Denial of Requested Personal Hearing Invalidates Faceless Reassessment Order.

JUDGMENT

Pranav Trivedi, J.- Heard learned advocate Mr. Anshul Jain for learned advocate Mr. Love Sharma for the petitioner and learned Senior Standing Counsel Mr. Varun Patel for the respondent.

2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Varun Patel waives service of notice of rule for and on behalf of the respondent.

3. Having regard to the controversy arising in this petition which is in a narrow compass, with the consent of the learned advocates for the parties, the same is taken up for hearing.

4. By this petition under Article 226 of the Constitution of India, the petitioner has challenged and prayed for quashing and setting aside the impugned demand notice dated 31.3.2023 issued by the respondent No.2 (hereinafter referred to as ‘the respondent’ for short) under Section 156 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short) as well as impugned order dated 31.3.2023 issued under Section 147 read with Section 144 of the Act as well as show-cause notice dated 16.3.2023 issued under Section 148A(b) of the Act and initiation of reassessment proceedings as well as Order dated 26.3.2022 under section 148A(d) of the Act and Notice dated 26.3.2022 under Section 148 of the Act.

5. Brief facts of the case are that the petitioner is an individual having PAN No. ATVPP8080F and is a non-resident Indian having permanent residence at Dubai, UAE. The petitioner is having income in India in form of NRE Bank Deposits in HDFC Bank having Account No. 03211060004162 and Standard Chartered Bank having Account No. 2261002979, which is invested through foreign exchange remittance. It is the case of the petitioner that he is having no other income in India except interest from NRE Bank Deposits and therefore has exempted income under Section 10(15) of the Act. It is the case of the petitioner that the respondent alleged that the petitioner has not filed return of income for A.Y 2018-19. The same was flagged as per Risk Management Strategy. It was alleged by the petitioner did transactions for the respondent that not disclose certain the A.Y.2018-19. Therefore, when the petitioner had not filed return of income, it was alleged that the disputed transactions were allegedly not disclosed by the petitioner. In view of the same, a showcause notice dated 16.3.2022 was issued to the petitioner as per the provisions of Section 148A(b) of the Act, requesting to show cause to as why notice under Section 148 of the Act should not be issued against the petitioner. Subsequent to the notice issued by the respondent, an order under Section 148A(d) of the Act was passed on 26.3.2022 declaring the petitioner’s case a fit case for assessment and further declaring that an amount to the tune of Rs.3,05,18,951/- has allegedly escaped income for A.Y. 2018-19.

5.1 It is the case of the petitioner that after the case being dormant for several months, suddenly in the year 2023, in pursuance of notice dated 26.3.2022 issued under Section 148A(d) of the Act read with Section 148 of the Act, a notice dated 1.2.2023 was issued under Section 142(1) of the said Act which, inter alia, demonstrate the details of the return of income filed for the A.Y. 2018-19. The petitioner was also requested to submit the documents along with a brief note describing the disputed activities undertaken by the petitioner. The petitioner submitted details on 10.2.2023. Subsequently, another notice under Section 142(1) of the Act was issued on 10.3.2023 requiring further details of the return of income filed for the A.Y. 2018-19. The petitioner responded to the respondent on 15.3.2023. Thereafter, the department issued show cause notice dated 22.3.2023, making observation that the responses of the petitioner has not explained the source of income and further requiring the petitioner to show cause as to why Rs.3,05,18,951/- should not be added to the income of the petitioner and the show cause notice stated that a personal hearing was subjected to be held on 25.3.2023. However according to the petitioner 25.3.2023 was a Saturday and Holiday for the respondent. In response to the showcause notice dated 22.3.2023, the petitioner communicated to the respondent on 24.3.2023 requesting to grant 15 days’ adjournment to file reply. On the very next day i.e. on 23.3.2023, the respondent again issued a show-cause notice under Section 142(1) of the Act requesting the petitioner to submit the relevant documents within 2 days by 25.3.2023 for the A.Y. 2018-19. In response to the notice dated 23.3.2023, the petitioner gave response on 24.3.2023, requesting the respondent to grant an adjournment of 15 days, however, without granting opportunity of personal hearing, respondent passed the impugned assessment order on 31.3.2023 under Section 147 read with Section 144 of the Act and held that an amount of Rs.3,05,18,951/- was to be made as an addition to the petitioner’s income and further on the very same day i.e. 31.3.2023, the impugned demand notice under Section 156 was issued demanding total payable income tax on the reassessed income including interest along with penalty proceedings initiated under Section 271AAC, Section 271F and Section 272A of the Act. 5.2 It is being aggrieved and dissatisfied by the impugned order and demand notice dated 31.3.2023, issued by the respondent No.2 being exparte order, which have been issued in gross violation of principles of natural justice, the present writ petition is preferred.

6. Learned advocate Mr. Ansul Jain for the petitioner submitted that the impugned order passed under Section 147 read with Section 144 of the Act has been issued in complete violation of the procedure laid down in the provisions and without providing any opportunity of hearing to the petitioner. This fact in itself vitiates the impugned proceedings against the petitioner. It was further submitted that the respondent fixed the date of personal hearing on 25.3.2023 i.e. merely within 3 days of the issuance of notice on 22.3.2023. The respondent has not even acknowledged the request made by the petitioner on 24.3.2023 seeking time for submission and the impugned order was passed in complete haste on 31.3.2023, without following the principles of natural justice.

7. Per contra, learned Senior Standing Counsel Mr. Varun Patel for the respondent was not able to controvert the submissions made by the petitioner. On the basis of the affidavit-in-reply filed by the respondent, it was submitted by Mr. Patel that the showcause notice dated 22.3.2023 was issued and the hearing was fixed on 25.3.2023. Demand made by the petitioner seeking an adjournment of 15 days was not possible for the Assessing Officer as the assessment proceedings were getting time barred. It was submitted that during the course of assessment proceedings, the petitioner was given adequate opportunity of being heard and therefore, it is denied that impugned assessment order is passed in violation of principles of natural justice.

8. Having heard the learned advocates for the respective parties and perused the material on record, certain facts are not in dispute. It is not in dispute that the notice under Section 142(1) of the Act was issued on 22.3.2023. It is also not in dispute that the petitioner had requested for personal hearing. However, without granting opportunity of personal hearing, the order under Section 147 read with Section 144 of the Act was passed on 31.3.2023. It is a fundamental proposition of law that other side should be heard before any order is passed. The maxim audi alteram partem is broad enough to include the rule against bias since a fair hearing is must for an unbiased hearing. In the instant case, it is not in dispute that the hearing was not granted to the petitioner despite request being made. In view of the same, the impugned assessment order passed by the respondent in case of the petitioner dated 31.3.2023 under Section 147 read with Section 144B of the Act for the A.Y. 2018-19 is not tenable and is required to be quashed and set aside and is accordingly quashed and set-aside. In view of the same, the notice under Section 156 of the Act dated 31.3.2023 is also quashed and set-aside. The petition is allowed. Rule is made absolute. No order as to costs.