2023 (3) TMI 823 - HC - Income Tax

Validity of assessment u/s 153C r.w.s.144 - Denial of natural justice - no notice u/s 142(1) issued prior to the assessment - HELD THAT - The undisputed fact situation obtained is that while passing the assessment orders, no notice was served upon the petitioner assessee in respect of any assessment years nor any notice was served before the competent authority proceeded to pass penalty order under section 271 of the Act. In none of these case Notice u/s 142(1) has been issued prior to the assessment. When the assessment under section 153 read with section 144 of the Act have been done by the assessing officer without giving the petitioner assessee an opportunity of being heard in terms of and within the meaning of section 144 of the Act, the orders are liable to be set aside on the said ground of not giving of opportunity and resultant breach of principles of natural justice. The proper course would be to remit back the cases to the assessing officer to be proceeded with from the stage of notice which shall be served upon the petitioner in each case. All the petitions are allowed. Order passed u/s 153C read with section 144 of the Act are set aside. Decided in favour of assessee.

Summary

Issues:
- Assessment orders passed without serving notice to the petitioner
- Breach of natural justice in assessment and penalty orders
- Interpretation of Section 153C and Section 144 of the Income Tax Act, 1961

Analysis:

Issue 1: Assessment orders passed without serving notice to the petitioner
The petitioner's main argument was that assessment orders under Section 153C read with Section 144 of the Act were passed without serving any notice, denying the petitioner an opportunity to respond. The petitioner contended a breach of natural justice due to the lack of notice, which is a fundamental procedural requirement in tax assessments.

Issue 2: Breach of natural justice in assessment and penalty orders
The court acknowledged that the petitioner was not served with assessment orders or penalty notices, leading to a clear violation of natural justice principles. The petitioner discovered the orders only through an email communication, indicating a lack of proper notification and opportunity to present their case before the tax authorities.

Issue 3: Interpretation of Section 153C and Section 144 of the Income Tax Act, 1961
Section 153C deals with the assessment of income of another person, allowing the Assessing Officer to proceed against such person based on seized assets or information. On the other hand, Section 144 outlines the best judgment assessment process, emphasizing the importance of providing the assessee with an opportunity to be heard before making assessments.

The court found that in all the cases presented, no notice was served on the petitioner before passing assessment or penalty orders, contrary to the requirements of Section 144. As per Section 144B (6)(ii), proper delivery methods were not followed, leading to the petitioner's lack of awareness regarding the impugned orders.

In conclusion, the court allowed all petitions, setting aside the assessment orders and penalty impositions. The Assessing Officer was directed to reinitiate the assessment proceedings, ensuring proper notice and opportunity for the petitioner to be heard within three months from the date of the order. This decision aimed to rectify the procedural shortcomings and uphold the principles of natural justice in tax assessments.