2024 (2) TMI 339 - HC - Income Tax

Validity of the notice u/s 142(1) - Shorter period less than 7 days to respond given - violation of principle of natural justice - HELD THAT - A period of 15 days normally to be given as a response time, which could be reduced to seven days in cases of subsequent notices. In the present case, notice has been issued on March 10, 2022, with the date for response as March 14, 2022, which is even below seven days as mandated. It is further to be noticed that limitation for conclusion of the proceedings admittedly did not arise in the present case. There is substantial merit in the contentions raised by the learned counsel for the petitioner. The question of resort to best judgment assessment u/s144 may not have arisen, if the petitioner had made out its reply to annexure J1 and the same was considered and the valid points were present as asserted that would be put forth in the reply to annexure J1. If that were to be so, the subsequent show-cause notice under section 144 at annexure J2 and the orders passed are required to be consequentially set aside. It is also to be noticed that annexure J1 has not been sent to the e-mail ID updated as per annexure N1. Accordingly, on the sole ground of violation of principles of natural justice, the notice is set aside.

Summary

Issues involved:
The petitioner sought to set aside the assessment order passed under section 147 read with section 144 read with section 144B of the Income-tax Act, 1961, along with various related documents. The main issue revolved around the validity of the notice under section 142(1) and subsequent proceedings.

Validity of Notice under Section 142(1):
The petitioner contended that the notice issued under section 142(1) was in violation of the standard operating procedure (SOP) as it provided insufficient time for response. The petitioner argued that the notices were sent to an incorrect email ID, leading to a lack of opportunity to respond. The petitioner emphasized that setting aside the initial notice would render all subsequent orders invalid due to the procedural irregularity.

Contentions of the Parties:
The petitioner's counsel highlighted the procedural lapses in issuing the notice under section 142(1) and subsequent actions taken by the department. On the other hand, the respondent's counsel argued that despite the procedural issues, the petitioner had not been diligent in participating in the proceedings, as evidenced by delayed responses to previous notices.

Court's Analysis and Decision:
The court examined the validity of the notice under section 142(1) in light of the prescribed response time in the SOP. It noted that the response time provided in the notice was below the mandated period, contrary to the guidelines. The court acknowledged the petitioner's argument that the subsequent proceedings were contingent on the validity of the initial notice. Consequently, the court set aside the notice under section 142(1) and deemed all consequential orders, including the assessment order and penalty orders, as invalid.

Remand and Conclusion:
The court remanded the matter back to the stage post the initial notice, allowing the petitioner to file a response within two weeks. The court directed the department to enable the petitioner's email portal for communication. The writ petition was disposed of in favor of the petitioner based on the violation of principles of natural justice.

This judgment underscores the importance of adherence to procedural requirements in tax assessments and upholds the principles of natural justice in administrative proceedings.