2017 (12) TMI 363 - HC - Income Tax

Reopening of assessment - violation of principles of natural justice - whether the respondent could not have passed the impugned order on 25.9.2017 as he fixed the date for production of documents on 27.9.2017? - Held that - There has been violation of the principles of natural justice. The petitioner having been afforded an opportunity to produce the records on or before 27.9.2017 the respondent should have waited till 27.9.2017. The explanation offered by the learned senior standing counsel that the officer himself has secured the documents from the concerned Sub-Registrar and therefore proceeded to pass the impugned order is not a convincing reply as the officer by intimation dated 11.09.2017 not only called for the copies of documents but also the copies of the profit and loss account the balance sheet and auditor s report Under Section 44 AB of the Act for the assessment year 2009-2010. Thus this Court is convinced that the impugned order has been passed in violation of the principles of natural justice. These are sufficient reasons to hold that the impugned order cannot stand to the test of law. Writ petition is allowed the impugned order is set aside and the matter is remitted back to the respondent for a fresh consideration

Summary

Issues:
1. Rejection of objections to a notice issued under Section 148 of the Income Tax Act for re-opening assessment.
2. Allegation of income tax evasion due to unfiled returns and undisclosed income.
3. Violation of principles of natural justice in passing the impugned order prematurely.

Analysis:
1. The petitioner challenged the impugned order rejecting objections to a notice under Section 148 of the Income Tax Act for re-opening the assessment for the year 2010-2011. The respondent alleged that the petitioner did not file income tax returns for that year despite substantial transactions, including property sales and professional fees. The respondent invoked Section 147, claiming income had escaped assessment due to the petitioner's non-disclosure.

2. The petitioner responded, explaining that the transactions in question occurred in the previous assessment year, for which returns were filed and taxes paid. As there was no income for the year under scrutiny, the petitioner did not file a return. The respondent, in a seemingly reasonable manner, requested the petitioner to provide supporting documents to verify the claims made in the objections.

3. However, the respondent prematurely passed the impugned order before the deadline set for the petitioner to produce the required documents. The petitioner argued that this premature action violated the principles of natural justice, as the respondent should have waited until the specified date. The Court agreed, noting that the officer's explanation for the early decision was insufficient, as the request for documents indicated a need for thorough examination before making a decision.

4. Consequently, the Court allowed the writ petition, setting aside the impugned order and remitting the matter back to the respondent for fresh consideration. The respondent was directed to provide a personal hearing, review the documents submitted by the petitioner, examine relevant financial reports, and issue a reasoned order in compliance with the law. The Court emphasized the importance of adhering to principles of natural justice and ensuring a fair and thorough assessment process.