2023 (9) TMI 692 - HC - Income Tax

Reopening of assessment - shorter period to reply - HELD THAT - As fact remains that the petitioner was issued with show cause notice on 25.08.2022. The time given to the petitioner was hardly 24 hours. The petitioner could not have responded to the same in time with full particulars. In any event, the petitioner had sought for a personal hearing which was also not granted to the petitioner. Therefore the impugned order has to be set aside and the case has to be remitted back to the respondents to pass a fresh order on merits after hearing the petitioner. This exercise shall be carried out by the respondents within a period of eight (8) weeks from the date of receipt of a copy of this order. Since, the assessment was re-opened prior to the amendment to Section 148 of the Income Tax Act, 1961, with effect from 01.04.2021, therefore, the respondents shall pass a speaking order within a period of eight weeks from the date of receipt of a copy of this order.

Summary

Issues Involved:
Challenge to impugned assessment order and notice under Section 148 of the Income Tax Act, 1961.

The petitioner challenged the impugned assessment order dated 29.03.2022 and the notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961 seeking to re-open the assessment completed on 30.12.2019 under Section 143(3) of the Act, 1961. A survey was conducted, leading to a show cause notice to the petitioner regarding cash deposits during the demonetization period. The petitioner replied, and a scrutiny assessment order was passed on 30.12.2019. Subsequently, a notice under Section 148 was issued on 31.03.2021, prompting the petitioner to file a return. Reasons for re-opening the assessment were provided, indicating discrepancies in cash deposits made in the name of another individual. The petitioner challenged the subsequent show cause notice and order, alleging a violation of natural justice.

The court considered arguments from both parties and noted that while the petitioner may have provided misleading information, the short response time and lack of a personal hearing constituted a violation of natural justice. The court set aside the impugned order and directed the case to be remitted back to the respondents for a fresh order on merits after hearing the petitioner. The respondents were instructed to pass a speaking order within eight weeks, allowing the petitioner to file a reply to the reasons given before completing the assessment. The writ petition was disposed of with these observations, and no costs were awarded.