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 2018-19. The Court found procedural unfairness due to the Trust's delayed response caused by Covid-19 challenges. It directed tax authorities to issue a fresh assessment order, ensuring procedural fairness and adequate opportunity for the Trust to be heard. The judgment underscores the necessity for flexibility in assessment proceedings during extraordinary circumstances, such as the pandemic, to prevent undue prejudice against taxpayers.

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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.

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