Any scheme of assessment or fair trial in any law must be abided with Principle of Natural Justice. The Principal of Natural Justice is derived from the Article 14 & Article 21 of the Constitution of India, 1950.

This research paper simply wishes to lay the focus of its readers also over to the argument that under the garb of faceless assAny scheme of assessment or fair trial in any law must be abided with Principle of Natural Justice. The Principal of Natural Justice is derived from the Article 14 & Article 21 of the Constitution of India, 1950.

This research paper simply wishes to lay the focus of its readers also over to the argument that under the garb of faceless assessment, over various occasions the assessee or simply a tax paying citizen of the country whose under assessment, often faces violations of his rights mentioned in the constitution of India on account of Principles of Natural Justice.

The term ―Principles of Natural Justice, derived from the expression “Jus Natural” of the Roman Law, means not necessarily a part of statute, but shall be followed. Following the Principle of Natural Justice shall be more important when some quasi-judicial authority deals with a dispute/matter amongst the parties. It is a homogenous combination of, laws which have been established over the years by the Higher Courts in various scenarios by giving constitutional protection against use of any kind of arbitrary procedure by judicial, quasi-judicial or any administrative body. The Principle of Natural Justice supplement the regular law. It is established that Principle of Natural Justice must be followed in all judicial, quasi-judicial and administrative proceedings which involve civil consequences to the parties. (A.K Kraipak vs. Union of India & Menka Gandhi

Natural justice is the soul of fair adjudication, and is backed by various fundamental rights given by the Constitution of India often referred to as the Indian Constitution. Principles of Natural Justice are majorly bound by the three principles:

• Nemo debet essc judex in propria causa;
• Audi alterem partem; and
• Speaking orders or reasoned decisions.

The former two have come from Roman law and the latter one is originated within various judicial developments in Administrative and Civil Laws.

Nemo debet essc judex in propria causa

In layman’s understanding the above-specified Principle of Natural Justice is stated that, “nobody shall be a judge in their own cause” or in a cause in which their personal interest lies. This principle is often referred to as the “Doctrine of Bias”. Thus, it becomes obligatory to follow his principles so there persists no bias in the judgment.

Audi alterem partem

The second principle of natural justice literally means ―”to hear the other side”. Providing a fair hearing is a part and procedure of law. No order can be passed without giving proper opportunity of being heard. In the famous case of Cooper v. Wandsworth Board of Works [(1863) 143 ER 414], the U.K. courts stated that ―Even God did not pass a sentence upon Adam, before he was called upon to make his defence. According to this rule no one should be condemned unheard. Notice is the first limb of this principle. No adjudication can be made without notice, without fair hearing and without adequate opportunity of being heard. Adequate time shall begiven to enable defendant to make his representation. In the absence of a notice of the kind and such reasonable opportunity, the order passed becomes wholly null and void. Issuance of Notice must be Prior notice of decision making. A proper and valid notice shall contain all facts of matter and proposed future action to be taken. The notice must clearly indicate all fa

Speaking orders or reasoned decisions

Third basic principle of Natural Justice is that order passed by any authority must be speaking order containing all defence taken by Petitioner/Assessee and proper and reasonable findings of the authority who are passing the said order. Proper reasons are required to be there to protect the real spirit of Justice. In many instances, non-speaking or non-reasoned order are often passed however, they are merely quashed by higher courts on the ground of not following the Principles of Natural Justice.

In a scenario where either a person is a judge or the judgement maker in his own case, or the person hasn’t been given a proper and fair opportunity of hearing or the judgement making authority hasn’t passed a judgment that fairly criticises or/and considered the facts and pointers put forth by the assessee, then in such a case the principles of natural justice often face the helm of reality and are violated by the authority themselves.

The authority that has been entrusted to keep regard of the principles of natural justice becomes the one violating it and ths is due to the nascent nature of the regime. The authority is still learning to properly get accustomed to the new regime and avoid any violations.

Due to the process being faceless, it often turns out to be more of a bane than a boon, as it has its own prejudices and negatives. Due to the process being new in nature, the fact that a speaking order is a necessity to be passed may slip out of the thoughts of the authorities.

The fact that an opportunity of hearing is necessary is as often misguided as it is surpassed by the authority due to there being misinterpretation and miscommunication. The lack of clarity of specific mentioning of “physical hearing” under the Income tax Act, 1961 or just calling the opportunity to respond to a notice with a letter/reply/communication as “opportunity of hearing”, often creates huge problems for the natural justices and thereafter increases litigation.

Since the said faceless laws is very new and at its nascent stage. This law needs to pass the litmus test under the four corners of law. In my research paper under literature review, authors have analysed few orders passed by various High Courts under WRIT jurisdiction under Article 226 of constitution of India to protect Principles of Natural Justice. There are few basic parameters of Principle of Natural justice, based on which, I tried to analysis following case laws discussed below, in which various High Courts tried to cater immediate problems/ issues arises under said Faceless Scheme of Assessment and Appellate Proceedings in Indian Income Tax Act, 1961 because of prima facie gross violation of Principle of Natural justice found.

1. A) No Show Cause Notice for any addition:

There have been cases where an order has been passed against an assesee and there wasn’t evena show-cause notice provided to the poor assessee. This is a grave violation of principles and right sunder the constitution of India.

As per faceless regime of Assessment and Appellate proceedings and by following Principles of Natural Justice, Faceless Assessment Officer is required to issue detailed show-cause and Draft Assessment Order, before passing any adverse assessment order. As per CBDT through instruction no. 20/2015, dated 29-12-2015, Para 4 reproduced hereafter-

“The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show-cause notice."

Therefore, if Assessing Officer proposes any kind of additions/disallowances to the asessee's declared income, he is duty bound to issue show cause notice/draft assessment order in the light of Principle of Natural Justice [CLH Gaseous Fuel Applications (P.) Ltd. v. National E-Assessment Centre, Delhi ].

In following cases, the assessment order and accompanied notices were set aside by Hon'ble Delhi High Court in YCD Industries v. National Faceless Assessment Centre . In this case Hon'ble Delhi High Court found gross violation of Principle of Natural Justice and held that- “3. The principal grievance of the petitioner, is that, contrary to the mandate of Section 144B of the Income Tax Act, 1961 (in short, ‘the Act’), and the Faceless Assessment Scheme, 2019 (in short, ‘the Scheme’), no show cause notice-cum-draft assessment order was served on the petitioner, before the passing of the impugned assessment order dated 20.04.2021, as also the impugned notices issued under Section 156 and Section 274 read with Section 270A of the Act, of even date. 16.1. The statute [i.e., Section 144B(1)(xiv), (xv), (xvi)(b) and (xxii)] provides for issuance of a show cause notice-cum-draft assessment order, and an opportunity to the petitioner/assessee to respond to the same where income of the assessee is varied by the respondent/revenue. Admittedly, the petitioner’s income was varied to its prejudice with the addition of Rs. 90,25,535/-. As a matter of fact, had the show cause notice cum draft assessment been served on the petitioner, its authorised representative could have requested for a personal hearing in the matter. The respondent/ revenue, to our minds, could not have side-stepped such safeguards put in place by the legislature.17. Accordingly, the impugned assessment order and the notice issued under Section 156 and Section 270A read with Section 274 of the Act are set aside.”

Thus, it can be settled that the pre-requisite for any assessment proceedings is a show-cause notice or for a layman, a informative communication detailing the necessary findings against the assess against whom an order is potentially going to be passed.

1. B) Where personal hearing was not given:

In these types of matter, Personal Hearing was sought by the assessee but was not allowed by the Department. It is again gross violation of Principle of Natural justice. As per section 144B(7)(vii) &(viii) of Income Tax Act 1961, Chief Commissioner of Income Tax/Director General of Income Tax or respective incharge of regional faceless assessment centre or National Faceless centre shall grant personal hearing on request by the assessee/his authorised representative in the light of Principle of Natural Justice. Personal Hearing through Video Conferencing can enable assesses to present their case through oral submissions and explain all facts co-related with relative evidences.

“144B. Faceless assessment: (7)(vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show-cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority in any unit; (viii) the Chief Commissioner or the Director General, in charge of the Regional Faceless Assessment Centre, under which the concerned unit is set up, may approve the request for personal hearing referred to in clause (vii) if he is of the opinion that the request is covered by the circumstances referred to in sub-clause (h) of clause (xii); ”

Hon'ble Delhi High Court in Lemon Tree Hotels Ltd. v. National Faceless Assessment Centre and in Ritn and Balved Education Foundation (Umbrella Organization of Amity Group of Institutions) v. National Faceless Assessment Centre stayed the operation of the assessment order because of no such personal hearing was granted even though requested. The Hon'ble Delhi High Court set aside the assessment in both the matters and remanded back the matter to the Assessing Officer for fresh assessment. The relevant abstract of judgment of Ritn and Balved Education Foundation (Supra) is reproduced for analysis purpose.

“5. The principal grievance of the petitioner is that the impugned assessment order and the consequential notice of demand and notice for initiating penalty proceedings issued to the petitioner are flawed, as they are contrary to the provisions of Section 144B(7)(vii) of the Income Tax Act, 1961 [in short “the Act”] and the Standard Operative Procedure For Personal Hearing Through Video Conference under The Faceless Assessment Scheme, 2019 [in short „SOP‟], issued by the Central Board of Direct Taxes [in short „CBDT‟], via Circular dated 23.11.2020.

Mr. Ved Jain, who appears on behalf of the petitioner, contends that the revenue was obliged in law to grant a personal hearing to the petitioner, if a request was made in that behalf. Mr. Jain says in this case a specific request was made by the petitioner for two reasons: Firstly, because of the prevalence of COVID-19. Secondly, as the matter was complex and needed to be explained to the assessing officer.

As noticed above, Mr. Jain has relied upon, both, the provisions of Section 144B(7)(vii) of the Act and the SOP issued by the CBDT.

For the sake of convenience, the relevant part of Section 144B(7)(vii) of the Act and the SOP framed by the CBDT are extracted hereafter:

“144B. Faceless assessment – xxx xxx xxx For the purposes of faceless assessment— xxx xxx xxx (vii) in a case where a variation is proposed in the draft assessment order or final draft assessment order or revised draft assessment order, and an opportunity is provided to the assessee by serving a notice calling upon him to show cause as to why the assessment should not be completed as per the such draft or final draft or revised draft assessment order, the assessee or his authorised representative, as the case may be, may request for personal hearing so as to make his oral submissions or present his case before the income-tax authority in any unit;

xxx xxx xxx” “STANDARD OPERATING PROCEDURE (SOP) FOR PERSONAL HEARING THROUGH VIDEO CONFERENCE UNDER THE FACELESS ASSESSMENT SCHEME, 2019 CIRCULAR F. NO. PR. CCIT/NeAC/SOP/2020-21, DATED 23-11-2020 The Principal Chief Commissioner of Income Tax, National e-assessment Centre, with the prior approval of the Central Board of Direct Taxes, New Delhi, lays down the following circumstances in which personal hearing through Video Conference shall be allowed in the Faceless Assessment Scheme, 2019:

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:-

1. The Assessee has submitted written submission in response to the DAO.
2. The Video Conference will ordinarily be of 30 minutes duration. That may be extended on the request of the Assessee or authorised representative.
3. The Assessee may furnish documents/evidence, to substantiate points raised in the Video Conference during the session or within a reasonable time allowed by the AU, after considering the facts and circumstances of the case.”

As would be evident, this provision [i.e., Section 144B(7)(vii) of the Act] would squarely apply in this case, as a specific request for personal hearing was made on behalf of the petitioner. The request made by the petitioner is contained in its communication dated 23.04.2021, appended on page 324 of the paper book [See Annexure P-29 (Colly)].

We may also note that, in the Lemon Tree Case, we had queried Ms. Malhotra as to whether any standards, procedures and processes have been framed by revenue in terms of sub-clause (h) of clause (xii) of Section 144B(7) of the Act . Ms. Malhotra had informed us that, in this regard, she had no instructions. We have queried Ms. Malhotra, once again today. Ms. Malhotra says that she has, still, not received any instructions in that regard.

Therefore, we have to presume that, no standards, procedures and processes have been framed in terms of clause (xii) Section 144B(7) of the Act. These standards, procedures and processes are required to be framed, to guide the assessing officer as to whether or not personal hearing in a given matter should be granted.

That apart, in our view, since the statute itself makes the provision for grant of personal hearing, the respondents/revenue cannot veer away from the same.

Accordingly, the impugned assessment order as well as the impugned notice of demand and notice for initiating penalty proceedings, of even date, i.e., 29.04.2021, are set aside.

Liberty is, however, given to the respondents/revenue to proceed from the stage of the show cause notice-cum-draft assessment order.

The respondents/revenue will grant a personal hearing to the authorized representative of the petitioner. The concerned officer will conduct the hearing via video-conferencing mechanism. For this purpose, prior notice, indicating the date and time, will be served on the petitioner, through its registered e-mail. Respondent no. 2 will, after hearing the authorized representative of the petitioner, pass a fresh order, albeit, as per law.”

In various other cases Hon'ble Delhi High Court has taken the same view by setting aside the assessment order, consequential demand notice and penalty notices. In these matters, Hon’ble High Court under WRIT Petition (Article 226) directed National E-Assessment centre to grant a personal hearing through video conferencing and passed the reusable order a fresh on merit. In all the below matters, Assessing officer rejected the plea of the Petitioners demanding personal hearing.

1. Lokesh Constructions (P.) Ltd. v. Asstt. CIT ;
2. DJ Surfactants v. National E-Assessment Center
3. Naina Lal Kidwai v. National Faceless Assessment Centre Delhi

In one other matter Sanjay Aggarwal v. National Faceless Assessment Centre, Delhi Hon'ble Delhi High Court distinguish the meaning of word “may” used in section observed that “11.4 A careful perusal of clause (vii) of Section 144B (7) would show that liberty has been given to the assessee, if his/her income is varied, to seek a personal hearing in the matter. Therefore, the usage of the word 'may', to our minds, cannot absolve the respondent/revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides hi under sub-clause (h) of Section 144B (7)(xii) read with Section 144B (7)(viii), the respondent/revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua he same."

1. C) Assessment Order passed without waiting reply:

In these cases, Faceless Assessing Officer passed Assessment order in a very hasty manner without even waiting or incorporating Assessee’s reply in given time line. Hon’ble Madras High Court pleased to remand back matter to the Assessing Office for not following Principles of Natural Justice. In this matter, Faceless Assessing Office was in a rush and passed his order without waiting or considering the submissions of the Assessee in the time frame given by him only. Jurisdictional Madras High Court was set aside the matter and directed concerned Assessing Office to consider Assessee reply on merit. In this case the assessment order was passed on 15-3-2021, whereas show cause notice was issued on 4-3-2021 and assessee was required to file the reply before the end of the day on 15-3-2021 by 23.59 hours. The reply was submitted before the end of the day 15-3-2021 but the order was passed before assessee could submit reply. (Antony Alphonse Kevin Alphonse v. ITO ). In the matter, Hon’ble Madras High Court held t“5. Since the impugned order has been passed before the time prescribed for filing the reply, it is evident that the impugned order has been passed with pre-set mind. In any event, the order has been passed without considering the reply received from the petitioner. Therefore, this Court is inclined to grant the relief sought for by the petitioner as there is a manifest violation of business of justice while passing the impugned order.

Under these circumstances, the impugned order stands quashed and the case is remitted back to the second respondent to pass a speaking order on merits in accordance with law after considering the reply filed by the petitioner on 15.03.2021.”

In another matter, [S. VeluPalandar v. Deputy Commercial Tax Officer ] under WRIT Jurisdiction (Article 226 of Indian Constitution), Hon'ble Madras High Court again held that Assessing Office should wait till the end of working day (23:59:00 Hrs), when the matter was fixed for finalisation. In this matter, Assessing office again violated the Principle of Natural Justice and passed the Assessment Order before time frame given to Assessee to file reply. The same view has been taken by Madaras High Court in Ekambaram Sukumaran v. ITO ; Raja Builders v. National Faceless Assessment Centre ).

Considering the reply of the assessee comes under the principles of natural justice of passing a speaking order. When an opportunity of hearing is provided to an assesse and he submits his reply to the authority, if the authority passes an order against such assessee and from the language it seems that the authority did not consider the reply of the assesee, then in such a case there is violation of principles of natural justice. Because, if their reply is not considered then the requirement of providing an opportunity of hearing is baseless and becomes a tooth-less tiger.

1. D) Where reasonable difficulty not considered:

In Hon'ble Delhi High Court in Sudhir Desh Ahuja v. National Faceless Assessment Centre , wife and son of the Assessee were suffering from Covid-19 and hospitalised and also which led to the petitioner having to quarantine himself. The Assessing Office did not consider reasonable difficulty of the Petitioner and failed to follow the Principal of Natural Justice. Hon’ble Delhi High Court remanded back the assessment proceeding with the direction to passed fresh order after considering Petitioner’s replies on merit and held that:

“5. As noted in our aforementioned order, the petitioner did, in fact, file a reply albeit on 22.04.2021, followed by a reply to the notice for initiation of penalty proceedings, which was filed, on 28.04.2021. 5.1. As noted by us, the aforementioned facts are not in dispute. In any event, these assertions are supported by an affidavit, qua which, no counter- affidavit has been filed on behalf of the respondent/revenue. 5.2. Given the aforesaid circumstances, we are of the view that the impugned orders are liable to be set aside for the following reasons:

• Firstly, the AO failed to deal with the request of the petitioner, for according an adjournment in the matter.
• Secondly, in any event, the petitioner's case has been that, given his difficulty, he was not in a position to file a response/objection to the show cause notice-cum-draft assessment order by 19.04.2021.

Therefore, as indicated hereinabove by us, we are of the view that the impugned assessment order, passed by respondent/revenue under Section 143(3) read with Section 144B of the Income Tax Act, 1961 (in short "the Act"), dated 22.04.2021, and notice of demand issued under Section 156 of the Act, as well as notices for initiating penalty proceedings issued under Section 274 read with Section 270A, and Section 271AAC(1) of the Act, should be set aside, with liberty to the AO to pass a fresh order, after considering the reply/objections of the petitioner. It is ordered accordingly.

Furthermore, the AO is also directed to accord a personal hearing to the petitioner and/or his authorized representative. The AO will intimate to the petitioner, the date and time fixed, for personal hearing, via his registered e-mail ID. The AO will also send the link to the petitioner, for the said purpose.”

1. E) No reasonable time given:

In these types of matters, Faceless Assessing Officer given very short time to file objection and no adjournment was given. It is again gross violation of Principal of Natural Justice. In KBB Nuts (P.) Ltd. v. National Faceless Assessment Centre Delhi , Hon’ble Delhi High Court again set aside the matter and remanded back to A.O. to passed fresh order. In this matter draft assessment order dated 19.04.2021 proposing some variation was served on 20.04-2021 at 03.06 pm with the direction to file reply by 21.04 2021 at 23.59 Hrs. He was given only one working day to Assessee/Petitioner to defend his case and file detailed reply for material addition proposed. Against such order, Petitioner filled an adjournment application seeking only one day time to file their reply. The same was not entertained by Assessing officer. The said impugned order was supposed to create an illegal demand of Rs. 15.76 Crores in the hands of Petitioner. One can easily understand the huge injustice with Petitioner for not following th “5.2. Therefore, without getting into the tenability of the objections on merits, in our view, the best course forward would be to set aside the impugned assessment order dated 22.04.2021, and have respondent no.1 pass a fresh assessment order after taking into account the objections filed qua the show cause notice dated 19.04.2021 on behalf of the petitioner. It is ordered accordingly.

The impugned assessment order is set aside. The respondent no. 1 will issue a notice via e-mail to the petitioner, and grant a personal hearing to the authorised representative of the petitioner, before proceeding to pass a fresh assessment order.”

Since the time for compliance was short, it appears, the petitioner, filed an application via the e-portal, seeking a day’s adjournment, i.e., till 22.04.2021. The petitioner claims that no response was received by it with respect to the request for adjournment.

In one another matter (Kumaran Silks Traders v. ITO, National E-Assessment Centre ), Hon'ble Madras High Court again found violation of Principle of Natural justice and was pleased to set aside the impugned assessment order and remanded the matter back to Assessing Officer for fresh Assessment. In this matter, draft assessment order cum show cause notice was issued on 12.04.2021 and received by Petitioner on 13.04.2021. In such draft assessment order cum show cause notice, Ld. Assessing Officer given only 24 Hours’ time to file reply to the Petitioner. Hon’ble Madras High Court observed that it has been gross violation of Principle of Natural Justice on account of Income Tax Department. With this observation, Hon’ble High Court set aside the impugned assessment order and remanded back to Assessing Officer for fresh Assessment.

Therefore, in conclusion it can be very well stated that thought the new regime is a helpful and a noble choice, but it comes with its drawbacks and has its own fault lines. The fact that the authority often surpasses the basic necessity of principles of natural justice as can be evidenced from the above-mentioned case-laws, it is believable that, the present regime is still at a very nascent stage and will take a few years maybe decades, to come to a more reliable, effective and non-violative stand-point.

Till the time there is clarity in provisions and the proper procedure is maintained by various Standard of Procedures form the CBDT, one has to go to-and-fro with the department as well as the authorities and take measures to simplify and ease the accommodation fo principles of natural justice in the new Faceless Regime.

1. AIR 1970 S.C. 150. All India Reporter, Supreme Court, 1970, p. 150.
2. AIR 1978 S.C. 597. All India Reporter, Supreme Court, 1978, p. 597.
3. CLH Gaseous Fuel Applications (P.) Ltd. v. National E-Assessment Centre, Delhi. P.(C) 5272 of 2021,
4. Delhi High Court.
   YCD Industries v. National Faceless Assessment Centre. [2021] 127 taxmann.com 606 (Delhi).
5. Delhi High Court.
   Lemon Tree Hotels Ltd. v. National Faceless Assessment Centre. P. (C) 5427 of 2021,
6. Delhi High Court.
   Ritnand Balved Education Foundation v. National Faceless Assessment Centre. P. (C) 5537 of 2021,
7. Delhi High Court.
   Lokesh Constructions (P.) Ltd. v. Asstt. CIT. P. (C) 5491 of 2021, Delhi High Court.
   DJ Surfactants v. National E-Assessment Center. [2021] 127 taxmann.com 641 (Delhi).
8. Delhi High Court.
   Naina Lal Kidwai v. National Faceless Assessment Centre, Delhi. P. (C) 5775 of 2021,
9. Delhi High Court.
   Sanjay Aggarwal v. National Faceless Assessment Centre, Delhi. [2021] 127 taxmann.com 637 (Delhi). Delhi High Court.
   Antony Alphonse Kevin Alphonse v. ITO. P. No. 8379 of 2021, Madras High Court.
   S. VeluPalandar v. Deputy Commercial Tax Officer. [1972] 83 ITR 683. Madras High Court.
10. Ekambaram Sukumaran v. ITO. P. No. 10433 of 2021, Madras High Court.
    Raja Builders v. National Faceless Assessment Centre. [2021] 127 taxmann.com 339 (Bombay). Bombay High Court.
    Sudhir Desh Ahuja v. National Faceless Assessment Centre. W.P. (C) 5422 of 2021,
11. Delhi High Court.
    KBB Nuts (P.) Ltd. v. National Faceless Assessment Centre, Delhi. [2021] 127 taxmann.com 194. Delhi High Court.
12. Kumaran Silks Traders v. ITO, National E-Assessment Centre. W.P. No. 10656 of 2021, Madras High Court.