Assessee has statutory right to personal hearing; failure to grant would vitiate assessment order: Delhi HC

Case details:  Balraj Hire Purchase (P.) Ltd. v. NFAC - [2021] 128 taxmann.com 190 (Delhi)

Judiciary and Counsel Details

• • Rajiv Shakdher and Talwant Singh, JJ
  • Jorawar Singh Bhasin and Dushyant Tiwari, Advs. for the Petitioner.
  • Sanjay Kumar, Sr. Standing Counsel, Ms. Easha Kadian and Gurtejpal Singh, Advs. Ravi Prakash, CGSL for the Respondent.

Facts of the Case

Assessee was served with a show-cause notice-cum-draft assessment order dated 9-3-2021. Vide such notice-cum-draft assessment order, assessee was granted time till 23:59 hours on 12-3-2021 to file a response. On 12-3-2021, assessee requested accommodation till 26-3-2021 to respond to the said notice. Despite having requested accommodation, assessee filed a reply to the show cause notice-cum-draft assessment order on 17-3-2021. Apart from anything else, in the said reply, assessee requested being accorded a personal hearing in the matter before passing the assessment order.

Assessing Officer (AO) passed the assessment order without according a personal hearing to assessee. Assessee contended that it was deprived of a personal hearing in the matter and that reply filed by it was not considered by AO while passing the assessment order. Revenue contended that a perusal of the assessment order would show that the reply to the show cause notice-cum-draft assessment order was considered. Since a reply had been filed and the same was considered, the outcome would have been the same even if AO had granted a personal hearing. In other words, there was no breach of the principles of natural justice on account of personal hearing not being granted.

High Court Held

On Writ, Delhi High Court held that assessee had a statutory right to a personal hearing under section 144B(7)(vii). In the case of Sanjay Aggarwal v. National Faceless Assessment Centre, Delhi, [2021] 127 taxmann.com 637 (Delhi), it was held that a careful perusal of Section 144B(7)(vii) would show that liberty has been given to assessee, if their income is varied to seek a personal hearing in the matter. Therefore, the usage of the word ‘may’ cannot absolve the revenue from the obligation cast upon it to consider the request made for a grant of personal hearing. It was incumbent upon the revenue to accord a personal hearing to assessee.

In assessee’s case, AO had made a substantial variation in the taxable income. Therefore, assessee ought to have been granted a personal hearing in the matter. The failure to grant a personal hearing has vitiated the assessment order.