Gujarat High Court Quashes Faceless Assessment Order For Lack Of Proper Opportunity Of Hearing

The Gujarat High Court has quashed the faceless assessment on the grounds that there is only a day for the assessee to respond so as to save the limitation period.

The bench of Justice Biren Vaishnav and Justice Devan M. Desai has observed that the order under Section 263 of the Act was passed by the PCIT-4 on March 16, 2020. No action was taken thereafter for over 17 months. At the far end of the schedule, when the time limit to complete the assessment was to come to an end, the department on September 8, 2021, and September 21, 2021, issued the first and second notices, respectively, which were issued to the petitioner on the old consultant’s email id. A show-cause notice was issued, asking the petitioner to submit a response on the very next date. Without considering the submissions, an order was passed on September 30, 2021.

The petitioner/assessee is an intermediary, agent, advisor, stockist, distributor, or consultant to deal in all sorts of raw materials, finished, processed, or in any other form, and other allied materials. The petitioner had filed a return of income, declaring a total loss of Rs. 33,78,626.

The case was selected for limited scrutiny for issues regarding the large increase in unsecured loans in comparison to high loans, advances, and investments in shares.

The Assessing Officer made a disallowance of Rs. 41,044 under Section 14A read with Rule 8D of the Income Tax Act, 1961, and Income Tax Rules in the assessment order dated February 8, 2017.

A notice under Section 263 came to be issued invoking the provisions of Section 2(22)(e) on the ground that the assessment order was passed, which was erroneous and prejudicial to the interest of revenue. The order was passed. Being aggrieved by the order passed by the revisionary authority, the petitioner filed an appeal on March 31, 2021, before the ITAT.

The petitioner contended that in pursuance of the order dated 16.03.2020, notices were issued on 08.09.2021 and 21.09.2021 asking for various details. Since the notices went to an old authorised representative on his email address, the petitioner could not represent himself on September 28, 2021. A draft assessment order was passed, proposing to make an addition under Section 2(22)(e).

The show-cause notice and the draft assessment order required the petitioner to comply with them on or before September 29, 2021. In response to the show-cause notice, the petitioner, with the help of a new authorised representative, filed a response to the show-cause notice on September 28, 2021, stating various contentions.

The petitioner contended that the notice was issued just two days before the limitation was to expire and only a day's time was provided, which deprived the petitioner of a reasonable opportunity to be heard.

The court quashed the order passed under Section 144B read with Section 263 of the Act for the assessment year 2015-16. The matter was remitted to the Assessing Officer so as to enable the petitioner to be heard in light of the detailed submissions made by the petitioner on September 28, 2021, and to meaningfully look into the aspects highlighted by the assessee.

Case Title: Shree Ganesh Intermediary Private Limited Versus National Faceless Assessment Centre, Delhi

Citation: 2023 Livelaw (Guj) 137

Case No.: R/Special Civil Application No. 16260 Of 2021

Date: 19/08/2023

Counsel For Appellant: Hardik V Vora

Counsel For Respondent: M R Bhatt & Co.

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