Gujarat High Court's division bench grants the petition and eliminates the empty examination order for breaching the notions of fairness (Sec 144B of the IT Act)

Case title: DINESH KUMAR CHHAGANBHAI NANDANI Versus INCOME TAX OFFICER

Date of Order: 19th June 2023

Bench:

• HONOURABLE MR. JUSTICE VIPUL M. PANCHOLI And
• HONOURABLE MR. JUSTICE DEVAN M. DESAI

SUBJECT

• In a petition submitted in accordance with Article 226 of the Indian Constitution, the petitioner asks for a number of reliefs. These consist of the right to respond to a show cause notice, the suspension of the order’s implementation and recovery proceedings, any additional relief that is judged just and appropriate, and the payment of petition-related expenses.
• The Division Bench of the Court found that faceless assessment under Section 144B of the IT Act is non-est after April 1, 2021, unless conducted in accordance with the procedure. The court found that the respondent failed to grant a reasonable opportunity of hearing, violating natural justice principles. The petition was allowed and the order was quashed and set aside.

IMPORTANT PROVISIONS

• According to Article 226, the High Courts have the ability to issue writs to any person or authority, including the government, in the forms of habeas corpus, mandamus, prohibition, certiorari, or any of these.

OVERVIEW

• The petitioner filed an income return for the 2014-2015 assessment year, claiming a total income of Rs.3,39,730/-. Respondent No.1 issued a notice, and the petitioner submitted the return on 30.04.2021.
•  Respondents provided reasons, and the petitioner was asked to provide details. A show cause notice was issued on 15.02.2022, and the petitioner submitted preliminary objections and requested to drop the assessment proceedings. The objections were rejected on 23.02.2022.
• The petitioner filed a show cause notice on 29.03.2022, requesting a variation. Respondent No.2 issued a 12-hour timeframe, and the petitioner filed part submissions and requested a video conference hearing.
• The impugned  assessment order was passed under Section 147 and Section 144B, and the petitioner challenged it.

ISSUES RAISED

• Do the renowned judges want to review the judgement in its final form?
• Is there a substantial legal question or any orders relevant to the interpretation of the Indian Constitution that are involved in this case?

ARGUMENTS ADVANCED BY THE PETITIONER

• Advocate Mr. Soparkar argues that the respondents’ 12-hour time limit for filing a reply to a show cause notice violates natural justice principles. The petitioner’s request for documents and cross-examination was not granted, and the respondents violated natural justice principles.
• The petitioner seeks quashing the respondents’ order and remanding the matter to the respondent Authority for fresh consideration.
• He cites the court’s decisions in Gandhi Realty vs. Assistant/Joint/Deputy/Assistant Commissioner of Income-tax/Income Tax Officer, Agrawal JMC Joint Venture v. Assistant/Joint/Deputy/Assistant Commissioner of Income-tax/Income Tax Officer, and Dipak Natwarlal Dholakiya v. Additional/Joint/Deputy/Assistant Commissioner of Income-tax.
• He argues that the courts did not give sufficient opportunity to the assessee, violating natural justice principles.

ARGUMENTS ADVANCED BY THE RESPONDENT

• Standing Counsel Karan Sanghani opposes the petition, arguing that the petitioner failed to respond to notices and provided necessary details. The respondent issued a show cause notice-cum-draft assessment order, but the petitioner failed to submit his reply within the specified time.
• The petitioner was given an opportunity of hearing through video conference, allowing for 12 hours to submit their reply. The learned counsel argued no prejudice was caused to the same.
• The petitioner has alternative remedies to file an appeal before the Appellate Authority, and the court cannot enter the petition.
• He relies on the Court’s decision in Nileshkumar Bhupendrabhai Shah v. Union of India, specifically citing paragraphs 7, 8, 9, and 11.

JUDGEMENT ANALYSIS

• The petitioner requested details for cross-verification and video conference hearing, but respondents denied the opportunity.
• The petitioner’s decision to examine learned advocates’ decisions is required in the case.
• In Gandhi Realty (India)(P) Ltd.(supra), the petitioner failed to issue a show cause notice-cum-draft assessment order, despite earlier notices being issued. The court held that faceless assessment requires a show cause notice-cum-draft order. However, the present case's decision is not applicable.
• The Division Bench of this Court observed that Section 144B of the IT Act provides for faceless assessment under Section 143 (3) and 144. The assessment is non-est after April 1, 2021, unless made in accordance with the procedure detailed in Section 144B.
• In Dipak Natwarlal Dholakiya supra, the court found that the respondent failed to grant a reasonable opportunity of hearing to the assessee, violating principles of natural justice. In this case, the petitioner was asked to submit a reply within 12 hours of receiving a show-cause notice-cum-draft assessment order. The respondent failed to grant adequate hearing and defence opportunities.
• The High court ruled that a show cause notice-cum-draft assessment order should provide sufficient opportunity for the petitioner. However, the petitioner’s opportunity was not provided, and thus the decision in Nileshkumar Bhupendrabhai Shah (supra) was not applicable to this case.
• Hence the said petition was allowed, and the assessment order was quashed and set aside.