal hearing would either frustrate the concept or defeat the very purpose of Faceless Assessment Scheme.
In Piramal Enterprises Limited vs. Additional/Joint/Deputy Assistant Commissioner of Income-tax/Income-tax Officer & Ors., 2021 SCC OnLine Bom 1534, while interpreting Section 144B of the Act, the Bombay High Court has held as under:-
“65. Principles of natural justice firmly run through fabric of section 144B(1) of the Income Tax Act, 1961. Whenever DAO, FDAO is prejudicial to the interest of assessee or RDAO is prejudicial to the interest of assessee in comparison to DAO or FDAO, upon a response to show-cause notice, personal hearing for oral submissions or to present its case before income tax authority is strongly entwined in the provisions on a request from an assessee unless it is absurd, strategised and/or intended to protract assessment etc. It would also emerge from various decisions, referred to above, ordinarily, such a request would not be declined. Judgments cited on behalf of petitioner referred to hereinbefore give exposition on significance and importance of principles of natural justice.
66. Section 144-B of the Income Tax Act, 1961 captioned ‘Faceless Assessment’ commences vide its sub-section (1) with a non-obstante clause and compulsively requires assessment u/ss 143(3) and 144 shall be by prescribed procedure contained in sub-section (1) of section 144-B in the cases referred to in sub-section (2) thereof.
67. Sub-section (9) of section 144B declares that assessment made under section 143(3) or under section 144(4) referable to subsection (2) other than sub-section (8) on or after 1st day of April, 2021 shall be non est if such assessment is not made in accordance with the procedure laid down under section 144B. There is a telling/pronounced rigour, to follow the procedure under section 144B, lest the assessment would be non est.
68. Going by the provisions under section 144B, when hearing has been envisioned and incorporated, it is imperative to observe principles of natural justice as stipulated.
70. In the circumstances, when an assessee approaches with response to show cause notice, the request made by an assessee, as referred to in clause (vii) of sub section 7 of section 144B, would have to be taken into account and it would not be proper, looking at the prescribed procedure with strong undercurrent to have hearing on a request after notice, to say that petitioner would have opportunity pursuant to section 144C in the present matter, would intercept operation of the scheme contained under section 144B.
This Court is further of the view that where an action entails civil consequences, like in the present matter, observance of natural justice would be warranted and unless the law specifically excludes the application of natural justice, it should be taken as implanted into the scheme. The settled position in law is that where exercise of a power results in civil consequences to citizens, unless the statute specifically rules out the application of natural justice, the rules of natural justice would apply, including the right to personal hearing. Denial of such opportunity is not in consonance with the scheme of the Rule of Law governing our society. [See: Raghunath Thakur vs. State of Bihar & Ors., (1989) 1 SCC 229]. In fact, the opportunity to provide hearing before making any decision is considered to be a basic requirement in Court proceedings.
This Court is further of the view that a quasi judicial body must normally grant a personal hearing as no assessee or litigant should get a feeling that he never got an opportunity or was deprived of an opportunity to clarify the doubts of the assessing officer/decision maker. After all confidence and faith of the public in the justness of the decision making process which has serious civil consequences is very important and that too in an authority/forum that is the first point of contact between the assessee and the Income Tax Department. The identity of the assessing officer can be hidden/protected while granting personal hearing by either creating a blank screen or by decreasing the pixel/density/resolution.
Consequently, this Court is of the view that the word “may” in Section 144B(viii) should be read as “must” or “shall” and requirement of giving an assessee a reasonable opportunity of personal hearing is mandatory. The argument of the respondent/Revenue that personal hearing would be allowed only in such cases which involve disputed questions of fact is untenable as cases involving issues of law would also require a personal hearing. This Court is of the view that the classification made by the respondents/Revenue by way of the Circular dated 23rd November, 2020 is not legally sustainable as the classification between fact and law is not founded on intelligible differentia and the said differentia has no rational relation to the object sought to be achieved by Section 144B of the Act.
Also, if the argument of the respondent/Revenue is accepted, then this Court while hearing an appeal under Section 260A (which only involves a substantial question of law) would not be obliged in law to grant a personal hearing to the counsel for the Revenue. Consequently, this Court is of the opinion that an assessee has a vested right to personal hearing and the same has to be given, if an assessee asks for it. The right to personal hearing cannot depend upon the facts of each case.
The Court ruled in favour of the assessee and dimissed the final assessment order and impugned notice (both dated 27th November, 2021) issued by Income Tax Department and the matter is remanded back to the Assessing Officer who shall issue a Show Cause Notice and a draft assessment order and thereafter pass a reasoned order in accordance with law.