Case Law Details Case Name : Imperial Shipping Service Vs Assessment Unit ( Madras High Court) Appeal Number : W.P .No. 10658 of 2024 Date of Judgement/Order : 23/04/2024 Related Assessment Year : 2022-23
The bench noted that the show cause notice provided only one day for the petitioner to reply, which was unreasonable
The Madras High Court set aside an impugned assessment order issued by the Income Tax Department, which provided only one day for the petitioner to reply, citing a breach of natural justice principles.
The petitioner, represented by Mr. G. Varadhini Karthick, had their assessment reopened by an order under Section 148A(d) and a notice under Section 148 of the Income Tax Act, 1961. Subsequently, the petitioner filed a return of income for the assessment year 2018-19. A notice dated 22.06.2023 under Section 143(2) of the I-T Act was issued, to which the petitioner responded on 05.07.2023.
Further notices under Section 142(1) were issued on 28.11.2023, followed by a show cause notice dated 16.03.2024, giving the petitioner one day to reply. The petitioner replied on 17.03.2024. Despite these communications, the assessment order dated 24.03.2024 was issued.
G. Varadhini Karthick, counsel for the petitioner, referred to the notice under Section 143(2) and the reply thereto. She pointed out the petitioner had stated that the amount received in the South Indian Bank was only Rs.43,21,783/- not Rs.85,84,660/-.
The petitioner’s counsel submitted a certificate from the South Indian Bank corroborating this statement and pointed out that the petitioner had granted only one day’s time to reply.
The respondents, represented by Dr. B. Ramasamy, contended that the petitioner did not reply to several notices, including those under Sections 148 and 142(1). He argued that the impugned order was a reasoned order, with details of cash deposits amounting to Rs.85,84,660/- in the South Indian Bank, which the petitioner failed to satisfactorily explain.
Justice Senthilkumar Ramamoorthy noted that the show cause notice provided only one day for the petitioner to reply, which was unreasonable.
The court set aside the impugned order, and the matter was remanded for reconsideration. The petitioner was permitted to submit additional documents, if any, within a maximum limit of 15 days from the date of receipt of a copy of this order.
The respondents were directed to take the necessary action to provide access to the portal. Additionally, the department must offer a reasonable opportunity to be heard, including a personal hearing. Following this, a fresh assessment order must be issued within three months from the date of receipt of additional documents from the petitioner.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An assessment order dated 26.03.2024 is challenged on the ground of breach of principles of natural justice. The petitioner filed the return of income for assessment year 2022-23 on 30.12.2022 by declaring income of Rs.1,19,06,850/-. Upon scrutiny thereof, notices were issued under Section 143(2) and Section 142(1). Upon receipt of show cause notice dated 19.03.2024 proposing a variation in respect of purchases reflected in the petitioner’s GSTR 1 statement, the petitioner requested for further time by communication dated 20.03.2024. In response thereto, by communication dated 20.03.2024, the petitioner was granted time until 21.03.2024 to respond to show cause notice dated 19.03.2024. The petitioner responded on 21.03.2024 and produced the ledger account statement of the suppliers and asserted that the freight charge paid to suppliers is correct and that such payments were made through bank channels against invoices issued by such parties. The impugned assessment order was issued in these facts and circumstances.
2. Learned counsel for the petitioner pointed out that the show cause notice proposing the variation was issued on 19.03.2024 calling upon the petitioner to show cause on or before 20.03.2024. In spite of a request for further time, he submitted that the time was extended by only one day. Within the limited time, he pointed out that the petitioner submitted a response on 21.03.2024 and also requested that if any further information is required, the petitioner would provide such information. By adverting to the impugned assessment order, learned counsel points out that the proposed variation was confirmed on the ground that the petitioner failed to provide invoices, income statements and the like. He also pointed out that the entire expenses of Rs.16,20,67,647/- were treated as unexplained expenditure and added to the income of the assessee under Section 69C read with Section 115BBE of the Income Tax Act. Since a reasonable opportunity was not provided to the petitioner, he submits that the impugned order warrants interference.
3. Mrs. S. Premalatha, learned junior standing counsel, accepts notice on behalf of the respondents. With reference to the details of opportunities provided, she submits that the impugned order was preceded by three notices under Section 143(2) and Section 142(1). Therefore, she contends that reasonable opportunity was provided to the petitioner.
4. The show cause notice dated 19.03.2024 calls upon the petitioner to show cause on or before 20.03.2024 by enclosing all supporting documents such as bills, vouchers and bank statements. By reply dated 20.03.2024, the petitioner requested for further time to respond. By reply thereto dated 20.03.2024, the respondents stated that extension is being granted only up to 21.03.2024 since the limitation period is approaching. In the impugned assessment order, it is recorded as under:
“Thus, the assessee has been accorded sufficient opportunities and ample time to submit the documents/ evidences with respect to the transactions undertaken. Since the case is getting barred by limitation on 31.03.2024, no more opportunities could be given to the assessee.
Considering the above facts and circumstances, I am taking the expenses claimed by the assessee on account of freight charges paid, amounting to Rs.16,20,67,647/- as unexplained expenditure and added back to the income of the assessee u/s 69C r.w.s 115BBE of the Act. Further I am satisfied that assessee is liable for penalty u/s 271AAC on account of addition made u/s 69C of the Act. I therefore initiate penalty u/s 271AAC of the Act.”
5. From the above extracts, it is evident that the respondents refused to provide further time since the limitation period expires on 31.03.2024. By refusing further time, the entire expenses claimed by the assessee of the aggregate value of Rs.16,20,67,647/- were added to the income of the assessee as unexplained expenditure. Thus, without providing reasonable time to the petitioner, the proposed variation was confirmed. In these circumstances, the interest of justice warrants that a reasonable opportunity be provided to the petitioner.
6. Therefore, the impugned assessment order dated 26.03.2024 is set aside and the matter is remanded to the first respondent for reconsideration. The petitioner is permitted to submit a detailed reply by enclosing all relevant documents within fifteen days from the date of receipt of a copy of this order. In order to enable the petitioner to upload such reply, the respondents are directed to provide access to the portal. Upon receipt of the petitioner’s reply, the first respondent is directed to provide a reasonable opportunity to the petitioner, including by way of video conference hearing, and thereafter issue a fresh assessment order within a period of three months from the date of receipt of the petitioner’s reply.
7. W.P.No.10658 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.11737, 11740, 11744 and 11746 of 2024 are closed.
