Karnataka HC: Principles of Natural Justice is violated where less than 24 Hours is given to respond to SCN
Fact and Issue of the case
The petitioner claims to be a limited liability partnership [LLP] firm and is a Builder, Developer and Contractor. It transpires that for the assessment year under consideration i.e., 2018-19, it has filed its return of income under Section 139(4) of the Act, which was processed under Section 143(1) of the Act. Vide notice dated 22.09.2019 issued by the Assistant Commissioner of Income-Tax (e-Verification) under Section 143(2) of the Act, the petitioner was informed that its case has been selected for scrutiny on the issues relating to “income from real estate business” and “investment in immovable property” and the petitioner was instructed to further conduct the proceedings through e-portal. Thereafter by letter dated 15.10.2020 issued by the respondent No.4, the petitoner was informed that assessment proceedings pending in the case of the petitioner henceforth shall be completed under Faceless Assessment Scheme, 2019, pursuant to which the notice under Section 142(1) of the Act was issued. The jurisdictional Assessing Officer issued the notice dated 28.09.2021 under section 142(1) of the Act, calling upon the petitioner to furnish the documents and information on or before 29.09.2021 at 4.00 p.m.
It is the grievance of the petitioner that no reasonable opportunity was provided to furnish the reply to the notice along with the information and documents. The assessment order was concluded on 29.09.2021 in breach of principles of natural justice.
This writ petition is directed against the assessment order dated 29.09.2021 passed by The Assistant Commissioner of Income Tax for the assessment year 2018-19 along with the impugned demand notices issued under Section 156, Section 274 read with Section 270A and Section 274 read with Section 271AAC(1) of the Income Tax Act, 1961 (“the Act”, for short) inter alia challenging the letter dated 29.09.2021 issued by The Assistant Commissioner of Income Tax (Annexure-E) to assume jurisdiction in the case of the petitioner for the assessment year 2018-19 relying on the letter dated 28.09.2021 issued by the Commissioner of Income Tax, further seeking for a declaration that sub-section (8) of Section 144B of the Act is unconstitutional.
Observation of the court
It is exfacie apparent that the notice under Section 142(1) of the Act was issued by respondent No.3 on 28.09.2021 calling upon the petitioner to file his reply on or before 29.09.2021 at 04.00 p.m. The respondent No.3 has issued the impugned letter dated 29.09.2021 addressed to the petitioner informing that the respondent No.3 had assumed jurisdiction over the case for concluding the assessment proceedings by 30.09.2021. Though the petitioner has submitted its reply to the notice dated 28.09.2021 and indeed sought some more time to file detailed objections/additional information, the respondent No.3 without providing reasonable opportunity to the petitioner has proceeded to pass the impugned assessment order dated 29.09.2021
The arguments of the learned counsel appearing for the petitoner that the objections filed by the petitoner was not considered by the Assessing Officer, appears to have some force. At this juncture, it will be beneficial to refer to the judgment of the Hon’ble Apex Court in the case of Magadh Sugar & Energy Limited (supra), the principles of law enunciated by the Hon’ble Apex Court. Similarly in the case of Vodafone India Limited (supra), the High Court of Bombay while considering the show cause notice issued to the assessee giving less than 24 hours to respond to the show cause notice observed that the same is a flaw in the decision making process and therefore amenable to judicial review; it has further observed that it has been stated times without number that Justice must not only be done but also appear to have been done, the non-consideration of the petitioner’s response to the notice by making it impossible to the petitoner to file its reply for the consideration of the Assessing Officer does cause prejudice to the petitioner leading to palpable injustice; thus, warranting the exercise of writ jurisdiction.
Ordinarily alternative remedy if not exhausted by the assessee, a writ petition is not maintainable, but in the exceptional circumstances as held by the Hon’ble Apex Court in the case of Magadh Sugar & Energy Limited (supra), violation of principles of natural justice certainly warrants interference. This legal principle is followed by the Hon’ble High Court of Bombay in the case of Vodafone India Ltd. (supra). We have no reason to differ from the judgment of Vodafone India Ltd. (supra), since in identical circumstances where a response was sought by the Assessing Officer to the show cause notice, giving less than 24 hours, it has been held to be arbitrary resulting in palpable injustice. Thus, without going into merits or demerits of the case, it would be suffice in restoring the proceedins to the Assessing Officer to provide reasonable opportunity of hearing to the petitioner with liberty to file additional reply, annulling the assessment order. Accordingly, the court set aside the assessment order and the demand notices. The proceedings are restored to the file of the Assessing Officer for reconsideration.
The court has ruled in favour of the assessee and set aside the assessment order passed by the Assessing Officer.