Faceless Assessments: Delhi High Court Makes Personal Hearing Mandatory
Another day, another court, another case where tax department's Faceless Assessment Scheme fails the natural justice test.
A taxpayer has a vested right to personal hearing and the revenue department has to grant it if such a request has been made. The right to personal hearing cannot depend upon the facts of each case, the Delhi High Court has held.
Faceless assessment scheme does not mean no personal hearing, the court said while hearing a dispute between Bharat Aluminium Co. and the revenue department.
"It is not understood as to how grant of personal hearing would either frustrate the concept or defeat the very purpose of Faceless Assessment Scheme." – Delhi High Court
The tax department's Faceless Assessment Scheme has come under intense scrutiny from courts in the last two years. While the department has amended the Faceless Appeal Scheme to allow all requests for personal hearing via video conference when a tax demand is raised, no such change has been made in the assessment scheme.
In Bharat Aluminium's case, the high court has read 'may' as 'shall' in the provision that gives discretion to the chief commissioner or the director general to grant a personal hearing. The court noted that it is settled law that having regard to the context, the expression “may” has varying significance.
The word “may” is capable of meaning “must” or “shall” in the light of the context. In fact, where a discretion is conferred upon a quasi judicial authority whose decision has civil consequences, the word “may” which denotes discretion should be construed to mean a command." – Delhi High Court
The court dismissed revenue department's argument that personal hearing, as per its November 2020 circular, would be allowed only in cases where facts are disputed. The argument, the court said, is untenable as cases involving issues of law would also require a personal hearing.
This court is of the view that the classification made by the revenue by way of the circular dated Nov. 23, 2020 is not legally sustainable as the classification between fact and law is not founded on intelligible differentia and the said differentia has no rational relation to the object sought to be achieved by Section 144B [provision detailing faceless assessment].Delhi High Court
Finally, perhaps to address the revenue department's concern that the scheme aims for no one-on-one interface, the court suggested the identity of the assessing officer can be hidden or protected while granting personal hearing by either creating a blank screen or by decreasing the pixel, density or resolution.
(Corrects earlier version that misstated that the order is by the Bombay High Court)