2022 (6) TMI 244 - HC - Income Tax

Validity of reopening of assessment u/s 147 - rejecting the objections submitted by the petitioner to notice issued under Section 148-A(b) by ignoring the reply submitted by the petitioner - HELD THAT - As abundantly clear that the mandate of Section 148- A(b) of the Income Tax Act that the assessee shall be provided a minimum of seven days and maximum of thirty days, which may be extended by the I.T.O. for filing reply to the show cause notice, was not complied with. Furthermore, annexure to the notice indicates that the assessment was sought to be reopened in respect of a suspicious transaction which took place in a bank account maintained at the Oriental Bank of Commerce, Connaught Place, New Delhi, Delhi India Branch in the year 2017- 18. In the reply petitioner, pertinently asserted that he had no connection whatsoever with the said bank account and sought details thereof so that proper response could be filed. However, the I.T.O. expressly ignored the reply of the petitioner and passed the impugned order (Annexure- 6) dated 30.3.2022, wrongly mentioning therein that the petitioner did not file reply to the notice under Section 148-A(b) - The said finding in the impugned order is factually incorrect in view of the admitted material available on record. The response to the notice was unquestionably submitted by the petitioner within the timeline as provided under Section 148-A(b) and thus, there was no reason whatsoever for the I.T.O. not to have provided the requisite details to the petitioner. Had the account details be provided and if the petitioner was able to establish that he had no connection with the suspected bank account, manifestly, the subsequent proceedings would not have been required. It is clear that the Income Tax Authorities were trying to cover up the default on their part in not having the notice served properly upon the petitioner. Since the impugned order came to be passed on 30.03.2022, there was no ostensible reason for the Tax authorities to ignore the reply dated 29.3.2022 filed by the petitioner. As a consequence, the impugned order (Annexure-6) dated 30.03.2022, does not stand to scrutiny, as the same is absolutely arbitrary and perverse and also suffers from the gross violation of the fair play and principles of natural justice. Consequently, the impugned order (Annexure-6) dated 30.03.2022 is quashed and set aside.

Summary

Issues:
1. Rejection of objections to notice under Section 148-A(b) of the Income Tax Act.
2. Compliance with the provisions of Section 148-A(b) regarding the timeline for filing a reply to the notice.
3. Allegations of improper service of notice and subsequent disregard of the petitioner's reply.
4. Violation of principles of natural justice and fair play in passing the impugned order.

Analysis:
1. The petitioner challenged the order rejecting objections to a notice issued under Section 148-A(b) of the Income Tax Act. The petitioner contended that the notice was served improperly, and the subsequent order disregarded their reply, leading to a violation of fair play and natural justice principles.

2. The petitioner's counsel argued that the notice was issued concerning a transaction in a bank account that the petitioner did not maintain. The petitioner submitted a detailed reply within the prescribed timeline, disputing any connection with the mentioned account. However, the assessing officer ignored this reply and proceeded to pass the impugned order under Section 148-A(b) without considering the petitioner's submissions.

3. The respondents claimed that the notice was served both electronically and through post. However, the petitioner's evidence showed discrepancies in the service of the notice, indicating that it was not served in a timely manner. The court found that the minimum and maximum timeline requirements for filing a reply under Section 148-A(b) were not adhered to by the tax authorities.

4. The court held that the impugned order was arbitrary, perverse, and violated principles of natural justice. It was deemed unsustainable in law due to the failure to consider the petitioner's response and provide necessary details for clarification. Consequently, the court quashed the impugned order and directed the Income Tax Officer to provide the petitioner with the required information and an opportunity to submit a detailed reply within a specified timeframe.

In conclusion, the court allowed the writ petition, setting aside the impugned order and instructing the Tax Authority to proceed afresh in compliance with the law and principles of natural justice, ensuring a fair opportunity for the petitioner to present their case.