Facts of the Case

The petitioner challenged an assessment order dated 28 March 2022 passed under Section 147 read with Section 144B of the Income Tax Act, 1961. The grievance raised was that despite a specific request for personal hearing, no such opportunity was granted before passing the order, thereby violating principles of natural justice.

Issues Involved

  1. Whether grant of personal hearing under Section 144B(7)(vii) is mandatory when requested by the assessee.
  2. Whether failure to provide such hearing renders the assessment order invalid.

Petitioner’s Arguments

  • The impugned order was passed in violation of principles of natural justice.
  • Section 144B(7)(vii) mandates granting of personal hearing upon request.
  • Reliance was placed on Sanjay Aggarwal vs National Faceless Assessment Centre Delhi (2021) 436 ITR 180, where similar assessment was set aside for lack of hearing.

Respondent’s Arguments

  • Notice was accepted; however, the respondent relied on statutory interpretation of procedural provisions under faceless assessment.
  • Implicit reliance on discretion under the term “may” in Section 144B.

Court’s Findings / Judgment

  • The issue is no longer res integra.
  • The Court relied on Bharat Aluminium Company Ltd. vs Union of India & Ors. (2022).
  • It was held that:
    • The word “may” in Section 144B(7)(vii) must be interpreted as mandatory where civil consequences arise.
    • Personal hearing is a mandatory requirement when requested.
    • Classification by department between factual and legal issues (via circular dated 23 November 2020) is unsustainable in law.

Court Order

  • The assessment order dated 28 March 2022 was quashed.
  • Matter remanded back to the respondent authority.
  • Direction issued to pass a fresh order after granting personal hearing.

Important Clarification

  • Personal hearing under faceless assessment is not discretionary when requested.
  • Principles of natural justice override procedural discretion.
  • “May” in quasi-judicial provisions can be interpreted as “shall” where rights are affected.

Sections Involved

  • Section 147, Income Tax Act, 1961
  • Section 144B, Income Tax Act, 1961
  • Section 144B(7)(vii), Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1442-DB/MMH21042022CW63552022_215140.pdf


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