Orissa HC Quashes Tax Assessment Order for Violating CBDT's 7-Day Notice Rule, Allows Fresh Response by July 20.

The Orissa HC quashed the assessment order and demand dated December 23, 2022, issued by the revenue authorities due to non-compliance with the CBDT directive mandating a minimum seven-day notice period. The court found no provision allowing the CBDT to waive this requirement. The show cause notice was restored, allowing the petitioner to respond by July 20, 2023. Non-compliance by this date would automatically reinstate the scrutiny and assessment orders. The writ petition was disposed of in line with these findings.

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In the case before the Orissa High Court, Justices Arindam Sinha and Sanjay Kumar Mishra presided over a dispute concerning the issuance of a show cause notice by the revenue authorities to the petitioner (assessee). The petitioner, represented by Mr. S. Ray, argued that the notice issued on December 12, 2022, required a response by December 16, 2022, which violated the Central Board of Direct Taxes (CBDT) directive mandating a minimum seven-day notice period unless curtailed due to an expiring limitation period.The revenue, represented by Mr. S. S. Mohapatra, contended that the assessee had been given several opportunities to comply and that the scrutiny order was passed on December 23, 2022, providing ample time for compliance. They argued that the response time could be curtailed in view of the assessment's limitation date, thus not violating the CBDT's Standard Operating Procedure (SOP).The court inquired whether any provision in the Income Tax Act, 1961, or rules empowered the CBDT to dispense with the requirement of a show cause notice due to previous omissions by the assessee. Finding no such provision, the court determined that the revenue was obligated to adhere to the CBDT's directive on reasonable response time.Consequently, the court set aside and quashed the impugned assessment order and demand dated December 23, 2022, restoring the show cause notice for the assessee to respond by July 20, 2023. Failure to comply by this date would result in the automatic restoration of the scrutiny order and the assessment order. The writ petition was disposed of accordingly.

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