EASTERN MATTRESSES (P) LTD. vs. THE ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX,

For the assessment year 2018-19, petitioner had declared a net loss of Rs.6.20 crores through its return. The return of the petitioner was selected for scrutiny and later, the respondents informed the petitioner that the assessment will be completed through the Faceless Assessment Scheme.

Petitioner was issued with notices calling for information which were all promptly responded to. Thereafter,

Immediately, on receipt of the proposal for completing the assessment based upon the draft assessment order, petitioner sought for a breathing time to respond and requested for a further four days time, as per communication dated 23.04.2021, evidenced by Ext.P7. Petitioner sought for an extended time to submit its response, specifying the reason as “gathering of material from multiple sources requires time.” According to the learned Senior Counsel Shri.Joseph Markos, though petitioner expected a communication from the respondents, either granting time or atleast rejecting it, contrary to its expectations, the respondents proceeded with and issued an order of assessment on 24.04.2021, after observing that petitioner had not responded to WP(C) NO. 11540 OF 2021 4 the show cause notice. According to the petitioner, the opportunity contemplated under Section 144B(1)(vii) and Section 144B(1)(xxii), of the Income Tax Act, 1961 was not granted and therefore, the impugned order of assessment is contrary to law.

Shri. Jose Joseph, learned counsel for the respondents submitted that sufficient time was granted and that even though the petitioner had sought time, as per Ext.P7, the petitioner was bound to appear on 24.04.2021 for hearing. According to the learned counsel, without appearing for the hearing, the petitioner is not entitled to raise the contention on violation of the principles of natural justice.

The Faceless Assessment Scheme, though intends to lend transparency to the process of assessments and eliminate physical interface between the assessee and the tax officer, it ensures a reasonable opportunity to respond to notices.

Section 144B(1)(vii) and Section 144B(1)(xxii) are relevant for the present and are extracted as below:-

The statute thus contemplates an application for extension of time and even the grant of extended time to furnish a response. Thus when the petitioner sought for a further four days time to respond, citing the reason to gather necessary materials from different sources, the assessing officer was bound to give a response, intimating either the rejection or its acceptance of request for time. Such a response is part of the basic requirements of the principles of natural justice. When there was a lack of response, it is only probable that the WP(C) NO. 11540 OF 2021 6 petitioner would have expected his request for adjournment having been accepted. Therefore, the assessing officer ought not to have proceeded with the assessment on 24.04.2021, as originally mentioned. In view of the above, there is a clear evidence of violation of principles of natural justice and hence, Ext.P8 is liable to be set aside on this count alone.

Notwithstanding the setting aside of Ext.P8, the respondents must be granted an opportunity to pass fresh orders of assessment and accordingly, there will be a direction to the respondents to accept objections to Ext.P6 show cause notice, if any filed by the petitioner within a period of thirty days from the date on which the respondents open up a link for filing objections, since, presently, the Faceless Assessment regime is in place. If such an objection is filed by the petitioner within the time stipulated above, respondents shall, necessarily, consider the same and pass appropriate orders, after granting an opportunity of hearing to the petitioner, as expeditiously as possible, at any rate,