2022 (1) TMI 656 - HC - Income Tax

Unexplained income - petitioner was asked instructions as to whether the petitioner was willing to deposit any amount as a condition for setting aside the impugned order and to remit the case back to the respondents to pass a fresh de novo order - respondents submits that the petitioner has been negligent in not responding to any of the notices and the information sought for and that repeated notices remained unanswered - HELD THAT - The petitioner has made out a case for interference as the impugned order has been passed based on the assumption that the amount urging in the petitioner's account during the period were an unexplained income of the petitioner. The fact remains that the two officers had left the petitioner and thus the petitioner could not reply to notice. The fact that the petitioner will have to be wound up if the impugned order remains. Therefore, the impugned order is quashed, subject to the petitioner depositing a sum of ₹ 5 Crores in two equal instalments within a period of two months from the date of receipt of a copy of this order. The first instalment shall be paid before the end of first month, i.e on or before 31.01.2022 and the second instalment by 14.02.2022. On payment of the aforesaid amount, the impugned order shall stands quashed. As and when the petitioner deposits the aforesaid amount, the attachment order issued pursuant to the impugned assessment order dated 29.09.2021 shall also automatically stand vacated. The official respondents shall pass an order on merits within a period of ninety (90) days from the date of receipt of a copy of this order on such payment. The impugned order which stands quashed by this order subject to compliance of the conditions stipulated herein, shall be treated as a Show Cause Notice in addition to the Show Cause Notice already issued to the petitioner.

Summary

Issues:
Assessment of unexplained income in petitioner's account, failure to respond to notices, impugned order quashed subject to deposit conditions, attachment order to be vacated upon deposit, time frame for passing fresh order, impugned order treated as Show Cause Notice, deadline for filing reply, instructions for uploading information, cooperation in reassessment proceedings.

Analysis:
The judgment addresses the issue of the assessment of unexplained income in the petitioner's account. The petitioner, an IATA agent, received advance amounts from clients for airline tickets. The impugned order considered this amount as unexplained income, leading to proceedings for finalizing the assessment. The petitioner's officers, who handled accounts and tax matters, had left the company, resulting in non-responsiveness to notices from the Income Tax Department.

Regarding the failure to respond to notices, the Senior Standing Counsel for the respondents highlighted the petitioner's negligence in not addressing the notices and information requests, leading to unanswered communications. The counsel argued that certain disputed facts could not be examined in summary proceedings under Article 226 of the Constitution, suggesting that the petitioner should pursue an appeal under Section 246A of the Income Tax Act.

The impugned order was quashed with the condition that the petitioner must deposit ?5 Crores in two equal instalments within two months. Failure to make these payments would result in the impugned order remaining valid. Upon deposit, the attachment order issued would be automatically vacated, and a fresh order on merits would be passed within ninety days.

The judgment treated the quashed impugned order as a Show Cause Notice, requiring the petitioner to file a reply within thirty days. Instructions were given for uploading information within the specified period, and the petitioner was directed to cooperate in the reassessment proceedings. The writ petition was disposed of with these directives, without imposing any costs, and related miscellaneous petitions were closed accordingly.