Facts of the Case

The petitioner challenged the reassessment order passed under Section 147 read with Section 144B of the Income Tax Act for AY 2018–19 along with the consequential demand notice under Section 156, both dated 15.03.2023.

Reassessment proceedings were initiated under Section 148A(d) on the basis of information that:

  • The petitioner had received ₹2.64 crore from sale of immovable property.
  • Rental income of ₹12,80,100 was also received.
  • No return was filed initially.

Due to severe medical condition (being bedridden and terminally ill), the petitioner filed a belated return on 05.01.2023 declaring:

  • Sale consideration of property
  • Rental income
  • Claiming exemption under Section 54 (capital gains exemption)

A show cause notice was issued questioning the Section 54 exemption on the ground that the new property was purchased in the name of her son.

Despite seeking reasonable adjournment citing medical grounds, limited time was granted. The petitioner submitted a detailed reply on 04.03.2023.

However, the assessment order was passed without:

  • Considering judicial precedents cited
  • Granting personal hearing

 Issues Involved

  1. Whether denial of exemption under Section 54 was justified when the property was purchased in the name of the son.
  2. Whether failure to grant personal hearing violates Section 144B(6)(viii) and principles of natural justice.
  3. Whether the assessment order is sustainable when judicial precedents cited by the assessee are ignored.

 Petitioner’s Arguments

  • The exemption under Section 54 cannot be denied merely because the new property was purchased in the name of her son, relying on settled judicial precedents.
  • The petitioner’s severe medical condition justified delay and required reasonable opportunity of hearing.
  • The assessment order ignored:
    • Judicial precedents cited
    • Request for personal hearing
  • This amounted to violation of:
    • Statutory mandate under Section 144B
    • Principles of natural justice (audi alteram partem)

 Respondent’s Arguments

  • The Revenue fairly conceded that:
    • Procedural lapses had occurred
    • The petitioner deserved a fair hearing
  • The department did not press to sustain the impugned order

 Court Findings / Order

The Court held that:

  • The assessment process suffered from procedural irregularities.
  • There was failure to grant fair opportunity of hearing, violating:
    • Section 144B framework
    • Principles of natural justice
  • Judicial precedents cited by the petitioner were not considered.

Final Order

  • The assessment order and demand notice dated 15.03.2023 were set aside.
  • The matter was remanded back to the Assessing Officer with directions to:
    • Consider judicial precedents cited by the petitioner
    • Grant proper opportunity of hearing
    • Proceed in accordance with law

 Important Clarifications

  • Personal hearing is mandatory when requested, especially under faceless assessment scheme.
  • Ignoring judicial precedents cited by the assessee renders the order legally unsustainable.
  • Procedural fairness is integral to reassessment proceedings.
  • Even in faceless assessments, natural justice cannot be compromised.

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 & 148A(d) – Reassessment initiation
  • Section 144B – Faceless assessment procedure
  • Section 144B(6)(viii) – Personal hearing requirement
  • Section 54 – Capital gains exemption
  • Section 156 – Demand notice

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/60824072023CW51362023_105022.pdf

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