NFAC acted Thick-Skinned instead of Adopting Liberal Approach during Pandemic: Gujarat HC slams Income Tax Dept [Read Order]

In an assessee-friendly ruling, the Gujarat High Court has slammed the National Faceless Assessment Centre (NFAC)for acting thick skinned instead of adopting a liberal approach during the pandemic period while conducting the proceeding under the Income Tax Act, 1961.

The petitioner, M/s VirdichandBawand as HUF Karta of HUF Pawankumar Virdhichand, approached the High Court challenging the draft assessment order under Section 144B of the Income Tax Act, 1961, and wanted to submit his response to such assessment order, whether in the facts of the case the Department was justified in not granting time to file reply especially when, the seeking of time by the assessee was during the pandemic period-is the question posed.

Analyzing the facts of the case, Justice N.V Anjaria and Justice Bhargav D. Karia observed that theScheme regarding faceless assessment which would resulted into the draft assessment order as reflected in the aforementioned notification dated 13th August, 2020, has now been translated into statutory format with effect from 01.04.2021.

“In other words, at the time when the final order was passed, the Scheme including the providence for giving opportunity to the assessee pursuant to the draft assessment order was a statutory requirement,” the bench said.

Holding that when statute provides for opportunity of hearing and the same is not complied with and breached, it could be said to have operated prejudicial to the assesee, without anything requiring further, the Court added that “the above stand reflects, to say the least, the thick skinned approach on part of the Taxing Authorities. We fail to understand when the assessment was to be finalized before 30.06.2021, what prevented the Department from granting time to the petitioner-assessee up to 06.06.2021.”

Remanding the matter back to the files of the Assessing Officer, the Court concluded that “the assessee congenial approach should be reflected not only in the application of taxation laws but also in the procedural mechanism to be applied towards assessee in treating him for the purpose of tax. It hardly stood to reason that the department refused the request of the assessee for grant of time to file his response to the draft assessment order. There was sufficient time available for the final assessment to be made. Furthermore, it was pandemic time when the department should have adopted liberal approach in refusing the request for time for filing objection to the draft assessment order and finally passing the assessment order. The department acted thick-skinned.”

To Read the full text of the Order CLICK HERE

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