2022 (5) TMI 1437 - HC - Income Tax

Addition of income - Denial of basic principles of law and justice - arbitrary exercises of powers by the respondents including the National Faceless Assessment Centre - HELD THAT - Addition has been made in the income of the petitioner for the A.Y. 2017-18 without there being any material disclosing escapement of income by the petitioner. The petitioner has been continuously bringing it to the notice of the respondents that he has not deposited any amount in his bank account i.e. Bank of Baroda and also filed copy of the bank account, a copy of which has also been filed along with supplementary affidavit; and yet the respondents have made addition. Basic principles of rule of law and justice has been deliberately denied to the assessee by the respondents. This prima facie shows conscious attempt to cause serious harassment to the assessee for reasons best known to the respondents. We are frequently coming across orders passed by the respondents including the National Faceless Assessment Centre which show that the respondents have made up their mind to act arbitrarily and not to adhere to the settled principles of law including natural justice and are passing reassessment orders in a whimsical manner. Such prevailing situation causing serious prejudice to the assessees and flagrant violation of basic principles of law by the respondents, needs to be arrested at the earliest. We direct the respondents to file a counter affidavit and show cause as to why exemplary cost in view of the law laid down by the Hon'ble Supreme Court in the case of Assistant Commissioner (ST) Ors. vs. M/s Satyam Shivam Papers Pvt. Limited Anr. 2022 (1) TMI 954 - SC ORDER , be not imposed. The respondent no.1 shall also file counter affidavit by means of his personal affidavit within three weeks. All the respondents, besides submitting reply to paragraph of the writ petition, shall also submit reply within one week with respect to the facts noted and the observations made in the order dated 26.05.2022, passed by this Court. Put up as a fresh case for further hearing at 10 AM. on 05.07.2022.

Summary

Issues:
1. Alleged high handedness and arbitrary exercise of powers by respondents in making an addition to petitioner's income.
2. Denial of basic principles of law and justice to the assessee.
3. Passing reassessment orders in a whimsical manner.
4. Need to address the prevailing situation causing prejudice to assessees and violation of basic legal principles.

Analysis:
The judgment delivered by the Hon'ble Surya Prakash Kesarwani and Hon'ble Deepak Verma, JJ. addresses various critical issues. Firstly, the Court observed that the respondents, including the National Faceless Assessment Centre, displayed high handedness and arbitrary exercise of powers by making a substantial addition of Rs.13,67,24,000/- to the petitioner's income for the assessment year 2017-18 without any material evidence of income escapement. The petitioner repeatedly informed the respondents about the absence of any deposits in the bank account, supported by bank statements, yet the addition was made, indicating a denial of basic principles of law and justice.

Moreover, the Court noted a deliberate attempt by the respondents to cause harassment to the assessee, showcasing a conscious disregard for the rule of law and justice. The judges expressed concern over the arbitrary nature of reassessment orders passed by the respondents, including the National Faceless Assessment Centre, highlighting a deviation from established legal principles, including natural justice. This approach was deemed prejudicial to assessees and a blatant violation of fundamental legal norms that require immediate intervention.

In response to the observed misconduct, the Court directed the respondents to file a counter affidavit explaining why exemplary costs should not be imposed, citing a precedent from a Supreme Court case. The respondent no.1 was specifically instructed to file a counter affidavit personally within three weeks. Additionally, all respondents were required to respond to the writ petition's paragraphs and the court's observations within one week based on a previous order dated 26.05.2022. The case was scheduled for further hearing on 05.07.2022 at 10 AM.

As an interim measure, the Court ordered that no coercive action should be taken against the petitioner based on the impugned reassessment order or demand until the next hearing date. This directive was to be communicated to the respondents by the learned counsels within 48 hours for compliance, emphasizing the importance of ensuring fairness and procedural justice in the legal proceedings.