eShakti.com Private Limited Vs ACIT (Madras High Court)
The petitioner challenged two assessment orders dated 26 December 2019 for Assessment Years 2016-17 and 2017-18 passed under the Income-tax Act, 1961. Although several grounds were raised, the Court identified the principal legal issue as whether a show cause notice is required before finalising an assessment.
The Court noted that two pre-assessment notices had been issued and there had been exchanges of correspondence between the parties. However, no show cause notice was issued setting out the proposed additions or disallowances and the issues ultimately dealt with in the assessment orders, thereby denying the petitioner an opportunity to respond before completion of the assessments.
The petitioner relied on CBDT Instruction No. 20/2015 dated 29 December 2015, which states that in scrutiny assessments where additions or disallowances are proposed, the Assessing Officer should provide a fair opportunity to the assessee by issuing a show cause notice indicating the reasons and supporting material, consider the assessee’s response, and thereafter pass the assessment order.
The Revenue initially contended that the Instruction applied only to Assessment Year 2014-15 and therefore had no application to the assessments under challenge. Since the issue had wider implications, the Court impleaded the Central Board of Direct Taxes (CBDT) as a respondent.
