Notice under Section 142(1) set aside for giving insufficient four-day response time violating natural justice principles

The Karnataka HC set aside a notice issued under section 142(1) for violating principles of natural justice by providing insufficient response time. The notice dated March 10, 2022 required response by March 14, 2022, giving less than the mandated minimum seven days. The court held that normally 15 days should be given for response, reducible to seven days for subsequent notices. Since no limitation period applied and the notice wasn't sent to the updated email ID, the court found substantial merit in petitioner's contentions and set aside the notice along with consequential orders under section 144.

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Issues involved:
The petitioner sought to set aside the assessment order passed under section 147 read with section 144 read with section 144B of the Income-tax Act, 1961, along with various related documents. The main issue revolved around the validity of the notice under section 142(1) and subsequent proceedings.

Validity of Notice under Section 142(1):
The petitioner contended that the notice issued under section 142(1) was in violation of the standard operating procedure (SOP) as it provided insufficient time for response. The petitioner argued that the notices were sent to an incorrect email ID, leading to a lack of opportunity to respond. The petitioner emphasized that setting aside the initial notice would render all subsequent orders invalid due to the procedural irregularity.

Contentions of the Parties:
The petitioner's counsel highlighted the procedural lapses in issuing the notice under section 142(1) and subsequent actions taken by the department. On the other hand, the respondent's counsel argued that despite the procedural issues, the petitioner had not been diligent in participating in the proceedings, as evidenced by delayed responses to previous notices.

Court's Analysis and Decision:
The court examined the validity of the notice under section 142(1) in light of the prescribed response time in the SOP. It noted that the response time provided in the notice was below the mandated period, contrary to the guidelines. The court acknowledged the petitioner's argument that the subsequent proceedings were contingent on the validity of the initial notice. Consequently, the court set aside the notice under section 142(1) and deemed all consequential orders, including the assessment order and penalty orders, as invalid.

Remand and Conclusion:
The court remanded the matter back to the stage post the initial notice, allowing the petitioner to file a response within two weeks. The court directed the department to enable the petitioner's email portal for communication. The writ petition was disposed of in favor of the petitioner based on the violation of principles of natural justice.

This judgment underscores the importance of adherence to procedural requirements in tax assessments and upholds the principles of natural justice in administrative proceedings.

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