2024 (6) TMI 692 - HC - Income Tax

Validity of assessment order passed without considering reply - Reasons for not incorporating the reply in the Assessment Order - HELD THAT - Once the petitioner assessee has tendered the reply to the Show Cause Notice on 23.02.2024 it was incumbent upon AO to consider such reply and thereafter to pass the Assessment Order dealing with the objections raised by the assessee with regard to additions proposed in the show cause notice otherwise issuance of show cause notice prior to framing the assessment along with the draft assessment order would be futile exercise contrary to provisions of Section 144B of the Income Tax Act 1961. Explanation given by the AO that the draft assessment order was already sent for approval and therefore reply dated 23.02.2024 tendered by the assessee was not reflected in the impugned Assessment Order cannot be accepted. Thus because while framing the impugned Assessment Order reply is not taken into consideration by the respondent Assessing Officer the same is hereby quashed and set aside and the matter is remanded back to the AO to pass fresh de novo order after considering the contents of reply filed by the petitioner assessee and after providing opportunity of hearing if the petitioner seeks such opportunity. Such exercise shall be completed within 12 weeks from the date of receipt of copy of this order.

Summary

Issues involved:
The petitioner sought to quash an Assessment Order and Demand Notice under Article 226 of the Constitution of India, alleging that their detailed reply was not considered before the Assessment Order was issued.

Summary:

Issue 1: Consideration of petitioner's reply before passing Assessment Order
The petitioner filed a return of income, responded to notices under Section 148 and 143(2) of the Income Tax Act, and requested documents related to a third party. Despite submitting a detailed reply to a show cause notice, the Assessment Order was finalized without considering it. The court found that the respondent Assessing Officer failed to consider the petitioner's reply, which was submitted before the Assessment Order was finalized. The court held that the Assessing Officer's explanation for not incorporating the reply in the Assessment Order was contrary to the provisions of the Act. The Assessment Order was quashed and remanded back to the Assessing Officer for a fresh order after considering the petitioner's reply and providing an opportunity for a hearing if requested, to be completed within 12 weeks.

Conclusion:
The court ruled in favor of the petitioner, quashing the Assessment Order and remanding the matter back to the Assessing Officer for a fresh order considering the petitioner's reply.