Triumph International (India) Private Limited Vs Assessment Officer (Madras High Court)
This article examines the recent decision by the Madras High Court in the case of Triumph International (India) Private Limited vs. Assessment Officer (Madras High Court). The Court ruled that a draft assessment order issued by the Income Tax Department must be treated as a show cause notice if it proposes significant adjustments to a taxpayer’s income without providing a prior opportunity to respond.
Background
The petitioner, Triumph International (India) Private Limited, challenged a draft assessment order issued by the Income Tax Department for the assessment year 2020-21. The Department identified a discrepancy between the closing stock of lingerie for the previous year (2019-20) and the opening stock for the current year (2020-21).
The Department issued a show cause notice, but it lacked crucial details, including the specific amount of the proposed adjustment to the company’s income. The petitioner responded to the show cause notice, explaining the discrepancy and requesting a personal hearing. However, the draft assessment order added a substantial amount to the company’s income and disallowed expenses without informing the petitioner beforehand.
Petitioner’s Contentions
The petitioner argued that the draft assessment order violated the principles of natural justice in several ways:
