Facts of the Case

The petitioner challenged the assessment order dated 29.03.2023 passed under Sections 147, 144, and 144B for AY 2016–17. The Revenue alleged that the petitioner was a beneficiary of accommodation entries amounting to ₹80,17,541 through fictitious purchase transactions.

A Show Cause Notice dated 22.03.2023 was issued, granting limited time for response. The petitioner filed a reply and requested a personal hearing via video conferencing. However, no such hearing was granted before passing the assessment order.

Additionally, a procedural objection was raised regarding the authority of the Special Power of Attorney (SPA) holder, which was later rectified by filing a fresh SPA.

Issues Involved

  1. Whether denial of personal hearing violates principles of natural justice in faceless assessment proceedings.
  2. Whether the assessment order passed without considering a request for hearing is sustainable in law.
  3. Whether procedural defects in SPA authorization affect maintainability of the writ petition.

Petitioner’s Arguments

  • The assessment order was passed in violation of principles of natural justice as no personal hearing was granted despite a specific request.
  • The petitioner had responded to the Show Cause Notice and clarified that the transactions were sales, not purchases.
  • The denial of hearing deprived the petitioner of an opportunity to present the case effectively.

Respondent’s Arguments

  • The Revenue relied on the available records and maintained that sufficient opportunity had been provided.
  • It was contended that the petitioner was involved in accommodation entries and fictitious transactions.
  • No counter-affidavit was filed, and reliance was placed on existing material.

Court’s Findings / Order

  • The Court held that failure to grant personal hearing despite request amounts to violation of natural justice.
  • The impugned assessment order dated 29.03.2023 was set aside.
  • Consequential demand and penalty notices were also quashed.
  • The Assessing Officer was granted liberty to pass a fresh assessment order after granting personal hearing.
  • The AO must provide an opportunity for written submissions and pass a reasoned speaking order.

Important Clarifications

  • Even under faceless assessment (Section 144B), personal hearing is mandatory when requested.
  • Procedural fairness cannot be compromised in tax proceedings.
  • Rectification of SPA defects is permissible and does not defeat substantive rights.

 Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS31072023CW56472023_114740.pdf

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