2021 (11) TMI 1204 - HC - Income Tax

Validity of assessment order u/s 143 - as argued proper opportunity was not provided to the petitioner to submit reply to the aforesaid notice u/s 143(3) - Due to imposition of lockdown in the State of Tamil Nadu, where the headquarter of the petitioner-Company is situated and petitioner's accountant who is also the authorized signatory, was suffering from Covid-19, the petitioner filed an on-line application for adjournment on the portal of respondent No. 2, but without assigning any reason it was rejected - as per respondent notice to the petitioner u/s 143(3) was served well in advance on 6.5.2021. The petitioner waited for the entire period upto 21.5.2021 and at the last moment submitted the request for adjournment HELD THAT - Having regard to the fact that the enormous tax liability of Rs. 15,24,18,329/- has been created and the assertion of the respondents, in their counter that no request for adjournment was received, has been found to be incorrect, in view of the reply received by the petitioner from the respondents, which is placed on record with the rejoinder and remains un-rebutted. But this is sought to be clarified by stating that it may not have received on the portal of the assessing officer due to technical glitch. Even if that be so, the petitioner can not be made to suffer on that account. Beside the reasons, which the petitioner gave in his application seeking further time to file reply to the notice, have not at all been considered. In any case, the return was likely to become time barred only after 30.6.2021. We are, therefore, persuaded to entertain the writ petition, as in our view, the appropriate course would be to provide opportunity of hearing to the petitioner to file reply to the notice and also if it desires, provide virtual hearing and then pass a fresh assessment order. We allow the writ petition and set aside the impugned order and remit the matter to respondent No. 2-National Faceless Assessment Centre, for passing fresh order of assessment, requiring the petitioner to file reply to the notice within 15 days.

Summary

Issues:
1. Quashing of assessment order under Section 143 of the Income Tax Act, 1961.
2. Violation of principles of natural justice in passing the assessment order.
3. Rejection of adjournment request by respondent No. 2.
4. Disputed acknowledgment of adjournment request by the petitioner.
5. Citation of similar cases by the petitioner's counsel.
6. Opposition to the writ petition by respondents No. 2 and 3.
7. Creation of substantial tax liability and incorrect assertion by respondents.
8. Consideration of reasons for adjournment request and time bar for return filing.
9. Decision to entertain the writ petition and provide an opportunity for a fresh assessment order.
10. Setting aside the impugned order and remitting the matter for a fresh assessment.
11. Non-effectiveness of penalty order pending the fresh assessment order.

Analysis:
The High Court of Himachal Pradesh heard a petition filed by M/s. Preethi Himachal & Company seeking the quashing of an assessment order dated 26.5.2021, passed by the National Faceless Assessment Centre, Income Tax Department, New Delhi, under Section 143 of the Income Tax Act, 1961, which raised a demand of Rs. 15,24,18,329. The petitioner alleged a violation of natural justice principles as they were not given a proper opportunity to respond to the assessment notice. The petitioner's adjournment request due to Covid-19 related issues and lockdown in Tamil Nadu was rejected by respondent No. 2, leading to the issuance of the impugned assessment order.

The petitioner's counsel argued that the adjournment request was acknowledged by the respondent on the portal, contrary to the respondent's claim of non-receipt. The petitioner cited similar cases where courts entertained petitions and remitted matters back for fresh assessment orders. However, the respondents opposed the writ petition, stating that the petitioner had ample time to respond and had an alternative appeal remedy available. The respondents also disputed the receipt of the adjournment request due to a technical glitch.

The Court noted the substantial tax liability and the incorrect assertion by the respondents regarding the adjournment request acknowledgment. Despite technical issues, the Court found in favor of the petitioner, emphasizing the need to consider the reasons for the adjournment request and the timeline for return filing. The Court decided to entertain the writ petition and directed for a fresh assessment order, providing the petitioner an opportunity for a virtual hearing. The impugned assessment order was set aside, and the matter was remitted to the National Faceless Assessment Centre for a fresh assessment within 15 days of filing a reply.

Additionally, the Court ruled that the penalty order under Section 271B would not be effective pending the fresh assessment order. The judgment highlighted the importance of providing a fair opportunity to taxpayers and ensuring procedural fairness in assessment proceedings.