2023 (7) TMI 1550 - HC - Income Tax

Sufficient time to comply with Show cause notice - mandation of minimum seven-day notice period unless curtailed due to an expiring limitation period - HELD THAT - Whether there is any CBDT provision in Income Tax Act 1961 or the rules having empowered the CBDT to issue a directive on dispensation of requirement to give show cause notice on earlier omission by assessee in the proceeding. Nothing could be shown. It transpires that revenue was mandated to give the show cause notice and on having given it was bound by directions made by CBDT on reasonable time for the assessee to answer. The statement in relied on passage in the counter saying that though compliance date was 16th December 2022 scrutiny order was passed on 23rd December 2022 after 11 days and assessee did not comply till then demonstrates that there is no basis for curtailment of the response time. We set aside and quash impugned assessment order and demand. The show cause notice is restored for being replied to. Assessee is to answer by 20th July 2023 failing which scrutiny order dated 23rd December 2022 culminating in impugned assessment order and demand will all stand automatically restored.

Summary

In the case before the Orissa High Court, Justices Arindam Sinha and Sanjay Kumar Mishra presided over a dispute concerning the issuance of a show cause notice by the revenue authorities to the petitioner (assessee). The petitioner, represented by Mr. S. Ray, argued that the notice issued on December 12, 2022, required a response by December 16, 2022, which violated the Central Board of Direct Taxes (CBDT) directive mandating a minimum seven-day notice period unless curtailed due to an expiring limitation period.The revenue, represented by Mr. S. S. Mohapatra, contended that the assessee had been given several opportunities to comply and that the scrutiny order was passed on December 23, 2022, providing ample time for compliance. They argued that the response time could be curtailed in view of the assessment's limitation date, thus not violating the CBDT's Standard Operating Procedure (SOP).The court inquired whether any provision in the Income Tax Act, 1961, or rules empowered the CBDT to dispense with the requirement of a show cause notice due to previous omissions by the assessee. Finding no such provision, the court determined that the revenue was obligated to adhere to the CBDT's directive on reasonable response time.Consequently, the court set aside and quashed the impugned assessment order and demand dated December 23, 2022, restoring the show cause notice for the assessee to respond by July 20, 2023. Failure to comply by this date would result in the automatic restoration of the scrutiny order and the assessment order. The writ petition was disposed of accordingly.