2020 (12) TMI 308 - HC - Income Tax

Reopening of assessment u/s 147 - non filing of the returns - petitioner was not given any opportunity to seek the reasons for reopening the assessment or submit his objections to the reopening of the assessment - HELD THAT - It is the case of the petitioner that they were unable to submit the returns due to the fact that the e-system portal of the respondents does not enable a company, which has been merged with another company pursuant to an amalgamation order passed by a Court, to file its income tax returns manually. The petitioner having produced the error report of the respondents will clearly establish that the attempts made by the petitioner to submit the returns for M/s.OAS Digital Infrastructure Private Limited, due to the fact that the e-portal system of the respondents does not enable the said report to be filed electronically, was a genuine one. Respondents vehemently argued that the reasons for non filing of the returns by the petitioner cannot be believed in view of the fact that the petitioner had contended before the respondents through their communication that they need not file returns on behalf of M/s.OAS Digital Infrastructure Private Limited, the same cannot be accepted by this Court, as there is no conclusive proof to show that the attempts made by the petitioner to file the returns was not a genuine one - the benefit of doubt must also be given to the assessee. Therefore, this Court is of the considered view that principles of natural justice has been violated by the respondents while passing the impugned assessment order, as no opportunity has been given to the petitioner to file their returns pursuant to the notice issued by the respondents under Section 148 of the Income Tax Act, 1961, for reopening of assessment. The impugned assessment order passed by the second respondent against the petitioner for the assessment year 2012-13 is hereby quashed and the matter is remanded back to the second respondent for fresh consideration and the second respondent shall pass final assessment orders after permitting the petitioner to file the returns under Section 147 on merits.

Summary

Issues:
Challenge to assessment order under Section 144 r/w Section 147 of the Income Tax Act, 1961 for assessment year 2012-13. Allegations of violation of principles of natural justice, inability to file returns electronically post-merger, suppression of income, denial of opportunity to file returns, and violation of principles of natural justice by the respondents.

Analysis:
The Writ Petition challenges the assessment order for the assessment year 2012-13 under Section 144 r/w Section 147 of the Income Tax Act, 1961. The primary ground of challenge is the lack of opportunity for the petitioner to seek reasons for the reopening of assessment or submit objections, as mandated by the Supreme Court in GKN Driveshafts vs. Income Tax Officer. The petitioner contends that the e-portal system did not allow filing returns electronically due to a merger with another company, leading to the assessment order being passed without authority under law.

The respondents, however, deny these allegations, stating that opportunities were provided for filing returns but the petitioner failed to do so. They argue that the petitioner never requested manual filing and that the merged company had not filed returns previously. The assessment order was based on income details that allegedly escaped assessment, including contract, professional, and interest receipts, along with unexplained cash deposits.

The Court notes that there is no provision for electronic filing post-merger under the e-portal system. It emphasizes the importance of providing the petitioner with a fair hearing and opportunity to raise objections. The petitioner's attempts to file returns electronically were hindered by system limitations, as evidenced by error reports. Despite the respondents' contentions, the Court finds the petitioner's efforts genuine and rules in favor of granting the benefit of doubt to the assessee.

Consequently, the Court quashes the assessment order and remands the matter for fresh consideration. The respondents are directed to allow the petitioner to file returns manually within a specified timeframe, ensuring a fair opportunity for the petitioner, including the right to a personal hearing. The judgment highlights the importance of upholding principles of natural justice and providing adequate opportunities for the assessee to present their case.

In conclusion, the Writ Petition is disposed of with the directions outlined to ensure a just and fair assessment process.