2024 (10) TMI 175 - HC - Income Tax

Validity of assessment order challenged on the ground of breach of principles of natural justice - shorter period to respond to SCN - show cause notice proposing the variation was issued calling upon the petitioner to show cause on or before 20.03.2024. In spite of a request for further time, he submitted that the time was extended by only one day - addition of unexplained expenditure u/s 69C r.w.s.115BBE - HELD THAT - Without providing reasonable time to the petitioner, the proposed variation was confirmed. In these circumstances, the interest of justice warrants that a reasonable opportunity be provided to the petitioner. Therefore, the impugned assessment order dated 26.03.2024 is set aside and the matter is remanded to the first respondent for reconsideration. The petitioner is permitted to submit a detailed reply by enclosing all relevant documents within fifteen days from the date of receipt of a copy of this order. In order to enable the petitioner to upload such reply, the respondents are directed to provide access to the portal. Upon receipt of the petitioner's reply, the first respondent is directed to provide a reasonable opportunity to the petitioner, including by way of video conference hearing, and thereafter issue a fresh assessment order within a period of three months from the date of receipt of the petitioner's reply.

Summary

Issues:
Challenge to assessment order based on breach of principles of natural justice.

Analysis:
The petitioner filed an income return for assessment year 2022-23, declaring income of Rs.1,19,06,850. Notices were issued under Section 143(2) and Section 142(1) for scrutiny. A show cause notice proposing a variation in purchases was sent on 19.03.2024, with a response requested by 20.03.2024. The petitioner sought more time, which was extended to 21.03.2024. The petitioner responded on the same day, providing ledger account statements of suppliers. The assessment order was issued without considering these responses, leading to the challenge on grounds of natural justice.

The petitioner's counsel argued that despite the short extension, the response was submitted on time, offering further information if needed. The assessment order confirmed the proposed variation due to the petitioner's alleged failure to provide necessary documents. The expenses were treated as unexplained and added to the income under relevant sections. The lack of a reasonable opportunity for the petitioner to present evidence was highlighted as a basis for challenging the order.

The respondent's counsel contended that the order followed three prior notices under Section 143(2) and Section 142(1), indicating adequate opportunity for the petitioner. The show cause notice required all supporting documents by 20.03.2024, with an extension granted only until 21.03.2024 due to approaching limitation period. The order justified the decision based on the limited time available and the impending deadline.

The refusal to grant further time due to the impending limitation period was a crucial point of contention. The entire claimed expenses were added to the income without allowing sufficient time for the petitioner to respond adequately. The judgment emphasized the importance of providing a reasonable opportunity to the petitioner for a fair assessment process.

Consequently, the assessment order dated 26.03.2024 was set aside, and the matter was remanded for reconsideration. The petitioner was given fifteen days to submit a detailed reply with relevant documents. The respondents were directed to provide portal access for submission, followed by a reasonable opportunity for the petitioner, including a video conference hearing. A fresh assessment order was to be issued within three months from receiving the petitioner's reply. The case was disposed of with no costs incurred, and related motions were closed.