Delhi HC quashes Faceless Assessment order as no personal hearing was accorded in respect of Show cause notice-cum-draft assessment order [Read Order]

The Delhi High Court quashed the Faceless Assessment order as no personal hearing was accorded in respect of Show cause notice-cum-draft assessment order.

The petitioner claims that, in respect of the AY 2018- 2019, the return was filed on 27.10.2018. It is averred that, via this return, the petitioner declared its income as Rs.33,43,690. According to the petitioner, the return was processed under Section 143(1) of the Act.

It is further averred by the petitioner that, on 22.09.2019, a notice was issued, under Section 143(2) of the Act read with Rule 12E of the Income Tax Rules, 1962, whereby, the petitioner’s return was picked up for scrutiny. It is the petitioner’s case that, via this notice, two issues were flagged by the AO. First, deductions made under the head ‘income from other sources’; and second, the aspect concerning unsecured loans.

Advocate Kapil Goel, on behalf of the petitioner submitted that the principal grievance of the petitioner is that, although, a personal hearing was sought, on account of the fact that the matter was complex and required proffering explanation, the respondent/revenue chose not to accord the same.

Mr. Goel contended that the respondent/revenue has, thus, committed an infraction of the statutory scheme encapsulated in Section 144B of the Income Tax Act, 1961.

The division bench of Justice Rajiv Shakdher and Justice Talwant Singh clarified that as per clause (vii) of Section 144B (7), the liberty has been given to the assessee, if his/her income is varied, to seek a personal hearing in the matter. Therefore, the usage of the word ‘may’, cannot absolve the respondent/revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides this, under sub-clause (h) of Section 144B (7)(xii) read with Section 144B (7) (viii), the respondent/revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua the same.

Therefore, the court held that it was incumbent upon the respondent/revenue to accord a personal hearing to the petitioner. In Spite of several requests made for personal hearing by the petitioner, none of which were dealt with by the respondent/revenue.

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