2019 (12) TMI 869 - HC - Income Tax

Assessment u/s 144 - addition u/s 69A - no SCN issued - no reasonable opportunity - HELD THAT - It is ex-facie apparent that no reasonable opportunity was provided to the petitioner to put forth his explanation. Moreover, no show cause notice under Section 144 of the Act was issued to the petitioner. In such circumstances, this court is of the considered opinion that the order impugned dated 26.06.2019 at Annexure A shall be treated as show-cause notice. The petitioner shall put forth his reply/objections within a period of two weeks from the date of receipt of the certified copy of the order. On receipt of such reply/objections, the respondent-authority shall conclude the assessment after providing an opportunity of hearing to the petitioner. Demand notice which is part of Annexure A dated 26.09.2019 issued u/s 156 is set aside.

Summary

Issues:
Assessment order validity under Section 144 of the Income Tax Act, 1961; Reasonable opportunity to present explanation; Show cause notice requirement under Section 144; Jurisdiction of the High Court in adjudicating factual aspects of VAT returns and tax liability.

Analysis:

Assessment Order Validity under Section 144:
The petitioner challenged the assessment order dated 26.09.2019, arguing that the respondent-authority incorrectly considered the income figure of &8377; 3,79,70,200/- and added it under Section 69A of the Income Tax Act to calculate the total tax liability. The petitioner contended that based on VAT returns, the net profit was &8377; 19,34,871/-, total turnover was &8377; 3,95,77,814/-, and total purchase was &8377; 3,76,42,943/-. The High Court noted that the respondent failed to provide a reasonable opportunity for the petitioner to explain the discrepancies in the assessment, leading to the conclusion that the order was flawed.

Reasonable Opportunity to Present Explanation:
The High Court emphasized that the petitioner was not afforded a fair chance to present his case and clarify the discrepancies in the assessment. It was observed that no show cause notice under Section 144 of the Act was issued to the petitioner, depriving him of the opportunity to respond adequately to the allegations made by the respondent-authority. The lack of a proper opportunity to explain the income figures led the court to set aside the assessment order and direct the respondent to treat it as a show-cause notice.

Show Cause Notice Requirement under Section 144:
Highlighting the procedural lapse in not issuing a show cause notice under Section 144 of the Income Tax Act, the High Court directed the petitioner to submit his reply or objections within two weeks from receiving the certified copy of the order. The court mandated that the respondent-authority must conclude the assessment after providing a proper opportunity for the petitioner to be heard, ensuring procedural fairness in the tax assessment process.

Jurisdiction of the High Court in Adjudicating Factual Aspects:
The Revenue's argument that factual aspects related to VAT returns and tax liability fall outside the purview of the High Court's writ jurisdiction was noted by the court. However, the High Court intervened in this case due to the failure to provide a reasonable opportunity for the petitioner to present his side, emphasizing the importance of procedural fairness in tax assessments. The court's decision to set aside the demand notice and instruct a re-assessment process underscored the significance of adhering to due process and providing a fair hearing to taxpayers.