Statutory Authority Bound To Afford A Personal Hearing Through Video Conferencing: Kerala HC Sets Aside Assessment Order Against Federal Bank Ltd.

The Court set aside the final assessment order passed by the Income Tax Department (statutory authority) against The Federal Bank Ltd. (Petitioner) for the assessment year 2018-19, which had imposed an additional liability of Rs. 321.26 Crores. The order was challenged on the grounds that the Petitioner had not been provided an opportunity for a personal hearing as requested during the faceless assessment proceedings.

A Single Bench of Justice K. Babu held, “In the present case, admittedly, the assessee specifically made request for a personal hearing, which has not been considered. Therefore, there has been violation of the principles of natural justice, and hence, the petitioner has rightly invoked the provisions of Article 226 of the Constitution. In my view, having regard to the facts and circumstances, the statutory authority was bound to afford a personal hearing to the petitioner through video conferencing as mentioned above. The result of this infraction would be that the impugned orders will have to be set aside.”

Senior Advocate Joseph Markose appeared for the Petitioner, while Senior Counsel P.K.R. Menon represented the Respondents.

The Petitioner, a banking company governed by the Banking Regulation Act, 1949, received a draft assessment Order accompanied by a show cause notice. The notice, issued under the Faceless Assessment Scheme, proposed modifications to the Petitioner’s tax liabilities. The Petitioner submitted a detailed reply requesting a personal hearing via video conferencing to present oral submissions.

However, the Income Tax Department passed the final assessment order imposing an additional tax liability. The Petitioner argued that the failure to provide a personal hearing violated Section 144B(7)(vii) of the Income Tax Act, 1961 (the Act) which allowed an assessee to make oral submissions when variations are proposed in the draft assessment order.

The statutory authority contended that the Petitioner had not exercised the option for a video conference through the online facility provided in the Income Tax portal. They further argued that the petitioner had an alternative remedy under Section 246A of the Act to appeal the order, and hence the Writ Petition was not maintainable.

The High Court noted that Section 144B, which provides for faceless assessment, was introduced in the Act with effect from 2021. “The Central Government notified a scheme for ‘faceless assessment’ with the intention of imparting greater efficiency, transparency and accountability in the assessment proceedings by introducing a scheme called E-assessment Scheme, 2019,” it stated.

The Court held that the failure to grant the petitioner an opportunity for a personal hearing amounted to a violation of the principles of natural justice.

“The adherence to principles of natural justice as recognized by all Civilized States is of supreme importance when a competent statutory authority embarks on an action involving civil consequences. The fundamental principle is that no one should be condemned unheard,” the Bench observed.

Consequently, the Court stated, “The statutory authorities are at liberty to pass fresh assessment orders in accordance with law after affording an opportunity of being heard to the petitioner through video conferencing mechanism.”

Accordingly, the High Court allowed the Writ Petition.

Cause Title: The Federal Bank Ltd. v. The Additional/Joint/Deputy/ Assistant Commissioner Of Income Tax & Ors. (Neutral Citation: 2024:KER:87253)

Appearance:

Petitioner: Senior Advocate Joseph Markose; Advocates V.Abraham Markos, Abraham Joseph Markos, Isaac Thomas, Alexander Joseph Markos and Sharad Joseph Kodanthara

Respondents: Senior Advocate P.K.R. Menon; SC Jose Joseph; CGC P.R.Ajith Kumar

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