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TMI Blog2025 (3) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... lties [2024 (11) TMI 1269 - BOMBAY HIGH COURT] of which one of us was a member to hold that section 144B inherits the principles of natural justice, which embraces the reasonable opportunity of representation to the assessee, being discernibly absent in the given case, as noted by us above.
Accepting the submissions would be contrary to and the teeth of these judgments referred to supra. Considering that the impugned order is legally unsustainable, as a sequel the impugned demand notice would not survive and has to be set aside.
We are of the clear opinion that the petitioner has become entitled to the reliefs as prayed for. Accordingly, the petition deserves to be allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ified reopening under Section 147 of the IT Act. The petitioner filed her return of income dated 29 April 2021, in response to the notice issued under Section 148 of the IT Act, which was duly acknowledged by the respondent no. 2. 8. Respondent no. 2 thereafter issued a notice dated 9 December 2021 under Section 143 (2) read with Section 147 of the IT Act to the petitioner supplying reasons for reopening of her assessment. The notice stated that the petitioner had not filed her return of income for the AY 2014-15, but had entered into financial transactions amounting to Rs. 11,61,22,771/-, the source of which was not explained. On such basis, the assessment of the petitioner was sought to be reopened. The return of income of the petitioner for the said assessment year was not filed. However, the petitioner had paid advance tax as reflected in the Form 26AS filed by the petitioner for the AY 2014-15. 9. Respondent no. 1, NFAC, issued notices to the petitioner under Section 142 (1) of the IT Act for the AY 2014-15 dated 28 December 2021 and 8 January 2022, respectively. Respondent no. 1 through such notices sought details from the petitioner in respect of the amount of Rs. 11,61,22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax had already been paid by the Trust and HUF for the earlier years. Such letter/reply dated 24 March 2022 of the petitioner was supported by detailed documentation and annexures with details to show that such amounts had already been brought to tax in the hands of the Trust and HUF. Bank summary was also enclosed to the said letter by the petitioner to support the receipt of the funds, with an explanation that such funds had been invested by the petitioner in different mutual funds and bonds, giving detailed break-up of such investments. The petitioner in the said letter also stated that the capital gains and/or other income derived from the said investments of the petitioner were offered to tax, from time to time. 15. Respondent no. 1 proceeded to pass the impugned assessment order dated 29 March 2022 proceeding to make a best judgment assessment under Section 144 of the IT Act, justifying the reopening of the petitioner's assessment under Section 147 of the IT Act and the conclusion that the amount of Rs. 11,61,22,771/- invested by the petitioner for the AY 2014-15 escaped assessment. This was followed by the issuance of impugned demand notice dated 30 March 2022. The reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement. According to him, the respondent no. 1 wrongly resorted to section 144 of the IT Act by undertaking the best judgment assessment which, without considering detailed reply of the petitioner dated 24 March 2022 was wholly unwarranted in the given facts and circumstances. Thus, no opportunity was granted to the petitioner to furnish relevant material for the Assessing Officer to come to an informed decision. 19. According to Mr. Naniwadekar, the respondents were not justified in concluding that the income of the petitioner for A.Y. 2014-15 to the extent of Rs. 11,61,22,771/- escaped assessment. In this regard, the relevant material in support of her case which she specifically sought for in her letter dated 14 January 2022, was not glossed over by the respondents who instead rushed to issue the show cause notice-cum-draft assessment order dated 16 March 2022. 20. He would then point out that the petitioner had submitted a detailed reply dated 24 March 2022 at the first available opportunity in response to the same, setting out the reasons as to why the income of the petitioner for the relevant A.Y. 2014-15 had not escaped assessment to tax. However, the respondents fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom complete non-application of mind. 22. Mr. Naniwadekar in support of his submissions would place reliance on the decision of the Delhi High Court in the case of Smart Vishwas Society v. NFAC 2021 128 Taxmann.com 278 Delhi. This is to buttress the proposition that non-adherence to the procedure mandated under section 144B of the IT Act would result in rendering the impugned order a nullity in law. Thus, on such ground it ought to be set aside. Also he would submit that even under the amended provisions of section 144B of the IT Act effective from 1 April 2022, the action of the respondents is vitiated in law as the impugned order is passed without following the mandatory provisions under section 144B of the IT Act. Even though the said amended provisions do not apply stricto sensu to the given facts and circumstances, he would submit that the legislature makes it mandatory to consider the petitioner's response and the material placed by her in the form of documents, before coming to any conclusion. This is particularly so in a situation of reopening the petitioner's assessment for A.Y. 2014-15 without granting her any opportunity to respond to the reasons for reopening vide noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner, against the impugned assessment order. 26. Mr. Sharma would submit that during the A.Y. 2014-15 the petitioner had undertaken huge financial transaction, but filed no return of income for the said assessment year. It was thus rightly concluded that such financial transactions set out in the chart in the reply at para 5 thereof were unexplained, leading to reopening of the petitioner's assessment for A.Y. 2014-15, under Section 148 of the IT Act. Accordingly, a notice dated 23 March 2021 under Section 148 was rightly issued to the petitioner after taking prior approval of the specified authorities under section 151 of the IT Act. Thus, he would submit that the procedure under the Act was duly followed. 27. Mr. Sharma would then submit that in response to the above notice the petitioner filed her return of income on 29 April 2021 declaring total income of Rs. 98,71,780/-. Thereafter, a statutory notice dated 9 December 2021 was issued under Section 143 (2) of the IT Act to the petitioner and the copy of reasons recorded for reopening of the assessment was furnished to the petitioner. However, no objections with respect to reasons recorded for reopening was filed by the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of which the provisions under section 147 of the IT Act to reopen the assessment of the petitioner for the A.Y. 2014-15 was rightly invoked. Thus, Mr. Sharma would vehemently submit that there is no infraction of procedure much less any irregularity and or illegality in the impugned assessment order. Thus, he would submit that the said order warrants no interference by the Court. 29. Mr. Sharma placing emphasis on paragraph 9 of the affidavit in reply would submit that it was after lapse of almost 3 months from the date of service of the impugned assessment order dated 29 March 2022, that the petitioner chose to file this writ petition on 30 June 2022. He would reiterate that the petitioner has failed to avail the effective alternate remedy of filing appeal under Section 246 of the IT Act before CIT (Appeals) for reasons best known to her. Such writ petition is filed to mask her own fault of not availing the alternate remedy and approaching the Writ Court which is not permissible. In this regard, he would place reliance on the decision of Supreme Court in the case of A.V. Venkateswaran, Collector of Customs, Bombay Vs. Ramchand Sobhraj Wadhwani & Anr. AIR 1961 SC 1506 where it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Board, including by way of an automated examination tool, whereupon it may decide to- (a) finalise the assessment, in case no variation prejudicial to the interest of assessee is proposed, as per the draft assessment order and serve a copy of such order and notice for initiating penalty proceedings, if any, to the assessee, along with the demand notice, specifying the sum payable by, or refund of any amount due to the assessee on the basis of such assessment; or (b) provide an opportunity to the assessee, in case any variation prejudicial to the interest of assessee is proposed, by serving a notice calling upon him to show cause as to why the proposed variation should not be made; or (c) assign the draft assessment order to a review unit in any one Regional Faceless Assessment Centre, through an automated allocation system, for conducting review of such order. (xvii) ............ (xix) the National Faceless Assessment Centre shall upon receiving suggestions for variation from the review unit, assign the case to an assessment unit, other than the assessment unit which has made the draft assessment order, through an automated allocation system; (xx) ..... (xxi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 March 2022 requesting for adjournment of 15 days on bonafide grounds of COVID -19 pandemic prevailing then. The said response was uploaded by the petitioner on the IT portal. However, the petitioner was not given any reply or documents, nor was a fresh hearing notice issued to the petitioner. Further, turning a blind eye to all of this, respondent no. 1 proceeded to issue draft assessment order on 16 March 2022 giving the petitioner only 3 days' time to file a reply to such show cause notice-cum-draft assessment order dated 16 March 2022, upto 23.59 hours of 19 March 2022. However, it needs to be noted that, the petitioner did file a detailed reply with documentary annexures dated 24 March 2022 to explain her stance in regard to the notice dated 9 December 2021 for reopening to which also no opportunity to respond was given to the petitioner in total breach of principles of natural justice inherent under section 144B of the IT Act. 34. We would turn to the standard operating procedure for Assessment Unit ("AU" for short) under the faceless assessment provisions of Section 144B of the IT Act issued by CBDT dated 3 August 2022. The relevant extract of the said SOP is reproduced as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays time at the first instance and thereafter extended the same by another two days, which apart from being not sufficient, was certainly, not in accordance with the time to respond the Show Cause Notice, as prescribed under the SOP (supra). The Assessing Officer, therefore, appears to have arbitrarily exercised jurisdiction by granting an extension of only two days. In our opinion, such approach on the part of the Respondents was clearly in breach of the SOP, which has also resulted in breach of the principles of natural justice, which guaranteed to the Petitioner a fair and reasonable opportunity to respond to the Show Cause Notice under the procedure prescribed, in undertaking the assessment proceedings. This has surely caused a prejudice to the Petitioner." Applying the above to the given facts, it is apparent that respondents have acted contrary to the SOP under section 144B of the IT Act violating the principles of natural justice, qua the petitioner, causing grave prejudice to her. 36. We would gainfully refer to a recent decision of a coordinate bench of this Court in the case of Jyostna Mehta v. Principal Commissioner of Income Tax and Others 2024 SCC OnLine Bom. 294 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n factors necessarily require a due consideration when it comes to compliances of the time limits even under the Income Tax Act. The situation in hand is akin to what a Court would consider in legal proceedings before it, in condoning delay in filing of proceedings. In dealing with such situations, the Courts would not discard an empathetic /humane view of the matter in condoning the delay in filing legal proceedings, when law confers powers to condone the delay in the litigant pursuing Court proceedings. This of course on testing the bonafides of such plea as may be urged. In our opinion, such principles which are quite paramount and jurisprudentially accepted are certainly applicable, when the assessee seeks condonation of delay in filing income tax returns, so as to remove the prejudice being caused to him, so as to regularise his returns. In fact, in this situation, to not permit an assessee to file his returns, is quite counter productive to the very object and purpose, the tax laws intend to achieve. In this view of the matter, we have no manner of doubt that the delay which is sufficiently explained in the present case would be required to be condoned. 8. Resultantly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2014-15, in the given facts and circumstances that too beyond 4 years would fall foul to first proviso to Section 147 of the IT Act. 38. The law on the above is settled by two recent decisions of this court in Imperial Consultants and Securities Ltd v. Deputy Commissioner of Income Tax, Circle-6(1)(2) Writ Petition (Original) No. 1783 of 2022 dt 20 December 2024 and Crystal Pride Developers v. The Assistant Commissioner of Income Tax, Circle-22(1) Writ Petition (Original) (L) No. 12546 of 2022 dt. 27 February 2025 to which one of us (G.S. Kulkarni, J.) was a member. This court in such decisions held that the re-opening in such cases lacked compliance of the jurisdictional requirements as ordained by the provisions of Section 147 of the IT Act. It was so held that considering the settled principles of law, that the writ petitions under Article 226 of the Constitution certainly would be entertained and adjudicated. Applying such principles, in the facts and circumstances of the present case, we are unable to accept the submission of Mr. Sharma in asserting maintainability of this petition on the ground of an alternate remedy. 39. On the submission of alternate statutory remedy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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