2024 (10) TMI 89 - HC - Income Tax

Validity of assessment order and penalty order - as argued petitioner did not have a reasonable opportunity to contest the proposed addition on merits - HELD THAT - By the impugned assessment order, the entire sale consideration for the purchase of the immovable property was added to the total income of the assessee. Such addition was made notwithstanding the fact that the petitioner had submitted documentary evidence with regard to the sanction of a loan by the Indian Overseas Bank. This aspect was noticed in the order u/s 148A(d), wherein it was concluded that the assessee had failed to substantiate the sources of income for the remaining Rs.23,00,000/-. However, while issuing the impugned assessment order, these aspects were not taken into consideration perhaps on account of non participation by the petitioner. As a result, the total sale consideration was added to the income of the assessee. Notwithstanding the non participation by the assessee, this approach has caused great hardship. The assessee, however, cannot be excused for non participation especially in view of the number of notices that were both uploaded and served by e-mail. In these facts and circumstances, it is just and appropriate to impose costs on the petitioner. Impugned assessment order is set aside subject to the condition that the petitioner pays a sum of Rs.40,000/- as costs to the Adyar Cancer Institute with in fifteen days from the date of receipt of a copy of this order. The petitioner is also permitted to submit a reply to the show cause notice within the said period. In order to enable the petitioner to upload the reply, the respondents are directed to provide access to the portal.

Summary

Issues: Challenge of assessment and penalty orders due to lack of reasonable opportunity for contesting proposed addition on merits.

Analysis:
The petitioner challenged an assessment order and penalty order, contending they did not have a fair chance to contest the proposed addition on merits. The issue stemmed from a notice under Section 148A(b) of the Income Tax Act, 1961, issued in relation to the assessment year 2015-16 triggered by information flagged by the Central Board of Direct Taxes. The petitioner's response, detailing a housing loan from a bank and sources of income for property purchase, was rejected for lack of substantiation beyond the bank loan. Despite subsequent notices and show cause opportunities, the petitioner did not participate in proceedings, leading to the impugned orders.

The petitioner's counsel argued about a request for property purchase permission and relocation hindering participation. The respondent's counsel highlighted that all notices were served electronically, with multiple opportunities provided, including Section 142(1) notices and show cause opportunities before the assessment order issuance. The assessment added the full property purchase amount to the petitioner's income, disregarding the documented bank loan evidence, which was not considered due to the petitioner's non-participation, leading to undue hardship.

The court set aside the assessment order subject to a cost of Rs.40,000 to be paid to the Adyar Cancer Institute within fifteen days. The petitioner was granted the opportunity to respond to the show cause notice within the same period, with directed access to the portal for submission. Upon payment and satisfactory reply receipt, the tax authorities were instructed to provide a fair opportunity for a fresh assessment order within three months, nullifying the consequential penalty order. The writ petitions were disposed of with no costs, and related miscellaneous petitions were closed accordingly.