2022 (5) TMI 284 - HC - Income Tax

Reopening of assessment u/s 147 - notice in the name of company amalagamated - denial of adequate opportunity to file response to the said show cause notice-cum-draft assessment orders - HELD THAT - Having heard learned counsel for the parties, this Court is of the view that even if the submission of learned counsel for the Respondents is accepted, then also the impugned assessment orders are liable to be set aside as the Petitioner was not given adequate opportunity to file response to the said show cause notice-cum-draft assessment orders. Consequently, as there has been a violation of principle of natural justice, the impugned assessment orders as well as demand and penalty notices dated 31st March, 2022 are set aside and the matter is remanded back to the Assessing Officer for fresh adjudication. The petitioner shall file its response to the show cause notices dated 30th March, 2022 within two weeks.

Issues:
Challenging reassessment notices under Section 148 of the Income Tax Act, 1961 for assessment years 2014-15 and 2015-16, alleging violation of natural justice in issuing assessment orders without adequate opportunity to respond.

Analysis:
The petitioner challenged reassessment notices and assessment orders issued under Section 148 of the Income Tax Act, 1961 for the assessment years 2014-15 and 2015-16. The petitioner contended that the notices and orders were void ab initio as they were issued in the name of a non-existing entity that had merged with the petitioner company. Citing the decision in Pr. Commissioner of Income Tax v. Maruti Suzuki India Limited, it was argued that issuing a notice to a non-existing company is a substantive illegality. The petitioner further argued that the alleged income had already been offered to tax in the hands of the amalgamated entity in previous assessment orders.

The petitioner also raised concerns about a violation of the principle of natural justice, stating that they were not given adequate opportunity to be heard. It was pointed out that the petitioner was not granted sufficient time to respond to the show cause notice, which led to a lack of procedural fairness. Reference was made to a previous case where a similar situation resulted in the assessment order being set aside. The respondent, represented by senior standing counsel, accepted notice and argued that the assessment orders were issued in the name of the amalgamated entity and that the question of whether income had escaped assessment could be addressed in appeal proceedings.

After hearing arguments from both parties, the Court found that the petitioner was indeed not given adequate opportunity to respond to the show cause notice-cum-draft assessment orders, leading to a violation of the principle of natural justice. As a result, the Court set aside the impugned assessment orders, demand, and penalty notices, remanding the matter back to the Assessing Officer for fresh adjudication. The petitioner was directed to file a response to the show cause notices within two weeks, and the Assessing Officer was instructed to schedule a hearing after four weeks and issue a reasoned order in accordance with the law, ensuring the petitioner's right to be heard. The Court disposed of the writ petitions and applications in light of the above findings.

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