Bombay High Court Quashes Income Tax Assessment Order for Violation of Natural Justice. Failure to Grant Personal Hearing Under Section 143(3) Read with Section 144B of Income-tax Act, 1961 Despite Assessee's Request and Assessing Officer's Agreement Rendered the Assessment Order Invalid and Required Fresh De Novo Assessment with Opportunity of Hearing and Draft Assessment Order.

Case Note & Summary

The dispute arose from an income tax assessment order passed against the petitioner, a marketing entity, by the respondent revenue authorities. The petitioner challenged the assessment order dated 09.08.2022 before the Bombay High Court, invoking its writ jurisdiction, on the ground that the order was passed in breach of the principles of natural justice. Specifically, the petitioner contended that despite an explicit request for a personal hearing, and although the Assessing Officer had agreed to a video conference for discussing technical issues, no such hearing was granted before completing the assessment. The assessment was framed under Section 143(3) read with Section 144B of the Income-tax Act, 1961. The petitioner sought quashing of the assessment order and consequential relief. During the proceedings, the Assistant Commissioner of Income Tax filed an affidavit acknowledging the procedural lapse. The affidavit detailed the sequence of notices issued under Section 143(2) and Section 142(1) and the petitioner's replies. It admitted that after the show cause notice dated 24.02.2022 and the petitioner's reply dated 02.03.2022 requesting video conferencing, a bona fide error occurred in granting the opportunity of hearing as requested and agreed. The affidavit further stated that proceedings under the Income-tax Act are non-adversarial and that it was the duty of the respondent to correct the error in the interest of both revenue and petitioner. The respondents prayed that the court set aside the assessment order and remand the matter to the Assessing Officer for fresh de novo assessment after granting personal hearing and providing a draft assessment order. The primary legal issue was whether the denial of personal hearing despite an explicit request vitiated the assessment order for violation of natural justice and statutory procedure. The court considered the fair approach reflected in the affidavit and was satisfied that there was a clear violation of the principles of natural justice. It noted that the petitioner had explicitly requested a personal hearing, but the same was not granted, contravening Section 143(3) read with Section 144B of the Income-tax Act, 1961. The court accepted the respondents' submission that the error was bona fide but held that this did not cure the violation. Accordingly, the court set aside the impugned assessment order dated 09.08.2022 and remanded the matter to the Assessing Officer with a direction to carry out the assessment afresh after giving an opportunity of hearing to the petitioner and providing a draft assessment order. The court directed that this exercise be completed within three months of uploading the order. The petitioner's counsel agreed that no limitation issue would be raised provided the assessment was completed within that period. All other contentions of the parties were left open. The rule was made absolute in the above terms without any costs order. The court also noted and corrected an obvious typographical error in paragraph 7 of the affidavit, reading the omitted word not between the words not granting as per the respondents' counsel's request. The judgment emphasizes that assessment proceedings, though non-adversarial, must adhere to the principles of natural justice, and denial of a requested personal hearing is a fundamental procedural defect warranting remand.

Headnote

Issue of Consideration

Final Decision

The Bombay High Court set aside the impugned assessment order dated 09.08.2022 and remanded the matter to the Assessing Officer to carry out assessment afresh after giving opportunity of hearing to the petitioner and providing a draft assessment order. The exercise was to be completed within three months of uploading the order. Petitioner agreed not to raise limitation issues if completed within that period. All other contentions left open. Rule made absolute without costs. The court also corrected an obvious error in paragraph 7 of the affidavit by reading the omitted word 'not' between 'not granting'.

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