Delhi HC Directs Revenue to Redo Faceless Assessment after Granting Personal Hearing through VC to Assessees in 2 Back to Back Judgements!!
The Hon'ble Delhi High Court in its two recent back to back judgements dated 27.5.2021, in the cases of 'YCD Industries vs. National Faceless Assessment Centre' (W.P (C) No. 5552 of 2021 and MS Lokesh Constructions Pvt Ltd vs. ACIT (W.P.(C) No. 5491/2021), has set aside the impugned faceless assessment orders on the ground that the said orders had been passed without issuing the mandatory Show Cause Notice (SCN) to the petitioners, and as such are in breach of the principle of natural justice.
These two judgements are first of their kinds of the recent 15-16 judgements on similar issue and ground, as in these two judgements the Hon'ble Delhi High Court has categorically directed the assessing authority/ National Faceless Assessment Centre to grant a personal hearing through video conferencing to the respective petitioners on the specified date and time.
Particularly in the case of YCD Industries vs. NFAC, dismissing the pleas of the Revenue DR that notices were issued prior to the passing of the impugned assessment order, the Hon'ble Delhi HC has observed and held as under:
"16.1. The statute [i.e., Section 144B(1)(xiv), (xv), (xvi)(b) and (xxii)] provides for issuance of a show cause notice-cum-draft assessment order, and an opportunity to the petitioner/assessee to respond to the same where income of the assessee is varied by the respondent/revenue. Admittedly, the petitioner's income was varied to its prejudice with the addition of Rs. 90,25,535/-. As a matter of fact, had the show cause notice cum draft assessment been served on the petitioner, its authorised representative could have requested for a personal hearing in the matter. The respondent/ revenue, to our minds, could not have side-stepped such safeguards put in place by the legislature.
16.2. The justification proffered by Mr. Bhatia that notices were issued prior to the passing of the impugned assessment order, does not impress us. This submission flies in the face of the schematic design of the statute.
17. Accordingly, the impugned assessment order and the notice issued under Section 156 and Section 270A read with Section 274 of the Act are set aside.
18. Liberty is, however, given to the respondent/revenue to pass a fresh assessment order, albeit, as per law.
18.1. The respondent/revenue will grant a personal hearing to the authorised representative of the petitioner.
18.2. For this purpose, the respondent/revenue will convene a hearing via videoconferencing mechanism.
18.3. The respondent/revenue will also indicate the date and time of the hearing, well in advance, to the petitioner via its registered e-mail id."
The above two judgements of Hon'ble Delhi High Court categorically directing the revenue authorities to grant personal hearing through video conferencing to the assessees, are indeed landmark and very progressive judgements.
However, in author's personal opinion, in view of the CBDT Order No. 187/3/2020-ITA-I dated 13.8.2020 u/s 119 applicable till 31.3.2021 and legislative provision of section 144B(9) applicable w.e.f. 1.4.2021, all such faceless assessment orders, passed without adhering to the prescribed procedure of issuing draft assessment order and the show cause notice (SCN), under faceless assessment scheme or u/s 144B of the Income Tax Act, are to be treated as nonest in law and not merely remitted back for denovo completion.
For ready reference of our Readers, the CBDT Order No. 187/3/2020-ITA-I dated 13.8.2020 u/s 119 applicable till 31.3.2021 is reproduced below:
F No. 187/3 /2020-ITA-I
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
North Block, New Delhi – 110001 .
Dated the 13th August, 2020
Subject: Order under section 119 of the Income-tax Act, 1961
With the launch of various e-governance initiatives, Income-tax Department is moving toward total computerization of its work. This has led to a significant improvement in delivery of services and has also brought greater transparency In the functioning of the tax administration.
2 . In order to ensure that all the assessment orders are passed through the Faceless Assessment Scheme, 20 19, the Board in exercise of powers under section 119 of the Income-tax Act, 1961 hereby directs that all the assessment orders shall hereafter be passed by National eAssessment Centre through the Faceless Assessment Scheme, 2019,
except as provided hereunder :-
i) Assessment orders in cases assigned to Central Charges.
ii) Assessment orders in cases assigned to International Tax Charges.
3. Any assessment order which is not in conformity with Para-2 above, shall be treated as non-est and shall be deemed to have never been passed.
4. This order shall come into force with effect from the 13th day of August, 2020.
5 . The Hindi version of this order shall follow.
Director to the Government of India
Further, Section 144B(9) of the Income Tax Act (applicable w.e.f. 1.4.2021), reads as under:
144B(9) “Notwithstanding anything contained in any other provision of this Act, assessment made under sub-section (3) of section 143 or under section 144 in the cases referred to in sub-section (2) (other than the cases transferred under sub-section (8), on or after the 1st day of April, 2021), shall be non-est if such assessment is not made in accordance with the procedure laid down under this section.”
For ready reference of our Readers, this landmark judgement of the Hon'ble Delhi High Court in the case of 'YCD Industries vs. National Faceless Assessment Centre' (W.P (C) No. 5552 of 2021 is enclosed as per PDF File below.
Readers may also refer to our earlier comprehensive article titled, "Recent HC Stay Orders on Faceless Assessments: Elephant in the Room Syndrome" at the link https://www.taxaaram.com/articles/recent-stay-orders-on-faceless-assessments-elephant-in-the-room-syndrome
Readers may also watch out our Founder Director Sh. Mayank Mohanka, FCA sharing his valuable insights analysing the recent HC judgements on Faceless Assessment Orders and the Doctrine of Audi Alteram Partem (Hear the Other Side) at the link https://youtu.be/fD9CpnjRvT4