Challenges to Income Tax Notices Dismissed, Petitioners Advised to Respond

The High Court of Bombay dismissed two petitions challenging Notices under Section 226(3)(x) of the Income Tax Act, 1961, requiring support for statements made on oath regarding dues to a party in default of revenue. The Court advised the petitioners to respond to the show-cause notices and present contentions to the Deputy Commissioner of Income Tax. The petitions were not entertained, but the petitioners were granted an extended time to reply. The respondents were restrained from taking coercive action until the matter was resolved. Both petitions were disposed of without costs.

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Issues:
Challenge to Notices under Section 226(3)(x) of the Income Tax Act, 1961

Analysis:
The judgment by the High Court of Bombay involved two petitions challenging identical Notices dated 26th March, 2018 issued to two petitioners under Section 226(3)(x) of the Income Tax Act, 1961. The impugned notices required the petitioners to support statements made on oath regarding dues to a party in default of revenue and show cause as to why they should not be treated as an assessee in default. The petitioners argued that the notices contradicted Supreme Court decisions and that they should not be declared as defaulters without the Assessing Officer first determining the validity of their statements. However, the Court observed that the notices were merely seeking to examine the basis of the statements made on oath and did not warrant interference at that stage. The petitioners were advised to respond to the show-cause notices and present their contentions to the Deputy Commissioner of Income Tax to have the impugned notices dropped.

The Court decided not to entertain the petitions at that stage but extended the time for the petitioners to reply to the notices by 15 days from the date of the judgment. It was directed that the respondent would consider the petitioners' responses and dispose of the matter in accordance with the law and principles of natural justice. Additionally, the respondents were prohibited from taking any coercive action against the petitioners until the notices were properly dealt with and for a further two weeks following communication of the orders to the petitioners. Ultimately, both petitions were disposed of with no order as to costs.

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