2025 (4) TMI 921 - HC - Income Tax

Tax Assessment Notice Upheld: Procedural Fairness Preserved with Extended Reply Time and Comprehensive Hearing Opportunity

GI. Retail Pvt. Ltd. Versus The Income Tax Officer, ITO Corporate Ward 2 (3), Chennai, National Faceless Assessment Unit, New Delhi

HC analyzed the validity of a show cause notice in a tax assessment proceeding. The Court rejected the petitioner's challenges to jurisdictional transfer ... Validity of show cause notice issued u/s 144 (8) by the first respondent - petitioner submitted that prior to the issuance of the impugned show cause notice by the first respondent/JAO, the second respondent/faceless Assessing Officer has already issued a show cause notice and when the faceless proceedings were going on, the second respondent abruptly and arbitrarily transferred the case to the first respondent/jurisdictional officer, without any intimation or communication to the petitioner stating the reason for transfer, therefore, the petitioner was in a perplexed state as to which show cause notice, he is required to file reply HELD THAT:- It is no doubt true that initially, a show cause notice dated 28.02.2025 was issued by the second respondent, however, since the said show cause notice was issued by a faceless AO, the case was transferred to the file of the jurisdictional AO, viz., the first respondent, who issued the impugned show cause notice dated 12.03.2025, and called for reply/objections from the petitioner. In the said show cause notice itself, a reference was made to the show cause notice issued by the Faceless Assessment Officer dated 28.02.2025, stating that the case of the petitioner has been transferred to the jurisdictional/AO, first respondent, therefore, the contention of the petitioner that the petitioner got perplexed as to which show cause notice, they have to file reply/objection is baseless, as rightly pointed out by the learned Standing Counsel for the respondent. Though this Court is not inclined to entertain the Writ Petition, however, grants liberty to the petitioner to file reply to the show cause notice issued by the first respondent, Jurisdictional Assessing Office which is impugned herein within a period of two weeks from the date of receipt of a copy of this order. Thereafter, the first respondent is directed to consider the reply and shall issue a clear 14 days notice affording an opportunity of personal hearing to the petitioner and shall decide the matter in accordance with law. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court in this matter are:Whether the issuance of the second show cause notice dated 12.03.2025 by the jurisdictional Assessing Officer under Section 144(8) of the Income Tax Act, 1961, subsequent to an earlier show cause notice dated 28.02.2025 issued by the faceless Assessing Officer, was valid and within jurisdiction.Whether the transfer of the case from the faceless Assessing Officer to the jurisdictional Assessing Officer without prior intimation or communication to the petitioner was arbitrary and violative of principles of natural justice.Whether the petitioner was placed in a state of confusion or perplexity regarding which show cause notice to respond to, and whether the limited time granted by the jurisdictional Assessing Officer to file a reply was reasonable or violated procedural fairness.Whether the impugned show cause notice dated 12.03.2025 was issued without following mandatory procedures and without authority of law, thereby warranting quashing of the notice.2. ISSUE-WISE DETAILED ANALYSISValidity and Jurisdiction of the Second Show Cause NoticeThe legal framework governing the issuance of show cause notices under the Income Tax Act, 1961, particularly Section 144(8), empowers the Assessing Officer to call for explanations from the taxpayer before passing any order. The faceless assessment scheme permits issuance of notices by faceless officers, but the jurisdictional Assessing Officer retains supervisory authority and may take over the proceedings.The Court noted that the initial show cause notice dated 28.02.2025 was issued by the faceless Assessing Officer, and on the same date, the case was transferred to the jurisdictional Assessing Officer, who subsequently issued the impugned show cause notice dated 12.03.2025. The latter notice explicitly referenced the earlier notice and informed the petitioner of the transfer. This demonstrated that the jurisdictional Assessing Officer acted within the scope of authority vested under the Income Tax Act and the faceless assessment scheme.The Court rejected the petitioner's contention that the second notice was issued without jurisdiction or authority of law, holding that the transfer and issuance of the second notice were legally valid and procedurally proper.Arbitrariness and Natural Justice in Transfer of ProceedingsThe petitioner argued that the transfer was abrupt, arbitrary, and effected without any intimation or communication, thereby violating principles of natural justice and causing confusion. The Court examined whether such transfer required prior notice or explanation to the petitioner.The Court observed that the impugned show cause notice dated 12.03.2025 itself contained a reference to the earlier faceless notice and the transfer of proceedings to the jurisdictional Assessing Officer. This inclusion served as sufficient communication regarding the transfer. The Court held that the transfer was not arbitrary but a procedural step permissible under the law, and the petitioner was adequately informed through the second notice.Hence, the Court found no merit in the argument that the transfer violated natural justice or was arbitrary.Perplexity Regarding Which Notice to Respond To and Time Allowed for ReplyThe petitioner contended that due to the issuance of two show cause notices by two different officers within a short span, there was confusion as to which notice required a reply. Further, the petitioner claimed that the jurisdictional Assessing Officer granted only two working days to file a reply, which was insufficient and unfair, especially since the petitioner had requested one month's time.The Court analyzed the contents of the impugned notice and found that it clearly referred to the earlier notice and the transfer, thereby negating any confusion about the notice to be replied to. Regarding the time granted, the Court acknowledged the petitioner's request for an extended period but noted that the Assessing Officer fixed a personal hearing on 24.03.2025, citing the limitation period expiring on 31.03.2025 as justification.While the Court did not find the petitioner's perplexity argument convincing, it nevertheless granted the petitioner liberty to file a reply within two weeks from the date of receipt of the order copy, thereby affording an opportunity to present objections adequately. The Court also directed the Assessing Officer to issue a clear 14-day notice for personal hearing thereafter, ensuring procedural fairness.Compliance with Mandatory Procedures and Authority of LawThe petitioner asserted that the impugned notice was issued without following mandatory procedures and without authority of law. The Court examined the procedural history and the contents of the notices.It was evident that the faceless assessment scheme and the Income Tax Act permit transfer of cases from faceless officers to jurisdictional Assessing Officers. The impugned notice complied with the requirement of referencing the earlier notice and informing the petitioner of the transfer. The Court found no procedural irregularity or lack of authority in issuing the second show cause notice.Therefore, the Court concluded that the issuance of the impugned notice did not violate any mandatory procedural requirement or legal authority.3. SIGNIFICANT HOLDINGSThe Court held that:'The contention of the petitioner that the petitioner got perplexed as to which show cause notice, they have to file reply/objection is baseless.''The case was transferred to the jurisdictional Assessing Officer, who issued the impugned show cause notice referencing the earlier notice, thereby adequately informing the petitioner.''The transfer of proceedings from the faceless Assessing Officer to the jurisdictional Assessing Officer was neither arbitrary nor without authority of law.''Liberty is granted to the petitioner to file reply within two weeks and the Assessing Officer shall thereafter issue a clear 14 days notice for personal hearing and decide the matter in accordance with law.'The core principles established include:The faceless assessment scheme permits transfer of cases to jurisdictional Assessing Officers, who may issue subsequent show cause notices referencing earlier proceedings.Such transfer and issuance of notices are valid if the taxpayer is adequately informed, even if prior intimation of transfer is not separately communicated.Procedural fairness requires that taxpayers be given reasonable opportunity to file replies and be heard, which may be secured by judicial intervention when necessary.On the issues presented, the Court declined to quash the impugned show cause notice but ensured protection of the petitioner's rights by granting additional time to file a reply and directing a proper hearing before final adjudication.