2021 (12) TMI 1455 - HC - Income Tax

Validity of assessment u/s 144B - short period that had been given on service of the final notice and the Draft Assessment Order - whether the request for adjournment made has been responded as required under the law and whether the assessment framed can therefore be permitted to be sustained? - HELD THAT - Once the statute provides that there is an opportunity to be availed to the assessee when there is a variation prejudicial to its interest is proposed his request for adjournment as well as for the hearing also needs to be responded to. It is a completely unacceptable and unpalatable proposition that once a request come from the assessee the respondent chooses not to respond to the same and go ahead with the framing of the assessment that too when the time period was not expiring. Even if the time period expires it is for the respondent to workout a schedule in the manner as expected particularly when there is no human agency and when the assessee also has no one to turn to but to send a request through the e-portal. Therefore in the instant case when there was already a second surge of infection due to COVID-19 virus the entire country was grappled with that second waive. If there is a categorical request that was made on account of such infection of the partner of the petitioner company and time was sought on 10.04.2021 when the time period for finalizing the assessment was getting over on 30.04.2021 as was known to the respondent from February 2021 as extension had already come by virtue of the Circular the framing of the assessment in clear defiance and in violation of this provision shall need to be interfered with. Resultantly we allow the present petition and quash and set aside the Assessment Order rendered u/s 143 (3) r.w.s. 143(3A) and 143(3B) which has been framed by the authority. The penalty proceedings and the demand notice are also quashed and set aside. AO shall be availing an opportunity to the petitioner including the opportunity of personal hearing if requested for and decide the matter in accordance with law.

Summary

Issues:
Challenge to Assessment Order under Income Tax Act, 1961 - Legality and Validity of Assessment Order dated 27.03.2021 under Section 143 (3) read with Section 143(3A) and 143(3B) of the Act.

Analysis:
1. The petitioner, a registered partnership firm, challenged the Assessment Order dated 27.03.2021 under Section 143 of the Income Tax Act, 1961. The petitioner filed the return for the Assessment Year 2018-2019, which was selected for scrutiny. Notices were issued under various sections, leading to a final show cause notice on 25.03.2021 with a Draft Assessment Order proposing modifications and additions to the income, resulting in a significant increase in the total income assessed.

2. The petitioner sought an adjournment on 26.03.2021 until 10.04.2021 due to COVID-19 related issues affecting partners and the festival of Holi, but the respondent proceeded with the Assessment Order on 27.03.2021 without responding to the adjournment request. The petitioner approached the court seeking to quash the order and restrain further actions.

3. The Income Tax Officer contended that the petition was premature as alternative remedies were available. The petitioner argued that the denial of the adjournment request was unlawful, supported by evidence from the ITBA portal. The court examined the response to the adjournment request and the validity of the Assessment Order in light of procedural requirements.

4. The court highlighted the importance of providing a reasonable opportunity to the assessee when proposing variations prejudicial to their interests. It noted the short time given to respond to the Draft Assessment Order and the adjournment request made by the petitioner due to genuine reasons related to COVID-19 and festival commitments.

5. The court found that the respondent's failure to respond to the adjournment request and provide a reasonable time for the petitioner to respond violated procedural requirements under the Act. The Assessment Order was set aside, along with penalty proceedings and demand notices. The assessing officer was directed to provide an opportunity to the petitioner, including a personal hearing if requested, and decide the matter in accordance with the law.

6. Direct service through speed post and e-mode was permitted in addition to regular modes of service to ensure effective communication in future proceedings. The judgment emphasized the importance of procedural fairness and providing adequate opportunities to parties involved in assessment proceedings.