2025 (3) TMI 727 - HC - Income Tax

Writ petition quashing of undated assessment order passed u/s 143(3) - Penalty u/s 270A and 271AAC - HELD THAT - AO would have to exercise its own discretion to reach a conclusion and would not be influenced by any other officer. We find force in the contention raised by petitioner that the concerned AO was influenced by the consultation and discussion with his superior officers. In fact the order passed by the AO appears to have been already prepared even before the reply was received as the consultations have been conducted on 26.10.2023 11.01.2024 and 14.03.2024 by the AO as mentioned by him in the order itself. Again after the reply was received and the order was passed by the AO the same has been approved by the Joint Commissioner. As such we find that the Joint Commissioner has in fact comprehensively and actively participated in the making of the assessment order while his role was only limited to the approval of the assessment order in terms of the CBDT Circular. Thus we find the order to be vitiated in law. The assessment order cannot be result of an independent application of mind and exercise of discretionary power by the AO in terms of Section 143(3) of the Act and but is an order passed under the influence and directions of the superior officers. As noticed that the consultation with a superior officer would be akin to directions of the superior. There is no room available for discretion where consultation is sought from a superior officer while if a superior officer consults his subordinates the discretion continues to stay with him. He may choose not to follow the advice of his subordinate but the opposite would be untrue. We are thus of firm view that the order has been passed whereby the AO has abdicated his authority and therefore the order has become vitiated in law. Non-compliance of principles of natural justice - A presumption cannot be drawn that after a demand is made the person would have to himself appear without being provided any particular date. In our opinion the submissions advanced by the respondents therefore are misconceived and we are unable to accept the contentions of the respondents that it was the duty of the petitioner s company to appear before the concerned AO after having filed its reply. We therefore held that the AO has failed to follow the basic principles of natural justice while passing the impugned order and the petitioner was not provided fair and reasonable opportunity to put up its defence and the order passed is therefore liable to be struck down as illegal and arbitrary. Order of assessment being time barred - While the assessment order is reflected on portal on 04.04.024 in order to further verify we ask the counsel for the revenue to place on record the email sent by them to the petitioner on 31.03.2024 relating to having passed the assessment order but the revenue filed evasive application wherein details of dates when emails were sent have been shown but from the chart placed before us along with the application it is apparent that no email was sent to the assessee containing the assessment order on 31.03.2024. A flimsy attempt has been made to cover up the mistake. It is a fact that for covering one mistake you make more mistakes one after the other. However we are satisfied after examining all the documents placed before us that there has actually been no order made on 31.03.2024 and therefore the judgment passed in the case of Mohammed Meeran Shahul Hameed case 2021 (10) TMI 363 - SUPREME COURT would have no application and would not save the time barred order of assessment. We also find that so far as the party who is effected by the order or decision would only consider the limitation from the date it acquires the knowledge and for him the limitation would start from the said date. Be that as it may since we have reached to the conclusion that order passed was not made upto 31.03.2024 the period in terms of proviso added vide Finance Act 2022 w.e.f. 01.04.2022 will apply to the facts of the case and the order is to be termed as time barred and beyond the period of limitation prescribed therein. The order of assessment is found to be non est and not sustainable in the eyes of law. Accordingly order of assessment is quashed and set aside.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the assessment order was vitiated due to improper exercise of discretion by the Assessing Officer, influenced by consultations with superior officers, contrary to the provisions of the Income Tax Act, 1961.

2. Whether the assessment order was barred by limitation as it was not completed within the prescribed period under Section 153 of the Act.

3. Whether the assessment proceedings violated the principles of natural justice due to the denial of a personal hearing to the petitioner.

ISSUE-WISE DETAILED ANALYSIS

1. Exercise of Discretion by the Assessing Officer

The relevant legal framework involves Section 143(3) of the Income Tax Act, which mandates the Assessing Officer to independently exercise discretion while making an assessment. The Court analyzed precedents like Anirudhsinhji Karansinhji Jadeja vs. State of Gujarat and SPL Siddhartha Ltd. to emphasize that statutory powers must be exercised independently, without undue influence from superior officers. The Court found that the Assessing Officer's consultations with superior officers amounted to an abdication of his discretion, rendering the assessment order vitiated in law.

The Court noted that the Assessing Officer's discussions with superior officers on multiple occasions before and after receiving the petitioner's reply indicated that the order was not independently made. This reliance on superior officers' input was contrary to the independent application of mind required under Section 143(3).

2. Limitation on Assessment Order

Section 153 of the Act prescribes a twelve-month limitation period for completing assessments for the assessment year commencing on or after April 1, 2022. The Court examined whether the assessment order was made within this timeframe. Despite the revenue's argument that the order was passed on March 31, 2024, the Court found no evidence of this, as the order was undated and only reflected on the portal on April 4, 2024.

The Court relied on judgments like M.M. Rubber and Rai Bahadur Kishore Chand to assert that the order must be made and communicated within the limitation period. The absence of a date on the order and the lack of communication to the petitioner before April 4, 2024, led the Court to conclude that the order was time-barred.

3. Violation of Principles of Natural Justice

The Court considered the petitioner's claim that a personal hearing was requested but not granted, violating the principles of natural justice. The Court emphasized the principle of audi alteram partem, which requires that a party must be given a fair opportunity to present their case.

The Court found that the petitioner was not provided a personal hearing despite requesting one, and the assessment order was based on documents not previously disclosed to the petitioner. This lack of opportunity to be heard and respond to the evidence used against them was a breach of natural justice, rendering the assessment order invalid.

SIGNIFICANT HOLDINGS

The Court held that the assessment order was vitiated due to the improper exercise of discretion by the Assessing Officer, influenced by superior officers, contrary to the statutory requirement for independent decision-making. The assessment order was also found to be time-barred, as it was not completed within the prescribed limitation period. Furthermore, the proceedings violated the principles of natural justice by denying the petitioner a personal hearing.

"The order has been passed whereby the Assessing Officer has abdicated his authority and, therefore, the order has become vitiated in law."

The Court emphasized that statutory powers must be exercised independently, and any influence from superior officers can render the decision ultra vires and void. The judgment reinforces the importance of adhering to statutory procedures and respecting the principles of natural justice in administrative processes.

In conclusion, the assessment order was quashed and set aside, with the Court allowing the writ petition and dismissing all pending miscellaneous applications.

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