2019 (6) TMI 405 - HC - Income Tax

Writ against assessment order - non consideration of belated defective and revised return - grievance of the petitioner that the respondent without providing sufficient opportunity of hearing had proceeded to pass the impugned assessment order u/s 143(3) sans considering the return and the revised return vis- -vis the claims made towards deduction/exemption u/ss 48 and 54F - HELD THAT - Ordinarily, this Court would have relegated the petitioner-assessee to avail the statutory remedy of appeal available under the Act provided the principles of natural justice are adhered to. As could be seen from the order impugned, the respondent has not whispered about the revised return filed by the assessee except observing that the returns filed by the assessee were invalidated being defective returns. If that being the position, no opportunity was provided to the petitioner u/s 139(9) to remove the defects in the returns pointed out by the Assessing Officer nor an opportunity was provided to file a return pursuant to the notice issued u/s 142(1 ). Even assuming that the arguments of the learned counsel for the Revenue that no revised returns could be accepted enlarging the claim of deduction/exemption beyond the time prescribed under the Act, it is sine-qua-non for the Assessing Officer to consider the claims of deduction/exemption made by the petitioner-assessee and thereafter to return the said claims if the assessee is not entitled to the same by assigning the reasons. The impugned assessment order prima-facie establishes that the deduction claimed u/s 54F is not considered while computing the taxable turnover. This would certainly indicates the non-application of mind by the respondent. Recording of reasons is sine-qua-non for arriving at a conclusion by the quasi-judicial authority and it is essential to adopt, to sub-serve the purposes of justice delivery system. The reasons are the soul and heartbeat of the orders without which the order is lifeless and void. Where the reasons are not recorded in the orders it would be difficult for the Courts to ascertain the minds of the authorities while exercising the power of judicial review. It is well settled legal principle that there is no bar to invoke the writ jurisdiction against a palpable illegal order passed by the Assessing Authority in contravention of the principles of audi alteram partem. On this ground alone, the order impugned cannot be approved. There is no cavil with the arguments of respondent placing reliance on the judgment of Goetze India Ltd. 2006 (3) TMI 75 - SUPREME COURT that no claim for deduction otherwise than, by filing a revised return can be considered but not in the absence of Assessing Officer analyzing, adjudicating and arriving at a decision by recording the reasons. It is apparent that no reasons are forthcoming for rejecting the revised returns as well as the claims made u/s 54F. Such a perfunctory order passed by the assessing officer cannot be held to be justifiable. Hence, for the a foregoing reasons, without expressing any opinion on the merits or demerits of the case, demand notice issued u/s 156 as well as the recovery notice issued by the respondent are quashed.

Summary

Issues:
Challenge to assessment order and demand notice under Income Tax Act, 1961.

Analysis:

Issue 1: Challenge to Assessment Order
The petitioner challenged the assessment order dated 24.12.2018 related to the assessment year 2016-17 under Section 143[3] of the Income Tax Act, 1961. The petitioner, an assessee, claimed to have filed a return of income on 30.03.2018, which was considered defective. A revised return was filed on 18.09.2018 declaring long term capital gains and claiming deductions under Section 48 and exemption under Section 54F of the Act. The petitioner argued that the respondent failed to consider the revised return and claims made towards deduction/exemption. The petitioner contended that the order was arbitrary and lacked reasons, with the rectification application remaining unconsidered.

Issue 2: Respondent's Position
The counsel for the Revenue argued that the original return filed on 30.03.2018 was belated and not a valid return under Section 139[1] of the Act, making the filing of a revised return unnecessary. Additionally, the revised return filed on 18.09.2018 was time-barred under Section 139[5] of the Act. The respondent relied on a judgment by the Hon'ble Apex Court in the case of Goetze [India] Ltd. v. Commissioner of Income Tax, emphasizing that a void return cannot be considered for assessment under Section 143[3] of the Act.

Judgment
The Court considered the arguments presented by both parties and emphasized the importance of providing reasons in administrative actions to ensure fairness and transparency. The Court found that the assessment order lacked consideration of the claims made by the petitioner towards deductions/exemptions, indicating a lack of application of mind by the respondent. Citing the necessity of recording reasons for orders, the Court highlighted that the absence of reasons could render the order liable to judicial chastise. The Court concluded that the order impugned was illegal due to the failure to provide valid reasons and directed the matter to be reconsidered by the respondent after providing an opportunity of hearing to the petitioner and assigning valid reasons for the decision.

Conclusion
The Court quashed the assessment order, demand notice, and recovery notice issued by the respondent, restoring the proceedings for re-consideration. The petitioner was directed to appear before the Assessing Officer for a hearing, and the assessment was to be concluded promptly, preferably within four weeks. The judgment emphasized the importance of providing reasons for decisions and ensuring a fair and transparent procedure in administrative actions.

This comprehensive analysis highlights the key arguments, legal principles, and the final judgment of the High Court in the case challenging the assessment order and demand notice under the Income Tax Act, 1961.