2024 (12) TMI 914 - HC - Income Tax

Validity of assessment order and demand notice based on non-service of show cause notice u/s 144B (1) (xvi) - HELD THAT - As is apparent that show cause notices dated 21.09.2022 and 27.09.2022 were never served upon the petitioner. We are therefore, left with no other option but to quash and set aside the impugned assessment order and remit the matter to the respondent-Assessing Officer for passing a fresh de novo order after giving an opportunity of hearing to the petitioner to file reply to the show cause notices dated 21.09.2022 and 27.09.2022 proposing to make additions as per the provisions of Section 144 (B) (1)(xvi) of the Act. Such exercise shall be completed within a period of Twelve weeks from the date of receipt of copy of this order.

Summary

Issues:
Challenge to assessment order and demand notice based on non-service of show cause notice under Section 144B (1) (xvi) of the Income Tax Act, 1961.

Analysis:
The petitioner filed a return of income for the Assessment Year 2020-21, including capital gains from a land transfer in a partnership firm. The case was taken up for scrutiny, and various notices were issued to the petitioner to provide details. The respondent passed an assessment order on 29.09.2022 without receiving replies to show cause notices dated 21.09.2022 and 27.09.2022, which the petitioner claimed were not served. The petitioner argued that non-service of these notices violated the mandatory requirement under Section 144 (B) (1) (xvi) of the Act.

The petitioner's counsel highlighted that the respondent admitted the non-service of the show cause notices in the affidavit-in-reply. It was revealed that the emails containing the notices bounced back, and the NeFAC Unit did not notice this issue while proceeding with the assessment. The petitioner contended that the show cause notices were never served, emphasizing the mandatory nature of such service under the relevant provision of the Act.

On the other hand, the respondent's counsel could not refute the petitioner's submissions. The respondent argued that the assessment order was passed before the case's limitation period expired. They detailed the timeline of notices issued to the petitioner and the petitioner's responses, claiming that the assessment order was passed within the statutory deadline. However, they did not address the specific issue of non-service of show cause notices.

After considering both parties' arguments and the undisputed fact of non-service of the show cause notices, the Court decided to quash the assessment order and remit the matter to the respondent-Assessing Officer for a fresh order. The Court directed the respondent to provide the petitioner with an opportunity to respond to the show cause notices dated 21.09.2022 and 27.09.2022, in compliance with Section 144 (B) (1)(xvi) of the Act. The Court ordered the reassessment process to be completed within twelve weeks from the date of the order.

In conclusion, the petition was disposed of, ruling in favor of the petitioner due to the failure to serve the mandatory show cause notices, leading to the quashing of the assessment order and a directive for a fresh assessment with proper opportunity for the petitioner to respond.