2022 (10) TMI 296 - HC - Income Tax

Court overturns order & notice under Income Tax Act, stresses natural justice principles.

BIRD WORLDWIDE FLIGHT SERVICES (I.) PVT. LTD. Versus DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 4 (2), DELHI

The court set aside the impugned order and notice under Section 148A(d) of the Income Tax Act for AY 2017-18, citing violation of natural justice ... Reopening of assessment u/s 147 - violation of the principles of natural justice - Lesser time granted to the Assessee to file the response u/s 148A(b) - HELD THAT:- This Court is of the view that the Petitioner has a right to get adequate time under Section 148A of the Act to respond to the show cause notice. It is pertinent to mention that Section 148A(b) of the Act permits the Assessing Officer to suo moto provide up to thirty days' period to an assessee to respond to the show cause notice issued under Section 148A(b) of the Act, which period may in fact be further extended upon an application made by the Assessee in this behalf. This Court in Meenu Chaufla Vs. ITO [2022 (6) TMI 89 - DELHI HIGH COURT] has held that in such cases the mandate of Section 148A(c) is violated as it casts a duty on the AO, by using the expression ‘shall’, to consider the reply of the Assessee in response to notice under Section 148A(b), before making an order under Section 148A(d) of the Act. Consequently, the impugned order and the notice under Section 148 of the Act, both dated 29th July, 2022 for the AY 2017-18 are set aside and the matter is remanded back to the AO for a fresh decision after considering the reply dated 26th July, 2022 filed by the Petitioner within four (04) weeks. Issues:Challenging order under Section 148A(d) of the Income Tax Act, 1961 and Notice under Section 148 for AY 2017-18.Analysis:The petitioner challenged the order passed under Section 148A(d) of the Income Tax Act, 1961, and the Notice issued under Section 148 of the Act for the Assessment Year 2017-18. The petitioner contended that there was a delay in providing the material forming the basis of the allegation of escapement of income, which affected their ability to respond adequately. The petitioner cited the judgment of Union of India Vs. Ashish Agarwal, emphasizing the importance of providing adequate time to the assessee to respond to the show cause notice. The petitioner argued that there was a violation of the principles of natural justice as their request for an extension to file a response was not considered before passing the impugned order dated 29th July, 2022.The court observed that under Section 148A(b) of the Act, the assessee is entitled to a reasonable period to respond to the show cause notice. It noted that the Assessing Officer can provide up to thirty days for a response, which can be further extended upon application by the assessee. Referring to the case of Meenu Chaufla Vs. ITO, the court highlighted that the AO must consider the reply of the assessee before making an order under Section 148A(d) of the Act. In this case, the court found that the mandate of Section 148A(c) was violated as the reply filed by the petitioner on 26th July, 2022 was not taken into account before passing the impugned order.Consequently, the court set aside the impugned order and notice dated 29th July, 2022 for the AY 2017-18 and remanded the matter back to the AO for a fresh decision after considering the reply filed by the petitioner within four weeks. The court disposed of the writ petition with these directions, leaving the rights and contentions of all parties open for further consideration.