2024 (8) TMI 435 - HC - Income Tax

Validity of reassessment proceedings - petitioner not being afforded with adequate opportunity to respond to the show cause - HELD THAT - From the digital signature appearing on the show cause, it would appear that the same was issued on 13th February, 2024, at around 18.37 hrs. As such 7 clear days time was not afforded to the petitioner. Petitioner ought to have been granted 7 clear working days time and the time period of 7 days is only the minimum period which has been provided for - Admittedly, in this case after expiry of the time specified for submitting the response, the submit response button on the portal was deactivated and as such the petitioner had no opportunity to file her response. The aforesaid constitutes violation of principles of natural justice. Admittedly, in this case limitation for completion of assessment proceeding do not intervene for not providing of clear days response time. It may be noticed that the object of show cause is to offer an opportunity to respond. Admittedly, in this case it would appear that Saraswati Puja was on 14th February, 2024 and as such, the same coupled with the short response time as indicated hereinabove, may have made it unviable for the petitioner to offer response, within the specified time. The above constitutes violation of the principles of natural justice. Since, the assessment order was passed without considering the petitioner s response, the matter is remanded back to the Faceless Assessment Unit. The petitioner is directed to submit her response with the Faceless Assessment Unit within a period of 15 days from date. For such purpose, the Faceless Assessment Unit shall reactivate the submit response button in the portal within a week from date and communicate the same to the petitioner via email. .

Summary

Issues: Challenge to notice under Section 148A(b), order under Section 148A(d), notice under Section 148, show cause notice for assessment year 2019-20, assessment order under Section 147, violation of principles of natural justice, opportunity to respond, remand of assessment order.

Analysis:
1. The petitioner challenged various notices and orders under the Income Tax Act, primarily focusing on the lack of adequate opportunity to respond to the show cause notice. The petitioner contended that the time provided to respond was insufficient and did not comply with the prescribed procedures and standards.

2. The petitioner's advocate argued that the petitioner was not given the required 7 clear working days to respond to the show cause notice, as mandated by Section 144B(6)(vii) of the Act and the Standard Operating Procedure (SOP) issued by the Commissioner of Income Tax. The advocate cited a judgment to support the claim of violation of natural justice principles.

3. The Court acknowledged the petitioner's contention and observed that the petitioner was not afforded a proper opportunity to respond within the stipulated time frame, thus violating the principles of natural justice. Consequently, the Court considered setting aside the assessment order and remanding the matter for the petitioner to file a response and for a fresh assessment order to be issued after due consideration.

4. The respondents argued that the petitioner had been given sufficient time to respond and that the judgment cited by the petitioner's advocate was not directly applicable to the present case. However, they admitted that certain intervening events, like Saraswati puja, might have affected the response timeline.

5. The Court noted that the petitioner had abandoned the challenge to certain notices and orders, limiting the scope of the petition to the challenge regarding the show cause notice and the assessment order. The Court proceeded to evaluate the case based on this narrowed focus.

6. After careful examination, the Court found discrepancies in the issuance of the show cause notice and noted that it did not adhere to the SOP for the faceless assessment unit under Section 144B of the Act. The Court highlighted the importance of following natural justice principles and ensuring adequate response time for the petitioner.

7. Considering the violations of natural justice and the assessment order being passed without considering the petitioner's response, the Court decided to remand the matter back to the Faceless Assessment Unit for the petitioner to submit a response within a specified timeline.

8. The Court directed the Assessment Unit to reactivate the response submission option and communicate the same to the petitioner. If the petitioner submits a response within the given time, the Assessment Unit is instructed to consider the response, provide an opportunity for a hearing, and pass a new assessment order within a specified period.

9. Consequently, the Court set aside the previous assessment order and related notices, emphasizing that the petitioner had waived the right to challenge certain other notices. The Court also instructed the assessing officer to adjust any tax paid by the petitioner while passing the new assessment order.

10. It was clarified that the Court had not delved into the merits of the case, and the assessing officer was directed to make the assessment order solely based on the case's merits, without influence from the Court's observations.

This comprehensive analysis outlines the key issues, arguments presented by both parties, the Court's observations, and the final directives given in the judgment by the High Court of Calcutta.