Addition due to non-filing of reply by assessee- HC Directs AO to Pass speaking order

Vinplex India Private Limited Vs Additional/Joint/Deputy/ACIT (Madras High Court)

In the case of Vinplex India Private Limited Vs Additional/Joint/Deputy/ACIT, the Madras High Court addresses the consequences of unexplained income addition due to non-filing of reply by the assessee, accompanied by changes in address and email ID. The court directs the Assessing Officer to pass a speaking order.

Introduction: The case of Vinplex India Private Limited Vs Additional/Joint/Deputy/ACIT involves a significant issue related to the addition of unexplained income under Section 69 of the Income Tax Act, 1961. The Madras High Court’s verdict in this case sheds light on the impact of an assessee’s failure to file a reply, coupled with changes in the address and email ID on the assessment order.

Analysis:

1. Background and Impugned Assessment Order: The petitioner challenged the Assessment Order dated 08.09.2021 for the Assessment Year 2018-2019. The assessment order added Rs.60 Crores as unexplained investment under Section 69. Despite several notices, including a Show Cause Notice, the petitioner did not respond.

2. Merger and Change in Address: The petitioner, previously in a Share Purchase Agreement with M/s. Periyapalayam Logistics Park Private Limited, merged with the latter after a Scheme of Amalgamation. The petitioner’s registered office shifted from Gleneden Place to Unit No.7 & 8, Pinnacle Building, International Tech Park, Taramani.

3. Filing of Returns and Mistakes: For the Assessment Year 2018-2019, the petitioner filed a regular return, followed by a revised return, and a fresh return. However, mistakes were made while providing the old address and email ID in the revised return, despite having changed them.

4. Communication Errors and Assessment Order: Notices were sent to the old address and email ID due to the mistakes in the revised return. Consequently, the Impugned Assessment Order was passed, making additions based on unexplained income.

5. Petitioner’s Contentions and Rules: The petitioner’s counsel argued that the Department was aware of the address and email ID changes, even though mistakes were committed. Reference was made to Section 282 and Rule 127(2)(a)(iii) and (iv) and Rule 127(2)(b)(iii) of the Income Tax Act.

6. Respondents’ Counter-Arguments: The respondents argued that the petitioner misled the Department with incorrect details in the return. Notices were issued to the address and email ID mentioned in the return. They emphasized that the petitioner’s status as a company negates ignorance as an excuse.

7. Court’s Evaluation and Order: The court acknowledged the petitioner’s mistakes but noted that the Department was aware of the changes. It highlighted that other notices/orders reflected the correct address and email ID. Provisions of Income Tax Rules, 1962, were cited, indicating that notices should be sent to the address available on the Ministry of Corporate Affairs’ website.

8. Quashing of Assessment Order and Remand: The court quashed the Impugned Assessment Order and remitted the case to the respondents. It directed the respondents to pass a speaking order within 45 days. The Impugned Assessment Order was treated as a corrigendum to the Show Cause Notice for dismissal purposes.

9. Opportunity for Reply and Lien Removal: The petitioner was granted 15 days to reply to the notice preceding the Impugned Assessment Order. Additionally, the petitioner could approach the respondents to lift the lien. The court allowed the writ petition with these directions.

Conclusion: The Vinplex India Private Limited case highlights the crucial role of accurate information provision and communication in the assessment process. Despite the petitioner’s mistakes, the court acknowledged the Department’s awareness of changes, ultimately quashing the assessment order. This case underscores the importance of maintaining updated details to ensure transparency and fairness in tax assessments.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The petitioner has challenged the Impugned Assessment Order dated 08.09.2021 for the Assessment Year 2018-2019.

2. By the Impugned Assessment Order dated 08.09.2021, the first respondent has added a sum of Rs.60 Crores as an unexplained investment under Section 69 of the Income Tax Act, 1961. The Impugned Assessment Order also records that despite several notices including Show Cause Notice issued to the petitioner, the petitioner has not replied to the same. Therefore, in view of Section 115BBE(2), the expenditure claimed in the return was to be disallowed as unexplained income in Section 69 read with Section 115BBE(b).

3. The petitioner had earlier entered into a Share Purchase Agreement with M/s.Periyapalayam Logistics Park Private Limited. Thereafter, the said M/s.Periyapalayam Logistics Park Private Limited merged with the petitioner, pursuant to a Scheme of Amalgamation sanctioned under Section 233 of the Companies Act, 2013.

4. Pursuant to a Scheme of Amalgamation, the petitioner company whose registered office was in Gleneden Place, 813, Poonamallee High Road, Kilpauk, Chennai – 600 010 was shifted to its current address at Unit No.7 & 8, First Floor, Pinnacle Building, International Tech Park,CSIR Road, Taramani, Chennai – 600 113.

5. For the Assessment Year 2018-2019, the petitioner had filed a regular return under Section 139 of the Income Tax Act on 31.10.2018. Thereafter, the petitioner filed a revised return on 31.03.2019. Thereafter, a fresh return on 05.06.2020.

6. While filing the revised return also the petitioner had given the old address and the old e-mail id, although the address of the petitioner and his e-mail id had been changed.

7. The petitioner appears to have however intimated the change in the address to the Income Tax Department. Several communications were sent to the petitioner to its new e-mail id and the new address of its registered office at Unit No.7 & 8, First Floor, Pinnacle Building, International Tech Park, CSIR Road, Taramani, Chennai – 600 113.

8. Since the revised return dated 05.06.2020 had the old address viz., Gleneden Place, 813, Poonamallee High Road, Kilpauk, Chennai – 600 010 and the old e-mail id viz., vinplex1991@gmail.com, all further notices regarding assessment came to be issued to the petitioner through email and through postal service at the old address in Gleneden Place, 813, Poonamallee High Road, Kilpauk, Chennai – 600 010. Thus, the Impugned Assessment Order dated 08.09.2021 came to be passed, whereby the additions have been made.

9. It is a specific case of the petitioner that the petitioner came to know that the Impugned Assessment Order dated 08.09.2021 only after the refund claim of the petitioner for the subsequent Assessment Year 2019-2020 came to be issued on 22.12.2021, whereby, an amount of Rs.65,98,57,410/- was stated to be the outstanding due of the petitioner for the assessment year 2018-2019. It is thereafter, the petitioner has retrieved the Impugned Assessment Order and has filed this writ petition.

10. The learned counsel for the petitioner submits that there are certain mistakes on the part of the petitioner, however these mistakes are not fatal as the Department was aware of the fact that the petitioner had already altered its email-id from vinplex1991@gmail.com, to accounts@ascendasfirstspace.com and poojari@ascendas-firstspace.com.

11. The learned counsel for the petitioner has placed reliance on Section 282 of the Income Tax, 1961 and the rules made there under. Specifically, a reference was made to Rule 127(2)(a)(iii) and (iv) and Rule 127(2)(b)(iii).

12. It is submitted that although the petitioner had committed mistake while filing the revised return on 05.06.2020, it was incumbent on the part of the respondent to have delivered or transmitted electronically all notices to the email address of the company as was available in the website of the Ministry of Corporate Affairs.

13. The learned counsel for the petitioner further submits that the petitioner had already pre-deposited a sum of Rs.3 Lakhs as against the tax liability of Rs.65,98,57,410/- which has been demanded on account of the challenge to the unexplained income under Section 69 of the Income Tax Act, 1961.

14. That apart, it is submitted that the respondents are also holding lien over the above deposit of the petitioner for a sum of Rs.7 Lakhs. Hence, prays for setting aside of the Impugned Assessment Order dated 08.09.2021 by way of remand.

15. The learned counsel for the petitioner has also made a request for lifting of the lien.

16. The learned Senior Standing Counsel assisted by Junior Standing Counsel for the respondents on the other hand would submit that the petitioner has deliberately mislead the Department by giving incorrect address which has resulted in the Impugned Assessment Order that came to be passed.

17. It is submitted that the notices that were sent by the office of the second respondent are prior to the Impugned Assessment Order at the address and the email-id given in the return that was filed on 05.06.2020. Therefore, there is no case made out for quashing the Impugned Assessment Order dated 08.09.2021. Hence, prays for dismissal of the writ petition.

18. It is submitted that the first respondent herein is the National Faceless Assessment Center and it has nothing to do with the Assistant Director of Income Tax, CPC subject to the extent that both the wings are part of the Income Tax Department.

19. Therefore, it is submitted that the contention of the petitioner that the first respondent National Faceless Assessment Centre, New Delhi, was at fault while passing the Impugned Assessment Order cannot be countenanced.

20. It is further submitted that the petitioner neither informed the Assessing Officer nor the National E-Assessment Centre about the change of address. Therefore, the petitioner cannot be aggrieved that the respondent for not serving notices or the orders at the address or the e-mail id mentioned in the return.

21. The learned Senior Standing Counsel assisted by Junior Standing Counsel for the respondents further submits that the petitioner is a company organized under the provisions of the Companies Act, 2013 and therefore ignorance of such mistakes while filing the email address cannot be done. Hence, prays for dismissal of the writ petition.

22. I have considered the arguments advanced by the learned counsel for the petitioner and the learned Senior Standing Counsel assisted by Junior Standing Counsel for the respondents.

23. There is no doubt, that there was a mistake committed by the petitioner while filing the revised return on 05.06.2020. Instead of giving new address and the new e-mail id, the petitioner has given the old postal address and the old e-mail id. Thus, all the communications pursuant to the aforesaid return that was filed on 05.06.2020 were addressed to the old e-mail id viz., vinplex1991@gmail.com and old address viz., Gleneden Place, 813, Poonamallee High Road, Kilpauk, Chennai – 600 010.

24. However, the fact also remains that other wings of the Income Tax Department was aware of the shifting of the address of the petitioner from old address viz., Gleneden Place, 813, Poonamallee High Road, Kilpauk, Chennai – 600 010 to new address viz., Unit No.7 & 8, First Floor, Pinnacle Building, International Tech Park, CSIR Road, Taramani, Chennai – 600 113. Similarly, the respondents were also aware of the change in email id.

25. The respondents were also aware of the change in e-mail id and address while passing order of refund claim for the subsequent financial year i.e., 2019-2020, the notices/orders were sent to the correct address at Unit No.7 & 8, First Floor, Pinnacle Building, International Tech Park, CSIR Road, Taramani, Chennai – 600 113

26. The Provisions of Income Tax Rules, 1962 under 127 also states that the in case of a company organized under the Companies Act, 2013, notice have to be sent to the address as available in the website of the Ministry of Corporate Affairs.

27. Rule 127(2)(a)(iii) and (iv) and Rule 127(2)(b)(iii) of the Income Tax Rules, 1962 reads as follows:-

28. Mistakes on the part of the petitioner and the respondents are on account of adaptation of the mode of communication electronically in view of Section 282 as amended as inserted by Finance No.2 Act, 2009 with effect from 01.2009.

29. The petitioner has not committed a serious mistake although it has turned out to be fatal to the petitioner. Considering the interest of the parties, court is inclined to quash the Impugned Assessment Order and remit the case back to the respondents to pass a speaking order within a period of forty five (45) days from the date of receipt of a copy of this order.

30. The Impugned Assessment Order dated 08.09.2021 which stands quashed shall be treated as a corrigendum to the Show Cause Notice for the purpose of final dismissal.

31. The petitioner is at liberty to file a reply to the notice which preceded the Impugned Assessment Order dated 08.09.2021 within a period of fifteen days (15) from the date of receipt of a copy of this order. The petitioner is also at liberty to approach the respondents to lift the lien.

32. The writ petition stands allowed with the above observations and directions. No cost. Consequently, connected miscellaneous petitions are closed.