Income Tax

Deciphering the Meaning of Reasonable Opportunity in Faceless Assessments

In a recent case, an assessee was issued show cause notice on 19^th April 2021, giving him the opportunity to file a response by 21^st April. The assessee received the notice on 20^th April through e-mail. It meant that the assessee had a day’s time to reply to the show cause notice. The High Court of Delhi set aside the assessment order and ordered a fresh notice to be issued to the assessee. Further, it also asked to grant a personal hearing to the assessee before passing a fresh assessment order. Lets’ discuss more on reasonable opportunity.

The Right of Opportunity- Legal Understanding

The right of opportunity is an indispensable part of natural justice which emphasises the fact that no one should be punished without being given opportunity of being heard. The court lives by this fundamental not just in judicial and quasi-judicial proceedings but also in cases involving administrative decisions. Not giving an opportunity of being heard can hamper the entire proceedings therefore, it is a crucial part of the proceedings till date.

Reasonable opportunity in Faceless Assessments- Section 144B IT Act 1961

In order to make assessments in faceless manner, sub-section (1) of section 144B lays down the procedure. Section 144 B provides the following, which protects the right of opportunity of a person:

• When a notice is served under section 143(2) by the National Faceless Assessment Centre, the assessee has the opportunity to file a response within 15 days.
• In case NFAC asks for more information, documents or additional evidence, the assessee has the opportunity to file the response within the time specified in the notice or within the time as extended on request.
• In case where such assessee fails to do so or fails to comply with a notice issued under section 142(1) (2A), the NFAC will send a show cause notice under section 144, and the assessee gets an opportunity to file his response within the time period mentioned in the notice.
• On receiving draft assessment order from the assessment unit by the NFAC, if there is any variation prejudicial to interest of assessee is proposed, the NFAC will send a show cause notice stating why the proposed variations should not be made.
• Alternatively, on receiving draft assessment order from the assessment unit, if there is any variation prejudicial to the assessee’s interest, the NFAC can send such proposal to the review unit.
• In case the review unit proposes variation and such variation is still prejudicial to the interest of the assessee, the NFAC will send a show cause notice stating why the proposed variation should not be made.

Sub-section (1) of Section 144B explains the scope of opportunity-

• The assessee can request for personal hearing to make oral submissions;
• The CCIT/DGIT may approve such request of the assessee;
• Such personal hearing will be conducted only through video conferencing or video telephony.

Apart from clause (ii) of section 144B (1), the provisions providing an opportunity to the assessee doesn’t prescribe a specific time to avail of such opportunity. The time period for filing a response under other clauses providing opportunity is not laid down in the section. It is as per the discretion of the assessing authorities. Thus, gives rise to litigation and controversy.

Opportunity granted must be a reasonable opportunity- Case Laws

As stated earlier, the opportunity provided must be reasonable. Lack of enough time while granting an opportunity amounts to an opportunity that is restricted to paper without any real intention to get a response.

If we observe the landmark case of M. Chockalingam and M. Meyyappan vs. CIT, the apex court held that-

The authorities acting under Income Tax Act^[1] must act judicially, and one of its essentials is to advance a fair hearing opportunity to a person before ruling against him.

The opportunity of being heard should be authentic, reasonable and adequate. It can’t be just for the name sake and a mere opportunity on paper. It was held in case of CIT vs. Panna Devi Saraogi.

Likewise, in case of Smt. Ritu Devi vs. CIT, only one day time was provided to the assessee to produce reply thus amounts to a denial of opportunity. Therefore the opportunity should be a reasonable opportunity and an effective one and not merely an empty formality. It is worth mentioning here that limitation of time also can’t be an excuse for not providing adequate opportunity. 

Consequences of non-compliance of procedure provided in section 144B

It may be noted here that severe consequences may transpire if the procedure provided in section 144B is not complied with. In such case, the assessment shall be “not existing”. Thus there is no scope for holding such violation interpreted as curable. Else the entire sub-section (9) would be redundant.

Conclusion

Therefore to sum up our discussion, clarity in respect of time limit for grant of opportunity is highly required. It will help in significantly reducing unnecessary litigation. The concept of reasonable opportunity is indispensable part of justice.

Read our article:Faceless E-Assessment Scheme: Role of Technology