Introduction

The case of Sanjay Aggarwal v. National Faceless Assessment Centre Delhi, adjudicated by the Delhi High Court on June 2, 2021, presents a pivotal examination of the procedural obligations under the Income Tax Act, 1961. The petitioner, Sanjay Aggarwal, challenged the assessment order for the financial year 2018-2019, contending that the Revenue did not honor his repeated requests for a personal hearing, thereby contravening the statutory provisions encapsulated in Section 144B of the Act.

Summary of the Judgment

The Delhi High Court, presided over by Hon'ble Mr. Justice Rajiv Shakdher and Hon'ble Mr. Justice Talwant Singh, examined whether the respondent, National Faceless Assessment Centre Delhi, adhered to the procedural mandates of granting personal hearings as per Section 144B of the Income Tax Act. The court found that the Revenue had failed to consider the petitioner’s repeated requests for a personal hearing before finalizing the assessment, thereby violating the statutory scheme. Consequently, the court set aside the impugned assessment order, emphasizing the necessity of transparency and accountability within the faceless assessment framework.

Analysis

Precedents Cited

The judgment primarily hinges on the interpretation of Section 144B of the Income Tax Act, rather than relying heavily on external precedents. However, it aligns with the broader judicial ethos favoring procedural fairness and the right to a fair hearing, as established in landmark cases like State of Punjab v. Baldev Singh and Union of India v. Mohinder Singh Chawla.

Legal Reasoning

The court meticulously dissected Section 144B, particularly sub-section (7), clause (vii), which provides the assessee the right to request a personal hearing when a variation in income is proposed. The use of the term "may" in the provision was interpreted by the court not as a mere discretion but as an obligation to consider such requests under the principles of administrative fairness.

The absence of established standards, procedures, and processes for granting personal hearings further accentuated the Revenue’s failure to comply with its statutory duties. The court emphasized that the faceless assessment mechanism, while designed for efficiency, must not compromise the fundamental rights of the assessee to be heard, especially in complex cases necessitating detailed explanations.

Impact

This judgment underscores the judiciary's stance on ensuring procedural propriety within the faceless assessment system. It mandates the Revenue to formulate and adhere to clear guidelines for granting personal hearings, thereby enhancing transparency and accountability. Future assessments will now be cognizant of the necessity to consider personal hearing requests seriously, particularly in cases involving significant income variations.

Complex Concepts Simplified

Section 143(1) and 143(2) of the Income Tax Act

Section 144B of the Income Tax Act

Introduced to streamline the assessment process by making it faceless, Section 144B allows taxpayers to apply for a personal hearing if their income is to be varied significantly. This provision aims to balance efficiency with the taxpayer's right to contest and explain discrepancies.

Faceless Assessment

A system implemented to reduce human interface between the taxpayer and the Income Tax Department, thereby minimizing corruption and enhancing transparency. However, it must still accommodate procedural fairness, such as providing opportunities for personal hearings in complex cases.

Conclusion

The Delhi High Court's decision in Sanjay Aggarwal v. National Faceless Assessment Centre Delhi reinforces the imperative of upholding procedural fairness within the faceless assessment framework. By mandating the Revenue to consider personal hearing requests, the judgment bridges the gap between efficiency and the taxpayer's right to a fair opportunity to present their case. This landmark ruling not only sets a precedent for future assessments but also underscores the judiciary's commitment to ensuring accountability and transparency in tax administration.

Key Takeaways

• The Revenue must consider and act upon requests for personal hearings under Section 144B when significant income variations are proposed.
• Faceless assessments should not undermine the fundamental rights of taxpayers to present their cases, especially in complex matters.
• The absence of clear procedural guidelines obligates the Revenue to formulate and adhere to standards ensuring transparency and accountability.
• This judgment strengthens the enforcement of procedural fairness within the Income Tax Act, promoting a more balanced and just tax administration system.