2024 (9) TMI 962 - HC - Income Tax

Validity of order of assessment u/s 143(3) - opportunity granted was not real but illusory and therefore the order of assessment is liable to be set aside on the ground of violation of principles of natural justice - order is made invoking Section 37 and 40 of the Act, instead of referring to the Transfer Pricing Officer (TPO) - HELD THAT - We find merit in the submission of petitioner that the opportunity granted was not real but illusory and therefore the order of assessment is liable to be set aside on the ground of violation of principles of natural justice. It may be relevant to note that fixation of time- limit during the working hours of a notified date has been deprecated by this Court. In this regard, it may be relevant to refer the judgment of this Court in Velu Palandar case 1971 (8) TMI 42 - MADRAS HIGH COURT where in after recording that the petitioner was granted time till 11.30 a.m. to file its objections and the same not having filed by 11.30 a.m., the assessing officer proceeded to pass orders of assessment on the same date, thus satisfied that the petitioner did not have an effective opportunity to state his objections and sustain his case that the goods in question cannot once over be subjected to tax, as, in law, they are liable to sales tax at one single point. Thus, we are inclined to set aside the order and to remand the matter back to the assessing officer to decide the matter afresh. The assessing officer shall pass orders after affording reasonable opportunity to the petitioner in accordance with law.

Summary

Issues:
Challenging an assessment order under Section 143(3) of the Income Tax Act, 1961 for violation of natural justice principles and incorrect invocation of sections 37 and 40 instead of referring to the Transfer Pricing Officer.

Analysis:
The petitioner contested the assessment order, arguing that inadequate time was granted to respond to the notice, rendering the opportunity illusory. Documents were submitted after the specified time, but the assessing officer did not consider them. The petitioner cited a previous court ruling emphasizing that documents filed throughout the working hours of the day should be considered. Additionally, the petitioner highlighted international transactions and the necessity to refer the matter to the Transfer Pricing Officer due to alleged profit shifting. The petitioner relied on a Supreme Court judgment endorsing Instruction No.3, which mandates TPO reference for significant transactions with associated enterprises. The failure to involve the TPO was deemed contrary to Instruction No.3 and unsustainable.

The respondents contended that adequate opportunities were provided, and documents submitted after the deadline were received post-assessment, justifying no interference with the order. However, the petitioner clarified that documents were submitted before the deadline, contradicting the respondent's claim. The court acknowledged the petitioner's argument regarding the illusory opportunity granted and referenced a previous case criticizing the fixation of time-limits during working hours as against natural justice principles. The court emphasized the importance of realistic opportunities for objections submission, even in the digital era, citing another case where an order passed without hearing the petitioner was set aside for violating natural justice principles.

Consequently, the court found merit in the petitioner's arguments, setting aside the assessment order and remanding the matter to the assessing officer for a fresh decision. The assessing officer was directed to provide a reasonable opportunity to the petitioner in line with the law, allowing the petitioner to submit objections within four weeks from receiving the order. The impugned order was overturned, and the writ petition was disposed of without costs, closing connected miscellaneous petitions.