2024 (12) TMI 714 - HC - Income Tax

Tax Authority Ordered to Reassess Provident Fund Trust's Exemption Claim Due to Pandemic-Related Delays.

The HC set aside the assessment order against the Provident Fund Trust, which sought exemption under Section 10(25)(ii) of the Income Tax Act for AY ... Assessment u/s 144B - Exemption from income tax u/s 10(25)(ii) - persuant to notification of Faceless Assessment Scheme u/s 143(3A), the petitioner’s assessment for the Assessment Year 2018-19 was selected for scrutiny of assessment - Request for additional time to respond to SCN due to Covid-19 situation - HELD THAT:- The petitioner has placed materials to show that it responded to Ext.P11 notice by filing its response on 20.4.2021 itself (Ext.P13). The screenshot of the e-filing proceedings would show that the competent authority has duly received the response. The e-proceedings response acknowledgment shows the receipt of the response with the date 20.04.2021, as evidenced by Acknowledgment. The respondents passed Ext.P16 assessment order on 20.4.2021 confirming the draft assessment order on the ground that no reply has been filed by the assessee to the show cause notice dated 10.4.2021. As petitioner has produced relevant materials to show that it had submitted the response. Therefore, Ext.P16 order is liable to be set aside. It is ordered accordingly. Liberty is given to respondent No.1 to pass fresh assessment orders in accordance with law after giving sufficient opportunity of hearing to the assessee. Issues:1. Exemption claim under Section 10(25)(ii) of the Income Tax Act for Assessment Year 2018-19.2. Faceless Assessment Scheme under Section 143(3A) and scrutiny of assessment.3. Show cause notices served to the petitioner.4. Effect of Section 144B on assessment proceedings.5. Request for additional time due to Covid-19 related circumstances.6. Assessment order confirming tax liability and demand raised.7. Challenge to the assessment order and relief sought.Analysis:The judgment pertains to a Provident Fund Trust seeking exemption under Section 10(25)(ii) of the Income Tax Act for the Assessment Year 2018-19. The petitioner, a Trust for the benefit of South Indian Bank Ltd. employees, had been claiming exemption but was subjected to scrutiny under the Faceless Assessment Scheme. The petitioner duly responded to the show cause notices served, but complications arose due to the introduction of Section 144B during the assessment process. The petitioner, facing Covid-19 related challenges, requested additional time to respond to the second show cause notice, which was granted until 20.4.2021. Despite filing a response on the due date, an assessment order was issued assessing the Trust's entire income to tax, leading to a demand of Rs. 11.17 Crores.The Senior Counsel for the petitioner argued that the staff's quarantine and circumstances beyond their control delayed the response submission, supported by evidence of the request for an extension on medical grounds. The petitioner's response was filed on 20.4.2021, as confirmed by the acknowledgment from the competent authority. However, the assessment order was passed citing non-receipt of the response to the show cause notice dated 10.4.2021. The Court, after considering the evidence presented, found in favor of the petitioner, setting aside the assessment order. The Court granted liberty to the tax authorities to pass fresh assessment orders following due process and providing a sufficient opportunity of hearing to the assessee.In conclusion, the Court allowed the appeal, emphasizing the importance of affording procedural fairness and adequate opportunity to be heard in tax assessment proceedings. The judgment highlights the need for flexibility and understanding in extraordinary circumstances such as those caused by the Covid-19 pandemic, ensuring that taxpayers are not unduly prejudiced due to unforeseen events beyond their control.