2021 (5) TMI 1024 - HC - Income Tax

Validity of assessment u/s 143(3) r.w.s.144B - Penalty proceedings u/s 274 read with Section 270A and 271 AAC (1) - petitioner claims that there has been a breach of the principles of natural justice. It is the petitioner s case that the objections filed on 22.04.2021 were not taken into account by respondent no. 1 before passing the impugned assessment order - HELD THAT - 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. Needless to add, respondent no. 1 will consider the objections dated 22.04.2021, filed qua the show-case notice dated 19.04.2021.

Summary

Issues:
1. Challenge to assessment order under Income Tax Act, 1961 for AY 2017-2018.
2. Setting aside of notice of demand and penalty proceedings.
3. Breach of principles of natural justice.
4. Enhanced imposition of tax demand and initiation of penalty proceedings.
5. Consideration of objections before passing assessment order.

Analysis:
1. The writ petition challenged the assessment order dated 22.04.2021 under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for AY 2017-2018. The petitioner sought setting aside of the notice of demand and initiation of penalty proceedings issued on the same date.

2. The petitioner alleged a breach of natural justice as the objections filed on 22.04.2021 were not considered before passing the assessment order. The impugned assessment order resulted in an increased tax demand of approximately ?15.62 crores and initiated penalty proceedings, pegging the taxable income at around ?19.19 crores.

3. Ms. Malhotra contended that the petitioner could not assume the extension of time to respond to the show cause notice due to the absence of a formal response to the adjournment request. However, the Court noted that the assessment order was passed before the objections were filed, indicating a procedural flaw.

4. Considering the procedural irregularity, the Court set aside the impugned assessment order and directed respondent no. 1 to issue a fresh notice to the petitioner via email. The petitioner's authorized representative was granted a personal hearing before the fresh assessment order was passed. It was emphasized that respondent no. 1 must consider the objections filed on 22.04.2021 regarding the show cause notice dated 19.04.2021 before proceeding with the fresh assessment order.

5. In conclusion, the writ petition was disposed of with the direction to set aside the impugned assessment order and ensure a fair consideration of the objections raised by the petitioner. The Court's decision aimed to uphold the principles of natural justice and provide an opportunity for the petitioner to present their case effectively.