Dr K R Shroff Foundation vs Additional/ Joint/ Deputy Assistant Commissioner Of Income Tax Income Tax Officer

C/SCA/14779/2021 CAV JUDGMENT DATED: 11/03/2022

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14779 of 2021

FOR APPROVAL AND SIGNATURE:

HONOURABLE MS. JUSTICE SONIA GOKANI

and HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK

==========================================================

1 Whether Reporters of Local Papers may be allowed YES to see the judgment ?

2 To be referred to the Reporter or not ? YES

3 Whether their Lordships wish to see the fair copy NO of the judgment ?

4 Whether this case involves a substantial question NO of law as to the interpretation of the Constitution of India or any order made thereunder ?

========================================================== DR K R SHROFF FOUNDATION Versus ADDITIONAL/ JOINT/ DEPUTY/ ASSISTANT COMMISSIONER OF INCOME TAX/ INCOME TAX OFFICER ========================================================== Appearance: MR SAURABH SOPARKAR assisted by MR B S SOPARKAR(6851) for the Petitioner(s) No. 1 M R BHATT & CO.(5953) for the Respondent(s) No. 1 ==========================================================

CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI and HONOURABLE MR. JUSTICE HEMANT M. PRACHCHHAK

Date : 11/03/2022 CAV JUDGMENT

(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)

1. This is a petition under Article 226 read with Articles

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19(1)(g) and 14 of the Constitution of India aggrieved by the

non-availment of the opportunity as required under the law,

challenging the action of the respondent authority under

Section 143(3) read with Section 144(B) of the Income Tax

Act, 1961 (hereinafter referred to as 'the Act') assessing the

income of the petitioner for the year 2018-19 and raising the

demand of tax and penalty thereby vide order date

17.09.2021.

2. The brief facts leading to the present petition are as

follows:-

2.1. The petitioner is a trust. The trusties and the

beneficiaries are individuals and citizens of India. It is a public

trust carrying on charitable activities under the Bombay

Public Trust Act, 1950 registered on 19.01.2002.

2.2. The petitioner filed return of income for the assessment

year 2018-19 on 26.10.2018 offering Nil income. The same

was offered on 10.05.2019 under Section 143(1) of the Act.

The case of the petitioner was selected under CASS for

Complete Scrutiny to verify some issues. Various

correspondences took place between the parties for the

purpose of framing of the assessment and the same eventually

resulted into the issuance of show cause notice on 21.04.2021

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reproducing the draft assessment order therein.

2.3. In response to the show cause notice, the petitioner

uploaded reply on 26.04.2021 and also requested for personal

hearing through video conferencing. The proposed time on

the part of the petitioner was from 4:00 pm. to 6:00 pm. on

any working day. In response to this, on 25.05.2021 a show

cause notice was issued which said that due to technical

error, the request of personal hearing through video

conference could not be processed. The respondent

acknowledged the reply and the request of personal hearing.

It further directed to make a request for personal hearing

through video conference through facility provided for this

purpose by clicking on the hyperlink under the column video

conferencing, through login at e-filing portal on or before

28.05.2021 so that the personal hearing through video

conference can be provided.

2.4. The petitioner was unable to find any hyperlink on the

Income Tax Portal which could be activated for the purpose of

confirming the virtual conference, therefore, he wrote for

number of times to activate the hyperlink for making request

for personal hearing. He submitted through various replies

dated 27.05.2021, 23.08.2021, 01.09.2021, 04.09.2021,

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07.09.2021 and 09.09.2021 that the link was not activated.

Eventually on 13.09.2021 a letter was received fixing the

personal hearing on 14.09.2021 at 12:09 p.m., leaving no time

for the petitioner to prepare. No hyperlink for activating the

video conference was available online and instead the link to

join the video conference along with password was provided.

2.5. It is the grievance of the petitioner that not only the

hyperlink to activate the video conference was not available

but the option to seek adjournment to the same video

conference was also not available on the web portal. The

given date and time of 14.09.2021 at 12:09 pm. was

inconvenient to the petitioner due to non-availability of the

authorized representative, however, due to system glitch at

the end of the respondent, the petitioner was not able to seek

adjournment through the portal, therefore, the petitioner

wrote an e-mail to request to reschedule the video conference

to Friday on 17.09.2021 between 3:00 pm. to 5:00 pm. It was

replied that the petitioner needs to seek adjournment online

through web portal only and e-mail will not be responded.

2.6. It is the say of the respondent that the time of video

conference for the personal hearing was not changed despite

the legitimate request of the petitioner for keeping the

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personal hearing on 17.09.2021 and it was held on

14.09.2021, therefore, the petitioner joined five minutes

earlier than the time given on 14.09.2021, however, it had

started late due to technical glitch at the end of the

respondent. The petitioner could not hear anything from the

other side and while the petitioner made partial submissions

and it was making further submissions, the video conference

got abruptly terminated. The petitioner requested to provide

personal hearing through video conference to complete the

submissions vide letter dated 14.09.2021.

2.7. It is averred by the petitioner that it was shocking not to

receive any further communication regarding the video

conference and instead to receive the impugned assessment

order dated 17.09.2021 without availing any opportunity of

personal hearing through video conference and in the said

assessment order, it has been mentioned surprisingly that

video conference was conducted although it was not properly

conducted, as emphatically averred and the petitioner was not

allowed to make the fullest submissions. There is no reference

of the request of second personal hearing due to sudden

disconnection.

2.8. The demand notice to pay Rs. 6,33,50,88,520/- within 30

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days of the service of notice as well as the notice of penalty

under Section 274 read with Section 270(A) dated 17.09.2021

had been issued. The said assessment order issued under

Section 143(3) read with Section 144(B) is under challenge.

This is alleged to be an order without jurisdiction and violative

of principles of natural justice and contrary to law.

3. In response to the same, affidavit-in-reply is filed by the

Commissioner of Income Tax (Exemption), Ahmedabad

denying all the averments. According to the respondent, there

is an alternative efficacious remedy available if the petitioner

is aggrieved by the assessment order and can file an appeal

before the Commissioner of Income Tax (Appeals) and

thereafter, challenge can lie before the Appellate Tribunal. It

is a settled law that the person aggrieved cannot abandon the

statutory mechanism stipulated under the Act.

3.1. In case of Chhabil Dass Agarwal [357 ITR 357] the Apex

Court has permitted the challenge to the assessment order on

a very limited ground. The sole challenge here is the violation

of principles of natural justice as the opportunity of personal

hearing averredly not provided. The said contention,

according to the respondent, is baseless and has been denied

eventually. The video conference has been conducted,

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according to the respondent, on 14.09.2021 and the learned

counsel for the petitioner also had joined. He raised similar

contentions during the course of the hearing which also form

the part of written submissions. Before framing the

assessment, the concerned Assessing Officer had considered

the submissions filed prior to the draft assessment order and

the detailed submissions made along with the voluminous

evidences filed in response to the draft assessment as also the

arguments advanced have been considered.

3.2. This is not a case of lack of jurisdiction nor violation of

principles of natural justice. According to the respondent,

through the prism of element of prejudice test, the aspect of

violation of principles of natural justice shall need to be

considered. Since the assessment order clearly reflected that

the representative of the petitioner was heard, his allegations

and averments would not hold the grounds on merit and the

submissions written as well as oral made by the petitioner

during the course of the assessment proceedings have already

been taken note of.

3.3. There had been para-wise denial which may not be

necessary to be reproduced. The emphasis all along is that the

matter does not deserve any consideration.

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4. The affidavit-in-rejoinder is also filed where seriously the

question is raised as to what amounts to the giving of

opportunity as required under the law. It is also reiterated

emphatically by the petitioner that the so called opportunity

was of namesake and at every stage, the faceless assessment

was in fact ear-less assessment.

5. We have since noticed the reiterative submission of

technical glitch which resulted into abrupt disconnection and

reiterative emphasis on the same, we passed the following

order on 12.10.2021 which deserves reproduction:-

"We have heard today learned counsels on both the sides. During the course of hearing an issue that had cropped up is in relation to the making available the copy of the Video Conferencing which had been recorded on the date on which the hearing had taken place. We are supplied with the FAQs for seeking VC and seeking VC adjournment where one of the questions is as follows :

"Would department provide the copy of the recording of video conferencing ? If yes, how to obtain the same ?

Ans Yes, after video conferencing is successfully conducted.'VC' recording' hyperlink will be displayed under the "VC link details"

column. Under the 'VC recording' hyperlink, the URL details from which the recording can be downloaded will be mentioned. The status and VC recording noting made by the Income Tax Authority will be available under the "ITD remarks". The recording will be made available within a reasonable period, not exceeding two days of recording. The recording can be

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downloaded from the portal through which the video conferencing was held.

Steps to check the recording of video conferencing availability and the URL details from which it can be downloaded.

2. According to learned Advocate Mr. Soparkar the recording is to be made available within a reasonable time not exceeding the two days of recording. According to him an attempt was made to download the recording which had taken place and the facility since was not available, it was not possible for him to avail the recording of the video conferencing that took place.

3. We noticed that the answer to the question in the FAQs supplied to us is quite clear that the recording will be made available within a reasonable period, not exceeding the two days of recording. "Recording can be downloaded from the portal through which the video conferencing was held." We have noticed that steps have been given to check the recording of the VC, availability and the URL details from which it can be downloaded.

3.1 We would like to get more inputs in this regard and know as to whether the recording of VC which had taken place with the petitioner would be available for viewing. If the request had not come on that day itself, because the answer as provided in the FAQs states that providing of such recording would be within a reasonable time, not exceeding the two days of recording. In absence of any further details as to how long such recording would be maintained by the department, the details can be obtained by learned Senior Advocate Mr. Bhatt on seeking necessary instructions in this regard. The said recording of video conferencing if already available on the portal and protected by the password, the details shall be furnished to the Court.

4. The matter is being posted on the 14.10.2021.

5. The further hearing on the aspect of the interim relief which is being pressed into service shall be done on that day.

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6. The matter shall be kept on top ten matters.

7. Direct Service is permitted today. "

5.1. As the receipt of the instructions and the availability of

the video conference was taking a while and the demand of

penalty under Section 274 read with Section 278(A) required

the payment within 30 days, this Court deemed it appropriate

to pass the following order on 14.10.2021:-

"1. Pursuant to the order passed by this Court on 12.10.2021, both the sides have been heard today.

2. Learned Senior Advocate Mr. Bhatt has urged that necessary instructions which have been sought by him have not come. The request has been made to the National Faceless Centre. He is expecting the instructions in relation to the availability of the Video Conference recording of dated 14.09.2021 by next week. The time therefore till 25.10.2021 is afforded for the same to be received.

3. In the meantime, as the request has come from the petitioner that notice of penalty under Section 274 read with Section 278(A) dated 17.09.2021 requires the payment to be done within 30 days, and the time is expiring on 17.10.2021, according to the assessee, there will be serious consequences which will be difficult for them to meet with. The request, therefore, is to stay the operation of the demand made by addition in the assessment order as well as the demand of notice by virtue of the notice of penalty under Section 274 and 278(A).

4. According to learned senior advocate Mr. Bhatt, as the addition is huge and also the penalty amount runs into crores of rupees, there should be a balance struck by the Court while acceding to the request and staying

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the same. He has urged that let an undertaking be filed by the petitioner and a specified portion be also earmarked from the property so that the recovery eventually may not be difficult for the Revenue. He is hopeful to get the details of video recording in a week's time.

5. Learned Senior Advocate Mr. S.N.Soparkar, on seeking instructions from the petitioner, has submitted that so far as earmarking certain properties or the substantial amount while the Court decides this matter, it may take some time to seek instruction. However, for now, the Court may accept undertaking in relation to three fixed deposits of the petitioner Trust.

6. The matter is being posted on 25.10.2021 for both the purposes i.e. for availing the recording of the video conference dated 14.09.2021 as also for the petitioner to let the Court know of the security it offers for the demand raised.

7. In the meantime, the three fixed deposits with Housing Development Finance Corporation Limited each of Rs.25,00,00,000/-, maturing on 23.04.2022, with the amount of maturity of Rs.31,75,59,697/- in the Kotak Mahindra Bank Ltd., Auda Garden, Ahmedabad, having Bank Account No.5612118006, MICR Code: 380485016, IFSC CODE: KKBK0002560, are being furnished as security, the details of which are as under:-

Sr. Deposit Deposit Deposit Maturity Inter Deposit Maturity No No. Date Period Date est Amount Amount (Rs.) Rate (Rs.) + (p.a.) 1. AM/ 23-APR 36 23-APR 8.30 25,00,00,000 31,75,59,697 760974 2019 Months 2022 % 2 2. AM/ 23-APR 36 23-APR 8.30 25,00,00,000 31,75,59,697 760963 2019 Months 2022 % 2 3. AM/ 23-APR 36 23-APR 8.30 25,00,00,000 31,75,59,697 760970 2019 Months 2022 % 4

8. Learned Senior Advocate, Mr. Soparkar has

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additionally, on instructions, submitted that till the further order of the Court, these FDRs shall not be withdrawn. An undertaking to that effect shall be also filed by the petitioner on or before 21.10.2021.

9. For now, the matter is being posted on 25.10.2021, accepting the version of learned Senior Advocate with a direction to the concerned bank to be sent through the registry the undertaking given by the petitioner through the learned Senior Advocate for it not to permit the release of FDRs till further order of the Court.

10. There shall be stay of demand of addition made in the assessment order impugned and the demand of penalty till the next adjourned date.

11. Other and further order with regard to the additional security for protecting the interest of the Revenue shall be passed on 25.10.2021 after hearing both the sides."

5.2. On completion of pleadings, this Court has heard at

length learned Senior Advocate Mr. Saurabh Soparkar

assisted by learned advocate Mr. B.S.Soparkar for the

petitioner and learned Senior Advocate Mr. Manish Bhatt

assisted by learned advocate Mr. Karan Sanghani appearing

for the respondents and respective sides have strenuously

attempted to bring home their respective stands.

5.3. Learned Senior Advocate Mr. Soparkar in support of his

detailed submissions along the line of pleading has relied on

the following authorities, which are essentially addressing the

merits:-

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C/SCA/14779/2021 CAV JUDGMENT DATED: 11/03/2022

(i) Saurashtra Education Foundation vs. Commissioner of

Income-Tax [[2004]141 Taxman 26 (Gujarat)]

(ii) Assistant Commissioner of Income-Tax vs. Surat City

Gymkhana [[2008] 170 Taxman 612 (SC)]

(iii) Hiralal Bhagwati vs. Commissioner of Income-tax [[2000]

246 ITR 188]

5.4. Learned Senior Advocate Mr. Bhatt has fervently

defended the department to urge that hue and cry made by

the respondent is to shrink the huge legal liability and apt

opportunity is already given.

6. This Court has been made available the pen drive for

watching the video of VC conducted and that exercise was

conducted by this Court minutely and carefully. One glaring

aspect we could notice was the amount of patience that would

be required at the end of the assessees and their authorized

representatives in conducting the video conference.

Transparency through faceless assessment is a very laudable

objective to be achieved which shall address various

undesirable aspects, however, this surely cannot put the

assesses to jeopardy and more particularly, when the entire

system is at a nascent stage. Here is a stage where the system

is in the making, where there are bound to be hiccups and

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there is a huge scope for improvisation.

7. We would have expected the administration to come

forward and also accept the limitations of the system. Once

there is an acceptance of its limitations, there is a scope of

improvisation and not otherwise. What means to be an

opportunity of hearing or what amounts to the observations of

principles of natural justice need not be conveyed and

explained and told to the department and yet, we would like to

quote the wisdom of the Apex Court on this aspect. In

S.L.Kapoor vs. Jagmohan and Others [(1980) 4 SCC 379]

after referring to certain English and Indian decisions, of

course in the context of that case, "In our view the principle of

natural justice know of no exclusionary rule dependent on

whether it would have made any difference if natural justice

had been observed. The non-observance of natural justice is

itself prejudice to any man and proof of prejudice

independently of proof of denial of natural justice is

unnecessary."

7.1. Watching of the video itself is a reason for us to hold in

no uncertain terms that not only there is a violation of the

need of availing opportunity of hearing but, there is surely a

requirement of also paying heed to such complaints, often

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made and correct the system wherever needed. Why we say

so, we hereby give the following reasons.

8. It is a matter of record that the show cause notice dated

21.04.2021 was responded to on 26.04.2021. The hearing

through video conference was requested for between 4:00 pm.

to 6:00 pm. on any working day, however, the show cause

notice was received on 25.05.2021 in response to the said

request on 21.04.2021. This communication admits that due

to technical glitch, the request for video conference could not

be provided. It is further directed that for availing the video

conference clicking on the hyperlink under the column video

conference through login at e-filing portal on or before

28.05.2021 should be done so that the personal hearing

through video conference can be provided.

8.1. It is the grievance of the petitioner that it could not find

any hyperlink on the Income-Tax Portal which could be

activated. It is also averred in the petition itself that through

various replies made on 27.05.2021, 23.08.2021, 01.09.2021,

04.09.2021, 07.09.2021 and 09.09.2021 this aspects have

brought to the notice of the department. It is only on

13.09.2021 the letter was received intimating the schedule of

personal hearing on 14.09.2021 at 12:09 pm. It was since a

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day prior to the scheduled date of video conference, the

petitioner was not prepared to conduct the hearing through

video conference which is understandable and more so, as he

was being represented by an authorized representative being

the senior advocate. Even if he is not represented by the

learned advocate, a day's time may be insufficient for anyone

as all would have their prior commitments.

8.2. In any case, it is stated that no hyperlink for activating

the video conference was available online and instead the link

to join video conference along with password was provided.

Thus, the insistence on the part of the petitioner on a previous

occasion in its communication by way of notice dated

25.05.2021 that for personal hearing through video

conference, the facilities can be availed as provided by

clicking on the hyperlink under the column video conference

and through login at e-filing portal does not appear to be

working and its challenge by the petitioner appears to be

fortified.

8.3. On 14.09.2021, in the affidavit-in-rejoinder the

chronology of events during hearing through VC has been

provided which is as follows as we have had an occasion to

run through this video.:-

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Timings Chronology of video hearing of the video 0.00 to Blank Video 6.43 6:44 We were there on screen 7:00 to Learned Senior Advocate for the petitioner 15:18 repeatedly asked whether he is audible. No answer from other side.

15:19 We posted a message through chat box - "we have logged in"

18:26 We posted a message through chat box - "we are waiting"

21:26 Reply from other side received through chat box - "Meeting on"

22:11 Learned Senior Advocate for the petitioner again asked that whether he should start his submissions.

22:12 Reply through chat box received - "you are audible please speak"

22:32 Hearing started. 23:35 Learned Senior Advocate for the petitioner

requests the other side to enable him to put the submission on the screen which, he is referring to, Permission of the other side is sought to upload the submissions. He informs to the otherside that he is in the process of uploading the submissions.

26:02 The other side says in chat box reply "Yes".

But no facility is provided through which we could share the submissions on the screen. Further there is no response from the other side to this request of Learned Senior Advocate for the petitioner except the word "Yes".

26:02 to Hearing continued where Learned Senior 40:51 Advocate for the petitioner made his submissions. In his opening remarks he said that there are mainly two issues. (i) Section 68 is sought to be applied vis-a-vis the amount of sale consideration for sale of shares to Arrow Electronics India Pvt. Ltd., (ii) the assessee trust is carrying on charitable

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activity or not.

40:52 to Audio was silent though video was on and 45:06 Shri Saurabh Soparkar was continuously speaking and that too on the first issue only. No submission on second issue was allowed to be made.

45:06 Video was terminated abruptly though Learned Senior Advocate for the petitioner was speaking.

9. We have watched the video as provided to us pursuant to

the directions issued by us as mentioned herein above and it

is quite obvious that the learned senior advocate representing

the petitioner went on asking and also waited, however, from

the other side, there was no reply. It is only after about 22:00

minutes in the chat box, the reply was received that the

authorized person was audible and therefore, he could speak.

A request was also made whether the submissions could be

uploaded to which the answer is in affirmative however, there

was no facility for sharing the screens of submissions. It is

also quite clear that from 26:00 minutes to 40:00 minutes

hearing continued and then from 40:52 minutes to 45:06

minutes the audio was silent though the video went on and

learned counsel went on speaking on the first issue and at

45:06 minutes, as rightly urged, the video of learned advocate

was abruptly terminated while learned advocate was

speaking.

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9.1. Even during the process of watching and also inquiring

as to whether in fact what has been provided in the rejoinder

categorically is as given by minute to minute and second to

second, we have found that to be true and it would really try

anyone's patience. The anonymity of a conductor of VC

though is a well accepted measure, but, merely because the

State has authority to decide the manner of conducting, it

cannot put the assessee to such a receiving end that it starts

feeling itself in a helpless situation.

9.2. In Special Civil Application No. 7477 of 2021 also, this

Court has held that the video conferencing is mandatory once

the assessee seeks personal hearing. Non-providing of the

same is in violation of the principles of natural justice. The

petitioner though has been provided the video conferencing,

one would notice that the technical glitch at couple of times

and the opportunity which has been presently given is surely

insufficient and incomplete. This surely is not in consonance

with the objective with which the legislature has brought this

faceless assessment regime. It needs to be understood that till

the system in place is robust and this happens over a period of

time, then there is a scope to move forward and strengthen

the same.

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9.3. We could also notice that the material which has been

already shared has not been in any manner reflected in the

final order. After the supply of draft assessment order, the

reason for providing the opportunity is to ensure that the

other and further material and the submissions made on the

part of the petitioner also are given due regard. If availing an

opportunity after once the draft assessment order is

preferred, is a mere formality, the importance of that stage

possibly has not recognized by the department.

10. We would like to refer to the Circular F No. PR.

CCIT/NeAC/SOP/2020-21 dated 23.11.202 which is a Standard

Operating Procedure (SOP) for personal hearing through

video conference under Faceless Assessment Scheme, 2019.

The Principal Chief Commissioner of Income Tax, National e-

assessment Centre, with the prior approval of the Central

Board of Direct Taxes (CBDT), New Delhi, laid down the

circumstances in which the personal hearing through video

conference is allowed in the faceless assessment scheme.

Where any modification is proposed in the draft assessment

order issued by the AU and the Assessee or the authorized

representative in her/his written response disputes the facts

underlying the proposed modification and makes a request for

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a personal hearing, the CCIT ReAC may allow personal

hearing through video conference after considering the facts

and circumstances where the assessee can submit written

submissions in response to the draft assessment order. The

video conference will ordinarily be of 30 minutes duration. It

may be extended on the request of the assessee or the

authorized representative. The assessee also may furnish

documents / evidences to substantiate the point raised in the

video conference during the session or within reasonable time

allowed by the AU after considering the facts and

circumstances of the case.

11. As can be noticed from the instant case, here also, the

modification is proposed in the draft assessment order and the

assessee had requested for personal hearing. It is to be noted

that as averred in the petition, in a response to the show

cause notice dated 21.04.2021 raising objections on

26.04.2021, the petitioner has furnished the fresh documents

which have been paged from 93 to 284 in its submission of

objections, explanation and details. It has also answered to

the serious question raised questioning the creditworthiness

of Arrow Electronics India Pvt. Ltd. It has also chosen to

substantiate the uploading of these documents by various

documents furnished before this Court and also downloading

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the details from the e-portal of Income Tax Department. An

attempt is made to show to this Court that in the final

assessment order which has been pronounced on 17.09.2021,

there is no whisper of any of these materials. There is no

change made in the draft assessment order after these

additional material has been sent. This also is indicative of the

fact that the opportunity of hearing given after the request

made on the receipt of the draft assessment order is mere a

formality. Not only the time granted is of less than 24 hours,

the non-response initially and disruption which eventually

resulted into sudden snap of the link, never was thereafter

responded to, even when request was made on the part of the

petitioner for permitting the hearing which had remained

unconcluded.

12. The decision of High Court of Orissa in case of Elite

Education Society vs. Chairman, Central Board of Direct

Taxes, Ministry of Finance, Department of Revenue and

Others [W.P. (C) No. 18472 of 2021] shall be necessary to be

referred to at this stage where the Court has held that the

requirement for providing the hearing in terms of Section

144(B)(7)(vii) is not merely directory but mandatory one.

"5. The requirement for providing such hearing in terms of Section 144 B (7) (vii) of the Income Tax Act,

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1961 ('Act') is not merely directory, but a mandatory one. It reads as under:-

"144-B (7) For the purposes of faceless assessment-- "(vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assess or his authorized representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority in any unit."

6. Not only is the Assessee given a right to make a request for personal hearing, but it is mandatory for the authority to provide for such personal hearing.

7. With there being no dispute that the Petitioner did make such a request, it was incumbent on the Opposite Parties to have given it an opportunity of being heard. The reply filed by the Opposite Parties only deals with the merits of the assessment itself and does not dispute that the above mandatory procedural requirement was not complied with.

8. In that view of the matter, on this short ground, the impugned assessment order is set aside and the matter is remanded to the assessing officer, i.e. National e-Assessment Centre, for compliance of the mandatory requirement of Section 144 B (7) (vii) of the Act and provide a personal hearing to the Petitioner as requested by it on a date and time to be conveyed to it at least one week in advance. It is made clear that the hearing can be in either physical or virtual mode. A fresh assessment order shall be passed thereafter within three months. If aggrieved by such order, it would be open to the Petitioner to seek appropriate remedies in accordance with law.

9. The Court makes it clear that it has not expressed any view on the merits of the case, except on the above limited procedural error of non-compliance with the mandatory requirement of Section 144 B (7)

(vii) of the Act."

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12.1. The decision of Bombay High Court in case of

Piramal Enterprises Limited vs. Addl./Jt./Dy./Asstt.

Commissioner of Income Tax/Income Tax Officer, Delhi

[[2021] 129 taxmann.com 18 (Bombay)], where also the Court

held that the faceless assessment is not made in accordance

with the procedure laid down under Section 144(B). There is a

telling / pronounced rigour, to follow the procedure under

section 144B, lest the assessment would be non est. It further

held that as per the provisions of Section 144(B), when the

hearing has been envisioned and incorporated, it is imperative

to observe the principles of natural justice as stipulated.

12.2. The High Court of Delhi in case of Sanjay

Aggarwal vs. National Faceless Assessment Centre,

Delhi [[2021] 127 taxmann.com 637 (Delhi)] held and

observed thus:-

"11.3. In this context, if one were to look at the relevant provisions, [which, for the sake of convenience are extracted hereafter], then, one would get a sense as to why the legislature has provided a personal hearing in the matter:

"144B. Faceless assessment -

(1) xxx xxx xxx

(7) For the purposes of faceless assessment--

xxx xxx xxx

(vii) in a case where a variation is proposed in

the draft assessment order or final draft assessment

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order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show-cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority in any unit;

(viii) the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up, may approve the request for personal hearing referred to in clause (vii) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii);

xxx xxx xxx

(xii) the Principal Chief Commissioner or the

Principal Director General, in charge of the National Faceless Assessment Centre shall, with the prior approval of the Board, lay down the standards, procedures and processes for effective functioning of the National Faceless Assessment Centre, Regional Faceless Assessment Centres and the unit set up, in an automated and mechanised environment, including format, mode, procedure and processes in respect of the following, namely:--

xxx xxx xxx

(h) circumstances in which personal hearing

referred to clause (viii) shall be approved;

xxx xxx xxx" [Emphasis is ours]

11.4. A careful perusal of clause (vii) of Section 144B (7) would show that 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', to our minds, cannot absolve the respondent/revenue from the obligation cast upon it, to consider the request made for grant of personal

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hearing. Besides this, under sub-clause (h) of Section 144B (7)(xii) read with Section 144B Signature Not Verified By:VIPIN KUMAR RAI Signing Date:09.06.2021 00:54:32 (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.

11.5. In several matters, we have asked the counsels for the revenue as to, whether any standards, procedures and processes have been framed for dealing with such requests. The response, which we have got from the standing counsels including Mr. Chandra, is that, to the best of their knowledge, no such standards, procedures as also processes have been framed, as yet.

Conclusion:

12. Therefore, in our view, given the aforesaid facts and circumstances, it was incumbent upon the respondent/revenue to accord a personal hearing to the petitioner. As noted above, several requests had been made for personal hearing by the petitioner, none of which were dealt with by the respondent/revenue.

12.1. The net impact of this infraction would be that, the impugned orders will have to be set aside. It is ordered accordingly."

13. We would, therefore, hold that the provisions which have

been envisioned to bring transparency and accountability in

the system if are not observed as contemplated under the law,

it will become imperative for the Court to intervene.

13.1. A detailed study on the subject of faceless

assessment regime in India in comparison of the other foreign

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countries is brought on record by learned Senior Advocate

Mr. Soparkar. The study eulogizes that "It is a revolutionary

move by the Indian Government to improve the tax

transparency by way of disconnecting the taxpayer and the

tax authorities. The electronic correspondence, personal

hearing through video conference and central point of

contract aim to ease the representation process for the

taxpayers and tax authorities while maintaining objectivity

and anonymity." The comparative study has been taken taken

while comparing with the six countries i.e. Australia, UK,

USA, Canada, Netherlands and Singapore. The author

summed up saying that some of the aspects newly introduced

in India are nearly similar to the procedure prevailing in other

countries. On video conference, it says that personal hearing

in India is through video conference and not in person

whereas in all other countries, there is no restriction to the

number of hearings and there is no specific condition needed

for invoking the provision of personal hearing. The personal

hearing also is in person and not limited to the video

conference.

13.2. From what is noticed from the VC conducted in the

instant case and as CBDT circular mandates a request for VC

hearing and personal hearing is not under contemplation nor

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requested for by the petitioner. However, once such

opportunity of hearing through VC is available, it cannot be

for namesake nor can that tire assessee or the authorized

representative and must be given in its true spirit. There shall

need to be response for the person to be sure that he/she is

not talking to the screen and resultant outcome also must

bear its testimony.

14. In case of Hiralal Bhagwati vs. Commissioner of

Income-tax [[2000] 246 ITR 188], the trust in question was

registered as public charitable trust and was registered with

the office of Charity Commission under the provisions

contained under the Bombay Public Trust Act. The object of

the trust was to help by giving financial aid to the employees

of the Gujarat Law Society, in cases of death of an employee

during his/her services, illness or permanent disability which

incapacitates the employee to discharge his/her duties. The

trust was denied exemption under Section 80(G) of the Act on

the ground that the object of the trust was to register only

the employees of the assessee and therefore, the object could

not be of the general public utility. The Income Tax Officer

issued notice under Section 148 of the Act. The petitioner had

questioned this notice as being without jurisdiction. The Court

held that the registration of the charitable trust under Section

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12(A) is not idle or empty formality. It required that not only

the application to be filed in a prescribed form stating all the

details but also the names and addresses of the trusties and

managers to be furnished to serve the charitable purpose. The

Court held that it is not necessary that the object must be to

serve the whole mankind or all persons living in a country or

province. Even if a section of public is given benefit, it cannot

be said that it is not a trust for charitable purpose in the

interest of public. It is not necessary that the public at large

must get the benefit. Considering the object of general public

utility, the matter needs to be decided.

14.1. According to this Court, this is an argument on

merit as on the ground of nonobservance of principles of

natural justice the Court is choosing to relegate the matters to

the concerned authority, it would prefer not to enter into this

arena of merit. The same shall be reserved to be agitated

before the Income Tax Authorities and thereafter, if

eventuality arises in future. The other two decisions are along

the line and therefore are not required to be diluted being

along the very line.

15. With the aforesaid reasons, we are of the firm opinion

that this is a matter where the order needs to be quashed and

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the petitioner needs to be availed an opportunity afresh by the

respondent from the stage where it was left. Accordingly, the

petition is Allowed. The order dated 17.09.2021 is quashed

and set aside with all its consequences. Notice issued of

penalty under Sections 274 and 278(A) dated 17.09.2021 also

shall be quashed. This will not in any manner prejudice the

rights of either side.

16. Pursuant to the order of this Court on 14.10.2021, three

fixed deposits maturing on 23.04.2022 for the sum of Rs.

25,00,00,000/- if matures prior to the passing of the order, the

amount shall be continued to be in the bank and shall not be

withdrawn by the respondents.

17. Let the matter be proceeded with from the stage of

availing opportunity of hearing through video conference on

fixing the time of such conference within two weeks of the

receipt of copy of this order. Let the entire process be

completed, as far as possible in eight weeks' time.

(SONIA GOKANI, J)

(HEMANT M. PRACHCHHAK,J) Bhoomi

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