2025 (3) TMI 149 - HC - Income Tax

Validity of ex-parte assessment order and subsequent demand notices issued - assessment order was passed on the basis of aforesaid FIR lodged by daughter of petitioner No.1 - HELD THAT - The foundation of impugned assessment orders is FIR No.3 dated 01.01.2001 which stands quashed by this Court on the basis of compromise arrived at between the parties. The respondent-department concededly has neither conducted independent investigation nor brought on record evidence to the effect that petitioner actually earned aforesaid amount during the relevant assessment year. In the absence of any concrete evidence demand cannot be created on assumptions and presumptions. Thus we are of the considered opinion that present petition deserves to be allowed and accordingly allowed.

Summary

The petitioners sought to set aside an ex-parte assessment order and subsequent demand notices issued by the Income Tax Department based on an FIR lodged by the daughter of one of the petitioners against her husband and in-laws. The assessment order made an addition of 30 Lakhs to the petitioner's returned income. The petitioner, who was in a vegetative state at the time, passed away before the assessment proceedings could be completed. The Court considered whether the assessment order was valid given the circumstances.The key issue in this case was whether the assessment order based on the FIR was justified, considering that the FIR had been quashed by the Court due to a compromise between the parties. The Court found that the respondent department had not conducted an independent investigation or provided concrete evidence to prove that the petitioner had actually earned the undisclosed income. The Court noted that the assessment order was solely based on the FIR and that the petitioner was unable to participate in the proceedings due to his health condition.The Court analyzed the arguments presented by both parties, where the petitioner's counsel argued that the FIR had been settled amicably and that there was no evidence to support the addition of 30 Lakhs to the petitioner's income. On the other hand, the Income Tax Department's counsel contended that the petitioner was duly served notice but did not participate in the proceedings, leading to the ex-parte assessment order.After considering the facts and findings, the Court concluded that the assessment order and subsequent demand notices were not justified in the absence of concrete evidence and independent investigation by the Income Tax Department. Therefore, the Court allowed the petition and set aside the impugned order and demand notices.In summary, the Court held that the assessment order based on the FIR, which had been quashed due to a compromise, was not valid without independent evidence to support the addition to the petitioner's income. The Court set aside the assessment order and subsequent demand notices issued by the Income Tax Department.