Bharat aluminium Company Limited v. Union of India & Ors

Case snapshot

Sections / provisions: Section 144B of the Income-tax Act; 1961

Questions before the Court / Tribunal

• *Bharat Aluminium Co Ltd Vs Union of India & Ors* *Forum Delhi High Court* *Date 14th January 2022* *Sub-Whether the requirement of giving opportunity of personal hearing while passing an assessment order u/s 144B is mandatory or directory and whether not granting the opportunity amounts to violation of principles of natural justice.* The Delhi High Court in this case was dealing with a situation where huge addition resulting in demand of more than Rs 177 crores was made even though the show cause notice which was issued prior to the draft assessment order did not propose any addition. The appellant in this case represented by Senior Advocate Arvind Datar argued that it was obligatory on part of the department to issue final show cause notice before an addition is made and it was incumbent upon the Department to accord a personal hearing to the assessee where such a request was made…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

J U D G M E N T MANMOHAN, J 1. Present writ petition has been f iled by the petitioner challenging the action of r espondent No.3 in passing the impugned final assessment order dated 27 : th November, 2021 under Section 143(3) of t he Income Tax Act, 1961 [ for short ‘the Act ’] and the impugned notice dated 27 th

November, 2021 under Section 156 of the Act for Assessment Year 2018-19. 2. Mr. Arvind Datar, learned senior counsel for the petitioner st ated that the impugned orders ha ve been passed arbitrarily, without following the ARGUMENTS ON BEHALF OF THE PETITIONER

principles of natural justice and in gross violation of the scheme of faceless assessment under Section 144B of the Act, inasmuch as even after the ‘ Nil’ or ‘ Null’ variation proposed in the show cause notice, additions had been made to the assessed income in the draft assessment order as well as in the impugned final assessment order. 3. He contend ed that respondent No.3 in the draft assessment order as well as in the impugned final assessment order had proceeded to make additions to the assessed income on the false premise that the p etitioner had not furnished relevant details / information in response to the statutory notice dated 19 th August, 2021, issued under Section 142(1) o f the Act.

He stated that respondent No.3 ha d failed to appreciate that the p etitioner was unable to upload the file due to technical glitches on the respondent’s own portal. He emphasise d that the petitioner had still filed reply to the notice that too within the due date vide email dated 3 rd 4. Mr. Arvind Datar submitted that while Section 144B(1)(xvi) provides an opportunity to the assessee by serving a Show Cause Notice in case any variation of assessment is proposed which is prejudicial to the interest of assessee, Section 144B(1)(xxv) provides for issuance of draft assessment order to the assessee after considering the reply to Show Cause Notice .

He emphasized that in t he present case , respondent No.3 issued a Show Cause Notice under Section 144B(1)(xvi) proposing ‘Null’ or ‘Nil’ variation and the petitioner duly confirmed the same vide letter dated 16 September, 2021 and, thus, there was no non-compliance on the part of the petitioner. th September, 2021. However, thereafter , respondent No.3 took a complete turnaround and issued the draft assessment order proposing variations for which no Show Cause Notice was ever issued to the petitioner.

Appellant / petitioner / assessee submissions

6. He also stated that the petitioner had not been granted any opportunity of personal hearing , despite a specific request having been made under Section 144B(7) of the Act by the petitioner. He submitted that Secti on 144B(7)(vii), (viii) and (ix) provides opportunity of personal hearing through video conferencing where such option is exercised by the assessee. He stated that this Court in Sanjay Aggarwal vs. National Faceless Assessment Centre [2021 (6) TMI 336 - Delhi High Court] and Umkal Healthcare (P.) Ltd. vs. NFAC [(2021) 131 taxmann.com 325 (Delhi)] ha s held that it was incumbent upon the Department to accord a personal hearing to the assessee where such a request was made under Section 144B(7) and failure to do so would amount to violation of principles of natural justice as well as mandatory procedure prescribed in the Faceless Assessment Scheme under Section 144B of the Act.

Revenue / respondent submissions

8. Per contra, learned counsel for the respondents/Revenue submitted that cases of violation of principle of natural just ice can be summarized in two categories i.e. (i) denial of opportunity and (ii) insufficiency of opportunity. He stated that the cases falling under the first category, wherein no opportunity wa s provided to the person charged, cannot withstand the scrutiny of law and were required to be set aside. However, in cases where insufficiency of opportunity wa s complained of, the prejudice caused to the person deprived of sufficient opportunity had to be taken into account before any finding on legality of such proceedings was recorded. ARGUMENTS ON BEHALF OF THE RESPONDENTS 9.

He pointed out that the Legislature , in its own wisdom , had provided for a mechanism for grant of personal hearing in deserving cases falling in the category of Section l44B of the Act itself. The relevant portion of Section 144B of the Act, relied upon by learned counsel for respondents/Revenue, is reproduced hereinbelow:-

Court / Tribunal analysis and reasoning

ITA-I dated 31 st March, 2021 extended the Circulars/notifications issued under Faceless Assessment Scheme to the Faceless Assessment under Section 144B of the Act and, therefore, the SOP contained in circular dated 23rd November, 2020 wa s equally applicable to the proceedings under Section 144B of the Act also. The circular dated 23 rd “Where any modification is proposed in the draft assessment order (DAO) issued by any AU and the Assessee or the authorized representative in his/her written response disputes the facts underlying the proposed modification and makes a request for a personal hearing, the CCIT ReAC may allow personal hearing through Video Conference, after considering the facts & circumstances of the case, as below:-

November, 2020 is reproduced hereinbelow:- 11. Therefore, according to him, the personal hearing is discretionary. He emphasised that under faceless assessment under Section 144B of the Act, the assessee does not have a ve sted right to personal hearing and the same could be granted depending upon the individual facts of each case and fulfilling of the conditions laid down in SOP dated 23rd November, 2020.

It is, therefore, all the more necessary that an opportunity of hearing is provided. 19. Subsequently, in Sahara India (Firm) vs. Commissioner of Income - tax, Central-I, reported in [2008] 169 Taxman 328 (SC) , the Apex Court highlighted the necessity and importance of opportunity of pre -decisional hearing to an assesee and that too in the absence of any express provision. Infact, the requirement of following principles of natural justic e was read into Section 142(2A) of the Income Tax Act following the earlier decisions of the Supreme Court in Swadeshi Cotton Mills vs. Union of India (1981) 1 SCC 664 and C.B. Gautam vs. Union of India & Ors.

“15. …There can be no doubt that this implies the performance of a public duty, as otherwise, the scheme underlying the section would be unworkable. The case, in our opinion, comes within the dictum of Lord Cairns in Julius v. Lord Bishop of Oxford:

It is not left to one's choice, b ut the law makes it imperative. Admittedly, M/s Ahmed Oomer Bhoy had not at the material time nominated any person, in relation to their Delhi branch. The matter is, therefore, squarely covered by Section 17(1)(a)(ii).

Operative decision and relief

NAVIN CHAWLA, J JANUARY 14, 2022 AS/js November, 2021) issued by respondent No.3 to the petitioner are set aside and the matter is remanded back to the Assessing Officer who shall issue a Show Cause Notice and a draft assessment order and thereafter pass a reasoned order in accordance with law. With the aforesaid direction, the present writ petition along with pending application stands disposed of.

Ratio and legal principle

The narrow proposition associated with Bharat aluminium Company Limited v. Union of India & Ors concerns *bharat aluminium co ltd vs union of india & ors* *forum delhi high court* *date 14th january 2022* *sub-whether the requirement of giving opportunity of personal hearing while passing an assessment order u/s 144b is mandatory or directory and whether not granting the opportunity amounts to violation of principles of natural justice.* the delhi high court in this case was dealing with a situation where huge addition resulting in demand of more than rs 177 crores was made even though the show cause notice which was issued prior to the draft assessment order did not propose any addition. the appellant in this case represented by senior advocate arvind datar argued that it was obligatory on part of the department to issue final show cause notice before an addition is made and it was incumbent upon the department to accord a personal hearing to the assessee where such a request was made… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in W.P.(C) 14528/2021.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: *Bharat Aluminium Co Ltd Vs Union of India & Ors* *Forum Delhi High Court* *Date 14th January 2022* *Sub-Whether the requirement of giving opportunity of personal hearing while passing an assessment order u/s 144B is mandatory or directory and whether not granting the opportunity amounts to violation of principles of natural justice.* The Delhi High Court in this case was dealing with a situation where huge addition resulting in demand of more than Rs 177 crores was made even though the show cause notice which was issued prior to the draft assessment order did not propose any addition. The appellant in this case represented by Senior Advocate Arvind Datar argued that it was obligatory on part of the department to issue final show cause notice before an addition is made and it was incumbent upon the Department to accord a personal hearing to the assessee where such a request was made… Its practical value lies in the way the Delhi High Court connected the governing provisions—Section 144B of the Income-tax Act; 1961—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of Section 144B of the Income-tax Act; 1961 and the decision date 2022-01-14; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Bharat aluminium Company Limited v. Union of India & Ors, the proceeding is W.P.(C) 14528/2021, and the decision is dated 2022-01-14. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as HON'BLE MR. JUSTICE MANMOHAN HON'BLE M R. JUSTICE NAVIN CHAWLA. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with Section 144B of the Income-tax Act; 1961. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• Section 144B of the Income-tax Act — apply the exact version considered in the judgment.
• 1961 — apply the exact version considered in the judgment.

Case network

• OERLIKON BALZERS COATING INDIA PRIVATE LIMITED VS. UNION OF INDIA & ANR — Court / Tribunal to be verified · Quashed / set aside
• UCB India Pvt. Ltd. vs. ACIT — Supreme Court of India · Quashed / set aside
• SPL Labs India Pvt ltd Vs ITO,Circle 6 Bangalore — Supreme Court of India · Quashed / set aside
• Lokmangal Nagri Sahakari Path Sanstha Maryadit Vs PCIT -4 Pune — ITAT Pune · Quashed / set aside

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