Assessment order set aside under Sections 147 and 144B for denial of natural justice and risk of double taxation

The HC set aside the assessment order passed under Sections 147, 144 read with 144B, finding a violation of natural justice as the petitioner was denied an opportunity to present evidence that the disputed income had already been taxed in AY 2019-20. The court noted the risk of double taxation on the same transaction for AY 2018-19 and held that the petitioner must be allowed to submit documents before the AO for proper adjudication. Despite the existence of alternative remedies, the writ petition was entertained due to the factual matrix and denial of opportunity. The matter was remitted to the AO to pass fresh orders after hearing the petitioner, who was directed to appear within two weeks to produce evidence and make submissions.

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ISSUES:

Whether an income tax assessment order passed under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961, for a particular assessment year can validly reassess income already disclosed and taxed in a subsequent assessment year, thereby resulting in double taxation.Whether the assessee was denied the "reasonable opportunity of being heard" before passing the assessment order, constituting a violation of the principles of natural justice.Whether the High Court should entertain a writ petition challenging an assessment order despite the existence of an alternative remedy of appeal, on grounds of violation of natural justice and potential double taxation.What is the appropriate remedy when an assessee is prevented from producing evidence before the Assessing Officer due to circumstances beyond his control.

RULINGS / HOLDINGS:

The impugned reassessment order under Section 147 read with Sections 144 and 144B for the Assessment Year 2018-19 is liable to be quashed as it results in "double taxation" on the same transaction already disclosed and taxed in Assessment Year 2019-20, violating Article 265 of the Constitution of India.The assessment order was passed without affording the petitioner a "reasonable opportunity of setting out his case," thereby violating the principles of natural justice as enunciated in Tin Box Company v. CIT (2001) 9 SCC 725.Despite the existence of an alternative remedy of appeal, the writ petition is maintainable and entertained under Articles 226 and 227 of the Constitution of India due to the exceptional circumstances of violation of natural justice and the risk of double taxation.The petitioner is entitled to a fresh opportunity to produce all relevant documents before the Assessing Officer for proper adjudication; consequently, the matter is remitted for fresh consideration after affording personal hearing.

RATIONALE:

The Court applied the statutory provisions of the Income Tax Act, 1961, specifically Sections 147, 144, 144B, 142(1), and 148A(b), alongside constitutional principles under Article 265 (taxation only by law) and Articles 226 and 227 (judicial review and writ jurisdiction).Precedents relied upon include the Supreme Court decision in Tin Box Company v. CIT emphasizing the necessity of a "reasonable opportunity of being heard" before passing an assessment order, and the principle that assessment orders must be made after due procedure is followed.The Court also referenced judgments of other High Courts (Madhya Pradesh and Karnataka) concerning capital gains taxation and the inadmissibility of double taxation on the same transaction.On the issue of alternative remedies, the Court referred to the settled principle that the existence of an efficacious alternative remedy is a rule of convenience and discretion, not an absolute bar to writ jurisdiction, especially where there is a breach of natural justice, as expounded in Commissioner of Income Tax v. Chhabil Dass Agrawal (2014) 1 SCC 603 and related precedents.The Court recognized the petitioner's inability to respond timely due to "personal indisposition" as a sufficient ground to grant relief and allow production of evidence to avoid unjust double taxation.The Court clarified that it did not express any opinion on the substantive merits of the tax liability but limited its order to procedural fairness and the opportunity to be heard.

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