143(1) & 139(9): Is the CPC actually adhering to the principles of natural justice?

People often wonder who considers the assessee's responses to notices u/s 143(1)(a) and 139(9) at the Centralized Processing Centre (CPC)? Or are they even considered?

A recent decision by the Hon'ble Bombay HC [WP(L) 15292 of 2024] brings this issue to the forefront. Here, the CPC issued a defective return order u/s 139(9), without giving any reason and ignoring the assessee’s response. It turned out the order was AI/software generated. While the Hon’ble HC relegated the assessee to an alternative remedy (Section 264), their lordships did observe:

"The principles of natural justice and fairness are too valuable to be sacrificed at the altar of AI and automation expediency."

However, one fundamental aspect which was not canvassed before the HC is this: Powers u/s 139(9) are given to an 'Assessing Officer'; Can AI/software really be considered to be an ‘Assessing Officer’?

Similarly, section 143(1) also provides for an opportunity of being heard before a proposed adjustment. Can AI/software actually apply ‘mind’, give an effective opportunity of being ‘heard’ and fairly consider the assessee’s response?

Realistically, I am yet to see the CPC accept assesse’s explanation and drop the proposed adjustment in any case, howsoever straightforward. A 143(1)(a) notice, in essence, seems like an empty formality.

While AI is the need of the hour, human involvement cannot be completely eliminated in complex tax matters, given the onerous provisions that lead to frivolous demands, denied refunds, unnecessary litigation and, of course, rectification applications.

It’s time for transparency in processes, proper reasoning in orders and importantly, for human intelligence to play a role before automated systems take adverse actions.

After all, why should robots have all the fun?

#BombayHC #AI #CPC