2022 (5) TMI 1163 - HC - Income Tax

Court quashes tax order, emphasizes respondent duty to grant adequate response time.

Ernst and Young U.S. LLP Versus Assistant Commissioner Of Income-Tax, Circle International, Taxation 1-2-2 & Anr.

The court quashed the order passed under Section 148A(d) of the Income Tax Act and the notice under Section 148, both dated April 13, 2022, due to the ... Validity of Order u/s 148A - reopening of assessment - HELD THAT:- A this Court is of the view that the Petitioner-Assessee has a right to get adequate time in accordance with the Act to submit its reply. Section 148A(b) permits the AO to suo moto provide up to thirty days period to an assessee to respond to the Show Cause Notice issued u/s 148A(b), which period may in fact be further extended upon an application made by the Assessee in this behalf, and such period given to the assessee is excluded in computing the period of limitation for issuance of notice u/s 148 in terms of the third proviso to Section 149 of the Act. Since, in the present case, the Petitioner-Assessee is a resident of the United States of America, this Court is of the view that the delay of one day in asking for an adjournment should not have led to closure of the right to file a reply to the Show Cause Notice. Consequently, the impugned order passed under Section 148A(d) as well as the notice under Section 148 of the Act, both dated 13th April, 2022, are quashed and the Respondent No.1 is directed to pass a fresh reasoned order under Section 148A(d) after considering the reply filed by the Petitioner in accordance with law within eight weeks. Issues:Challenging order under Section 148A(d) of the Income Tax Act, 1961 and notice under Section 148 of the Act.Analysis:The petitioner filed a writ petition challenging the order dated 13th April, 2022 passed under Section 148A(d) of the Income Tax Act, 1961, and the notice dated 13th April, 2022 passed under Section 148 of the Act. The petitioner argued that they were not given proper consideration as the impugned order was passed without taking into account their request for adjournment and detailed reply to the Show Cause notice. The respondent contended that the adjournment request was not filed within the stipulated time, justifying the Assessing Officer's decision to pass the order under Section 148A(d).The court observed that the petitioner has the right to adequate time to respond in accordance with the Act. Section 148A(b) allows the Assessing Officer to provide up to thirty days for the assessee to reply to the Show Cause Notice, with the possibility of further extension upon application by the assessee. The court highlighted that the period given to the assessee for response is excluded in calculating the limitation period for issuing a notice under Section 148 of the Act as per the third proviso to Section 149.Considering the petitioner's status as a resident of the United States of America, the court opined that a one-day delay in requesting an adjournment should not result in the closure of the right to file a reply to the Show Cause Notice. Consequently, the court quashed the impugned order passed under Section 148A(d) and the notice under Section 148 of the Act, both dated 13th April, 2022. The Respondent No.1 was directed to pass a fresh reasoned order under Section 148A(d) after considering the reply filed by the petitioner within eight weeks. The court disposed of the writ petition and related applications with this direction.