Gujarat High Court
Swastik Builders vs The National E-Assessment Centre, ... on 1 August, 2022
Author: N.V.Anjaria
Bench: N.V.Anjaria, Bhargav D. Karia
C/SCA/14344/2021 ORDER DATED: 01/08/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 14344 of 2021
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SWASTIK BUILDERS
Versus
THE NATIONAL E-ASSESSMENT CENTRE, GOVT. OF INDIA
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Appearance:
MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1
MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 01/08/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) With request and consent of learned advocates for the parties, the petition was taken up for final consideration today.
1.1. Rule, returnable forthwith. Learned advocate Mr.Nikunt Raval waives service of Rule for the respondent.
1.2 Heard learned senior advocate Mr. Tushar Hemani assisted by learned advocate Mr. Vaibhavi Parikh for the petitioner and learned advocate Mr. Nikunt Raval for the respondent.
2. By filing this petition under Article 226 of the Constitution, the petitioner has prayed to set aside the assessment order dated 05.05.2021 as also the Page 1 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022 C/SCA/14344/2021 ORDER DATED: 01/08/2022 demand notice dated 05.05.2021 for the assessment year 2018-19 issued to the petitioner. The impugned order is passed under section 143(3) read with Section 144-B of the Income Tax Act, 1961.
2.1 The challenge to the aforesaid assessment order and demand notice are based on the ground of violation of principles of natural justice by disregarding the adjournment application moved by the petitioner requesting for time. It is stated by the petitioner that by denying such opportunity, demand of Rs. 4,11,60,767/- was raised.
3. Noticing the basic facts, 3.1 The petitioner was a partnership firm engaged in the construction of buildings, filed its return of income in respect of assessment year 2018-19 on 30.09.2018. The petitioner declared total income at Rs. 11,09,440/- for the year under consideration. The return of the petitioner was selected for scrutiny assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the "Act").
3.2 After calling the details from the petitioner, the respondent prepared draft assessment order determining the total income of the petitioner to be Rs. 6,52,04,729/-. The same was communicated to the petitioner by issuing show-cause notice dated 15.04.2021, asking the petitioner as to why the assessment should not be completed as per the draft Page 2 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022 C/SCA/14344/2021 ORDER DATED: 01/08/2022 assessment order.
3.3 It was stated in the notice inter alia that the response should be submitted before particular time on 17.04.2021. It was communicated that it was open for the petitioner to prefer personal hearing. The petitioner addressed letter dated 17.04.2021, furnishing the details required under the show-cause notice, which was pertaining to unsecured loans. The petitioner stated he would need further 2-3 days and the further details were also furnished on 19.04.2021.
3.4 It is to be noted that on account of the Covid- 19 Pandemic, the Government of India extended time limit for framing assessment from 30.04.2021 to 30.06.2021. A separate notification dated 27.04.2021 was issued in this regard.
3.5 It appears that the respondent authority issued another notification dated 27.04.2021 under section 142(1) of the Act calling upon the petitioner to submit certain details on 30.04.2021. The petitioner requested for adjournment on several grounds including that the lockdown was imposed in the city of Surat because of the pandemic. However, few more time was requested by the petitioner for furnishing the requisite details.
3.6 It is the case of the petitioner that despite the request as above to grant adjournment and though Page 3 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022 C/SCA/14344/2021 ORDER DATED: 01/08/2022 the scenario was marred by Covid-19, the respondent did not pay heed to even such grave situation and passed the order dated 05.05.2021 under Section 144-B of the Act, assessed income was determined at Rs. 5,35,35,741/- after making additions. As a result, whopping demand of Rs.4,11,60,767/- came to be raised.
4. Learned senior advocate for the petitioner harped that the refusal to adjourn the proceedings and depriving the petitioner of submitting the requisite details was enacted in total disregard of natural justice on the part of respondent. It was submitted that such approach was adopted in grave situation when the pandemic gripped the whole range of affairs and activity in the society. Therefore, it was even otherwise not possible for the petitioner to submit the details within the stipulated date and further time was needed. It was submitted that by not extending such opportunity and not granting adjournment and passing draft assessment order by the respondent authority has violated the principles of fair hearing, which is a guaranteed right flowing Article 14 of the Constitution. It was submitted that effective opportunity was sine qua non before draft assessment could be passed.
4.1 On the other hand, learned advocate for the respondent, relying on the affidavit-in-reply filed on behalf of the respondent, had sought to raise Page 4 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022 C/SCA/14344/2021 ORDER DATED: 01/08/2022 several contentions including on merits. According to the respondent, the assessee was given more than sufficient opportunity to file replies and draft assessment order was therefore passed. There is no gainsaying however that the adjournment application of the petitioner was declined and the petitioner was prevented from submitting further details and documents it wanted to furnish to the authority to put forth its defence with regard to show-cause notice.
5. In Virdichand Bawandas HUF Karta Of HUF Pawankumar Vidhichand Agrawal Vs. The National E- Assessment Centre being SCA No. 12864 of 2021, decided as per judgment dated 05.07.2022, similar set of facts were involved and it gave rise to the very issue whether the respondent could have ignored the request for grant of time by the assessee and proceeded to have passed the order under Section 144B of the Act.
5.1 In that case, on 16.05.2021, the department passed the draft assessment order. The assessee made request on 22.05.2021 for grant of two weeks' time with reference to the show-cause notice which was issued pursuant to the draft order. The request was not responded to and the order came to be passed. The facts of the said case also coincided the period of pandemic. This Court observed in paragraph 5, Page 5 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022 C/SCA/14344/2021 ORDER DATED: 01/08/2022 "The Scheme regarding faceless assessment which would resulted into the draft assessment order as reflected in the aforementioned notification dated 13th August, 2020, has now been translated into statutory format with effect from 01.04.2021. In other words, at the time when the final order was passed, the Scheme including the providence for giving opportunity to the assessee pursuant to the draft assessment order was a statutory requirement."
5.1.1 The right of the assessee to reply and put forth his case and objection to the draft assessment order was recognised. Observing that the statute provides opportunity of hearing, "5.1. It could not be said, nor it is the case of the Department, that the right of the assessee to reply and put forth his case and the objections, if any, at the stage of draft assessment order before it culminates into the final assessment order under Section 143(3) read with Section 144B of the Act, was not the statutory providence. When statute provides for opportunity of hearing and the same is not complied with and breached, it could be said to have operated prejudicial to the assesee, without anything requiring further."
5.1.2 The court further observed, "5.2. While the above aspect by itself clinches the relief for the assessee, there is an additional weighty aspect. The request for time to respond the draft assessment order, when made on 22.05.2021, it was admittedly a period when Covid-19 Page 6 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022 C/SCA/14344/2021 ORDER DATED: 01/08/2022 pandemic was at its peak. The second wave which had shattered the life and affairs in the society. Even a judicial notice can be taken of the said state of thing. In such hard times, it was expected of the Income Tax Department to be even more lenient."
5.1.3 The same set of facts and situation arise in the present case. The Court observed that it was a thick skinned approach on the part of the authorities, "5.5 The assessee congenial approach should be reflected not only in the application of taxation laws but also in the procedural mechanism to be applied towards assessee in treating him for the purpose of tax. It hardly stood to reason that the department refused the request of the assessee for grant of time to file his response to the draft assessment order. There was sufficient time available for the final assessment to be made. Furthermore, it was pandemic time when the department should have adopted liberal approach in refusing the request for time for filing objection to the draft assessment order and finally passing the assessment order. The department acted thick skinned."
5.2 On the same set of facts and circumstances, the petitioner is entitled to succeed. The assessment order dated 05.05.2021 under Section 143(3) read with Section 144B of the Act as well as the notice dated 05.05.2021 under Section 274 read with Section 270A of the Act are hereby set aside.
6. The assessment proceedings are remanded to the Page 7 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022 C/SCA/14344/2021 ORDER DATED: 01/08/2022 Assessing Officer to be taken up afresh from the stage of the draft assessment order. The Assessing Officer shall pass appropriate order after giving opportunity to the petitioner to file reply.
6.1 The entire assessment proceedings culminating into the final assessment order shall be completed within twelve weeks from the date of receipt of this order.
6.2 We make it clear that we have allowed the petition and quashed the order and notice, as mentioned above, only on the ground of breach of natural justice without going into much less expressing any opinion on the merits of the case of the either side.
7. The petition is allowed as above. Rule is made absolute in the said terms.
(N.V.ANJARIA, J) (BHARGAV D. KARIA, J) BIJOY B. PILLAI Page 8 of 8 Downloaded on : Sat Dec 24 22:29:05 IST 2022