2023 (8) TMI 1370 - HC - Income Tax

Upward adjustment by the AO to income - demand raised inclusive of interest levied u/s 234B/C - as argued demand raised is completely unsustainable as no show-cause notice was issued as required under the proviso appended to Section 143(1)(a) - HELD THAT - The petitioner could not respond to the email dated 29.05.2023. Since Mr Gupta Respondent has no instructions on whether the tab on the designated e-filing portal was operable this aspect attains criticality. The reason is even if we were to accept Respondents contention that there is no requirement to serve a show cause notice what cannot be disputed by him is that there is a requirement to consider the response of the petitioner in terms of the proviso appended to Section 143(1)(a) of the Act. Therefore the terminology used in the email will make little difference to the outcome. What is relevant is that if an assessee is served with intimation by an AO he should be in a position to respond to it failing which the AO cannot consider it which is the requirement of the provision. As regards the other submission concerning the grant of approval by the person(s) who executed the POA we would like Mr Jain to place on record the consent given for instituting the writ petition along with other relevant documents which would sustain the progress of the writ petition. We also note that although the intimation email dated 29.05.2023 adverted to a disallowance amounting the addition as stated above was substantially more. Therefore whether this intimation would suffice is another aspect that Respondents will have to answer on the next hearing date. Accordingly issue notice. List the matter on 16.10.2023.

Summary

Issues Involved:
The issues involved in this judgment pertain to the Assessment Year (AY) 2022-23, where the petitioner/assessee filed its Return of Income (ROI) and faced an upward adjustment by the Assessing Officer (AO) under Section 143(1)(a) of the Income Tax Act, 1961. The key issues include the validity of the adjustments made by the AO, the necessity of a show-cause notice, the requirement to consider the petitioner's response, and the compliance with procedural requirements.

Adjustments Made by AO:
The petitioner's income was substantially enhanced by the AO through an intimation order, resulting in a demand of Rs. 35,72,60,44,590/- inclusive of interest. The adjustments made by the AO were challenged by the petitioner, claiming that the additions were based solely on an increase in profit without considering the corresponding decrease. Additionally, the petitioner argued that credit for prepaid taxes was not allowed, further contesting the sustainability of the demand raised.

Procedural Compliance and Validity of Adjustments:
The petitioner contended that the AO's actions were unsustainable due to the absence of a show-cause notice, as required under Section 143(1)(a) of the Act. It was argued that the additions made did not fall within the AO's power under the said provision, especially considering that a notice under Section 143(2) had already been issued. The petitioner emphasized the need for compliance with procedural safeguards and relied on relevant legal precedents to support its position.

Response to Intimation and Compliance Issues:
The petitioner faced challenges in responding to the intimation email dated 29.05.2023, citing technical difficulties with the e-filing portal. The petitioner raised concerns regarding the lack of clarity in the intimation and the AO's failure to consider its response before passing the impugned order. The Court highlighted the importance of allowing the assessee to respond to such communications and emphasized the significance of procedural fairness in tax assessments.

Compliance with Power of Attorney Requirements:
The respondents raised an issue regarding compliance with the Power of Attorney (PoA) requirements, asserting that prior approval was necessary for instituting the writ petition. The Court directed the petitioner's counsel to provide consent for instituting the petition and other relevant documents to address this aspect. The compliance with PoA provisions was deemed essential for the progression of the writ petition.

Conclusion:
The Court acknowledged the contentions raised by both parties and issued notice on the matter, with further instructions for compliance and documentation. The operation of the impugned intimation was stayed, pending the resolution of the issues raised. The parties were directed to act based on the digitally signed copy of the order, with a scheduled listing for the next hearing date on 16.10.2023.