2023 (6) TMI 740 - HC - Income Tax

Reopening of assessment - evasion of Value Added Tax (VAT) - variation in income - bogus documents used in this context - petitioner sought accommodation on the ground that he would require time to gather and/or collate the relevant material - HELD THAT - As is evident, AO without dealing with the request of the petitioner for accommodation, has passed the impugned assessment order u/s 147 r.w.s. 144B. There was clearly a violation of principles of natural justice. The petitioner was entitled to know whether or not his request for accommodation was being entertained. Having regard to the aforesaid circumstances, the impugned assessment order is set aside. The AO is, however, given liberty to pass a fresh order, if deemed necessary, albeit in accordance with the law.

Summary

Issues Involved:
The judgment involves issues related to evasion of Value Added Tax (VAT), use of bogus documents, escapement of income, violation of principles of natural justice, and assessment order under Section 147 of the Income Tax Act, 1961.

Evasion of VAT and Escapement of Income:
The petitioner was alleged to be involved in evasion of Value Added Tax (VAT) and using bogus documents. The respondent claimed that income of Rs. 86,45,876/- had escaped assessment due to VAT-related issues. However, the petitioner argued that the allegation pertained to VAT refund, not evasion, stating that VAT refund cannot lead to escapement of income. A show cause notice proposing variation in income was issued, but the Assessing Officer (AO) passed the assessment order without addressing the petitioner's request for time to gather relevant material, leading to a violation of natural justice principles. The court set aside the assessment order, granting the AO liberty to pass a fresh order in accordance with the law.

Violation of Principles of Natural Justice:
The petitioner's request for time to gather relevant material in response to the show cause notice was not addressed by the Assessing Officer (AO) before passing the assessment order. This lack of consideration amounted to a violation of principles of natural justice. The court held that the petitioner was entitled to know whether his request for accommodation was being entertained before the assessment order was finalized. Consequently, the impugned assessment order was set aside, with the AO given the option to issue a fresh order, if necessary, while ensuring compliance with legal procedures.

Disposal of Writ Petition and Consequential Notices:
In light of setting aside the impugned assessment order due to the violation of natural justice principles, the court directed the petitioner to file a reply to the notice under Section 148A(b) of the Income Tax Act within four weeks. The respondent was instructed to facilitate the petitioner's access to upload the reply through the designated portal. As the court did not delve into the merits of the case, it clarified that nothing in the judgment would impact the case's substance. Consequently, all consequential notices, including demand and penalty notices, were deemed void following the annulment of the assessment order. The writ petition was disposed of accordingly, with pending interlocutory applications closed, and parties instructed to act based on the digitally signed copy of the order.