2024 (12) TMI 1066 - HC - Income Tax

Validity of re-assessment u/s 148A - short time of two days was given to the petitioner to submit its reply after receipt of the Investigation Report, petitioner - HELD THAT - Having considered the rival submissions of learned counsels and on perusal of the record, we are of the opinion that order passed by 3rd Respondent initiating re-assessment proceeding against the petitioner is not only in utter violation of the principles of natural justice, but the same has been passed in undue haste which smacks of arbitrariness, as statutory provision of Section 148A has not been followed by 3rd Respondent. It is well settled principles of law that anything done in undue haste can also be termed as arbitrary and cannot be condoned in law. From the facts of the case, it is clearly evident that, initially, show cause notice was issued on 24.02.2024, wherein there was mention about enclosure of an Investigation Report, but said Investigation Report was not supplied to the petitioner and, as per the petitioner, said Investigation Report was supplied on 17.03.2024. Respondents, in their Counter Affidavit, admit that, probably, on account of technical error, enclosures were not contained as attachment to the notice dated 24.02.2024, but it has been stated that subsequently Investigation Report was duly sent to the petitioner through ITBA system vide letter dated 12.03.2024 and through Departmental e-mail dated 13th March, 2024 at 1.06 P.M. In the present case since new facts were introduced in the notice on 20th March, 2024, at least seven days time should have been granted to Petitioner for replying to the same, but in a hurried manner, entire proceedings were conducted and impugned order dated 29.03.2024 was passed by 3rd respondent in utter violation of the principles of natural justice and contrary to statutory provisions contained u/s 148A of the Act. Impugned order and Notice initiating re-assessment proceeding u/s 148 both issued by the 3rd Respondent, are hereby, quashed and set aside.

Summary

Issues:
Violation of principles of natural justice in re-assessment proceeding under Section 148A of the Income Tax Act, 1961.

Analysis:

The petitioner challenged the order passed by the 3rd Respondent under Section 148A (d) of the Income Tax Act, initiating re-assessment proceedings for the Financial Year 2018-19. The petitioner contended that the notice issued did not comply with the principles of natural justice and was in undue haste. The petitioner was accused of benefiting from alleged bogus entries, cash withdrawals, and time deposits without proper disclosure of sources. The petitioner requested copies of the Investigation Report, which were not provided in a timely manner, leading to a rushed response deadline. The 3rd Respondent added new allegations regarding a time deposit, further complicating the case. Despite requests for more time to respond, the 3rd Respondent proceeded hastily and issued the impugned order for re-assessment. The High Court found the actions of the 3rd Respondent to be arbitrary and in violation of natural justice principles.

The Court emphasized that actions taken in undue haste can be considered arbitrary and unacceptable in law. The failure to provide adequate time for the petitioner to respond to new allegations and the rushed nature of the proceedings were highlighted as key issues. The Court noted that the 3rd Respondent did not follow the statutory provisions of Section 148A, which require providing sufficient time for the assessee to respond. The introduction of new facts in the notice on 20th March 2024 necessitated a reasonable time for the petitioner to reply, which was not granted. The Court concluded that the 3rd Respondent's actions were in violation of natural justice principles and statutory provisions.

The Court quashed and set aside the impugned order and notice issued by the 3rd Respondent, citing the violation of natural justice and statutory provisions. However, the 3rd Respondent was permitted to initiate fresh proceedings strictly following the provisions of Section 148 of the Act. The Court acknowledged the petitioner's unnecessary harassment and imposed a cost of Rs. 50,000 on the 3rd Respondent to be paid to the petitioner. The writ petition was allowed, and any pending applications were disposed of accordingly.