Delhi High Court Stays Income Tax Faceless Assessment Order without Personal Hearing, Directs to Allow Personal Hearing to Assessee

The Delhi High Court while staying the recovery proceedings against disputed tax demand and initiation of penalty proceedings held that prima facie Assessee to be heard Before passing Assessment Order.

The Show cause notice was issued to the petitioner on March 1, 2021, along with the draft assessment order of even date. As per the said show cause notice, the petitioner was required to file a response by March 8, 2021, as to why the assessment should not be completed as per the draft assessment order.

The petitioner sought a week’s accommodation to respond, as the queries raised in the aforementioned show cause notice required time to gather the relevant material. This request was made on 08.03.2021. Since no response was received from the Assessing Officer, the petitioner, by way of abundant caution, filed a reply to the said show cause notice on March 12. 2021. Furthermore, in the reply, a request was made for grant of a personal hearing in the matter.

The impugned assessment order was passed on 13.03.2021, without having regard to the aforesaid reply dated 12.03.2021 submitted by the petitioner.

A perusal of the impugned assessment order shows that the AO has made an addition to the petitioner’s declared income of Rs.9,56,00,000/- under Section 68 of the Income Tax Act, 1961 concerning the assessment year 2018-2019. The addition has been made on account of purported unexplained, unsecured loans.

The petitioner contended that the petitioner had, via the material placed before the AO, along with its reply dated March 12, 2021, explained and attempted to establish the genuineness of the unsecured loans received by the petitioner.

Mr. Zoheb Hossain, who appears on advance notice on behalf of the revenue, on the other hand, says that the addition was made to the petitioner’s declared income because of the dissonance between the audit report and balance sheet of the petitioner concerning unsecured loans pertaining to the financial year in issue, i.e., 2017-2018.

In this behalf, Mr. Hossain highlighted that the unsecured loans, as per the audit report, are shown as Rs.11,55,35,000/-, while unsecured loans in the balance sheet, are shown as Rs.5,33,18,001/- in respect of the financial year in issue, i.e., 2017-2018.

The division bench of Justice Rajiv Shakdher and Talwant Singh held that the petitioner has been able to establish, at least at this stage, a prima facie case in its favor. There shall be a stay on the operation of the impugned assessment order till further orders of the Court and the matter was listed on June 2, 2021.