2024 (8) TMI 227 - HC - Income Tax

Validity of Assessment Order - violation of principles of natural justice - Shorter time for reply to SCN - as argued show cause notice issued directed furnishing of reply which was inadequate time and despite reply being made within short period of time made available, prejudice has been caused as the reply was made hurriedly and subsequently - HELD THAT - The show cause notice issued on 24.04.2024 at 10.35 hours sought for a reply by 26.04.2024 by 17.00 hours. This by itself is in violation of the Standard Operating Procedure as it provides that the response time for show cause notice ought to be seven days. No doubt, in the present case, written response has been made within the time sought for by the Revenue and the first of such reply at Annexure- P-1' was made on 26.04.2024 and upon subsequent opportunity, another reply was made on 28.04.2024 at Annexure- Q-1'. However, furnishing of replies within short time can be construed to be replies filed in order to meet the timeline and in case of such replies filed within short time, contention of prejudice due to lack of sufficient time to make out a reply and lack of opportunity of personal hearing to make out clarifications, as raised by the assessee, requires acceptance. Assessee submitted that the petitioner may be permitted to have opportunity of a personal hearing - The contention of the petitioner requires acceptance as the process of consideration of replies cannot be hurried in the light of last date for completion of assessment, which in the present case, was 30.04.2024. The petitioner's reply requires sufficient consideration and if an opportunity of personal hearing is furnished, not only would the petitioner be in a position to make out clarification, but, it would afford sufficient time for the Assessing Officer to consider detailed replies and to pass the orders. Accordingly, impugned Assessment Order are set aside. The matter is relegated to the stage of providing an opportunity of personal hearing to the petitioner consequent to the replies. Authority must take note of the time available under Section 163 (6) of the Income Tax Act, so as to avoid passing of an order at the fag end, which, in the present case, has caused prejudice to the assessee. All contentions are kept open.

Summary

Issues involved:
Challenge to validity of Assessment Order, computation sheet, demand notice, and refund; challenge to notice dated 30.04.2024; violation of principles of natural justice; inadequate time for reply; lack of personal hearing; hurried manner of passing order; violation of Standard Operating Procedure regarding response time; contention of prejudice due to lack of time for reply and personal hearing; request for opportunity of personal hearing; setting aside Assessment Order and notice; providing opportunity of personal hearing; consideration of replies; avoiding passing orders at the last moment; keeping all contentions open.

Analysis:
The petitioner challenged the validity of the Assessment Order, computation sheet, demand notice, and sought a refund. Additionally, the petitioner contested a notice dated 30.04.2024. The petitioner argued that the time provided for reply to the show cause notice was inadequate, leading to a hurried response and lack of personal hearing, causing prejudice. The respondent, representing Revenue, argued that a written response sufficed, denying any violation of natural justice principles.

Upon examination, it was found that the show cause notice had a response time shorter than the Standard Operating Procedure's requirement of seven days. Although the petitioner submitted responses within the given time, the hurried nature of the replies to meet deadlines could lead to prejudice due to insufficient time for clarification and lack of personal hearing. The petitioner requested a personal hearing to explain the replies further and provide additional clarifications if needed.

Acknowledging the need for a thorough consideration of the replies, the court set aside the Assessment Order and the notice dated 30.04.2024. The matter was remanded for a personal hearing to allow the petitioner to elaborate on the responses provided. Emphasis was placed on avoiding hasty decisions at the last minute to prevent prejudice to the assessee. The authority was instructed to adhere to the time constraints under the Income Tax Act to ensure fair proceedings. The petitioner was advised to await further communication from the authority and was granted the liberty to share the court's order.

In conclusion, the writ petition was disposed of accordingly, with all contentions left open for further consideration.