2022 (12) TMI 183 - HC - Income Tax

Validity of reopening of assessment u/s 147 - violating principles of natural justice - sufficient opportunity was not granted to object to the proposed assessment - HELD THAT - This Court has been noticing a disturbing pattern on the part of the Income Tax department by granting minimal time to assessees to explain or answer showcause notices. The principles of natural justice mandate reasonable time to be given to the assessees to reply to showcause or other notices issued under the statute. The purpose of a showcause notice is to provide an opportunity to explain the allegations in the notice. Several steps precede the reply noticecollection of materials, verification of documents, appreciation of the allegations raised in the showcause notice, consultation with professionals etc. The aforesaid attributes that precede the preparation of response alone make an effective reply. When even minimal time to initiate the above mentioned steps is denied to assessees, this Court will be justified in exercising its extraordinary jurisdiction under Article 226 of the Constitution of India to interfere with such orders violating principles of natural justice. Adequacy of notice has to be determined on the basis of facts in each case. In the instant case, petitioner cannot complain of violation of the principles of natural justice because, though short, petitioner utilised the limited opportunity granted to him and filed an effective reply. In such circumstances, remedy of the petitioner, if any, is to move the Appellate Authority challenging Ext.P9.

Summary

Issues:
Challenge to Ext.P9 order of assessment under Section 147 of the Income Tax Act, 1961 for lack of sufficient opportunity violating principles of natural justice.

Analysis:
The petitioner challenged Ext.P9 assessment order issued under Section 147 of the Income Tax Act, 1961, alleging a lack of sufficient opportunity to object to the proposed assessment, thus violating principles of natural justice. The petitioner invoked the jurisdiction under Article 226 of the Constitution of India. The petitioner's counsel argued that the showcause notice was uploaded on a Saturday, with a deadline on Monday, not providing adequate time for a response due to Sunday being a non-working day. The respondent's counsel contended that the petitioner had sufficient time to respond and had indeed filed objections within the given timeframe. The assessing officer considered the objections but rejected them in the assessment order.

The High Court considered both parties' contentions and noted that the petitioner had utilized the opportunity given to file objections along with necessary documents. Although the petitioner mentioned the short timeline for response and requested more time to elaborate on transactions, the assessing officer addressed the contentions in the assessment order. The Court emphasized that its jurisdiction under Article 226 does not involve assessing the merits of an assessment order, especially when an appellate remedy exists. Despite the short time provided, since the petitioner utilized the opportunity and submitted objections with supporting documents, there was no infringement of natural justice warranting Court interference.

The Court expressed concern over the Income Tax department's trend of granting minimal time for responses to showcause notices, highlighting the importance of providing reasonable time for assessees to reply. While acknowledging the need for adequate time for a meaningful response, the Court stressed that the adequacy of notice must be evaluated based on individual case facts. In this case, the petitioner's effective reply despite the short timeline led the Court to conclude that there was no violation of natural justice. The Court advised the petitioner to seek redressal through the Appellate Authority against Ext.P9. The Court also excluded the time spent on the writ petition from the limitation period for filing a statutory appeal, granting liberty to the petitioner.