Lees than stipulated 7 clear days to respond: HC directs Fresh Assessment 

Sreelekha Banerjee Vs Deputy Commissioner of State Tax & Ors. (Calcutta High Court)

In the case of Sreelekha Banerjee vs. Deputy Commissioner of State Tax & Ors., the Calcutta High Court addressed a dispute over the tax assessment for the year 2019-20. The petitioner challenged a series of notices and orders under Section 148A and Section 147 of the Income Tax Act, arguing that she was not given adequate time to respond to a show cause notice, which violated the principles of natural justice and the Standard Operating Procedure (SOP) issued by the National Faceless Assessment Centre. The petitioner highlighted that the notice was digitally signed on February 13, 2024, but required a response by February 20, 2024, effectively providing less than the stipulated 7 clear days. The Court acknowledged this and noted that Saraswati Puja, a significant festival, occurred during this period, further reducing the effective response time. Consequently, the assessment order dated March 7, 2024, was set aside, and the case was remanded to the Faceless Assessment Unit. The Court directed the Unit to reactivate the response submission portal and allow the petitioner to submit her response within 15 days, followed by a fresh assessment within 8 weeks. The petitioner waived her right to challenge certain other notices, and the tax paid, if any, would be adjusted accordingly. The Court emphasized that the new assessment should be conducted on merit, without being influenced by its observations.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

1. The present writ petition has been filed, inter alia, challenging a notice dated 12^th March, 2023 for the assessment year 2019-20 under Section 148A(b) of the Income Tax Act, 1961 (hereinafter referred to as the “said Act”), the order dated 27^th March, 2023 for the assessment year 2019-20 issued under Section 148A(d) of the said Act, the notice issued under Section 148 of the said Act, the show cause notice dated 13^th February, 2024 proposing variations in the income/loss for the assessment year 2019-20 and the assessment order dated 7^th March 2024 issued under Section 147 read with Section 144 and 144B of the said Act.

2. Ray, learned advocate appearing for the petitioner after arguing the matter for sometime submits that although the petitioner has canvassed several issues, however, the primary contention of the petitioner is with regard to the petitioner not being afforded with adequate opportunity to respond to the show cause and confines the petition to such challenge only. He submits that the show cause notice had been issued in contravention of the provisions of Section 144B(6)(vii) of the said Act as also the Standard Operating Procedure (SOP) circulated by a communication dated 3r^d August, 2022 issued by the Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi. By referring to the said SOP it is submitted that in terms of clause N.1.3, the time to respond to a show cause is 7 days. By referring to the show cause notice, Mr. Ray submits that the petitioner was given time to submit her response till 17.34 hours of 20^th February, 2024. However, from the digital signature appearing on the show cause, it would appear that the same was issued on 13^th February, 2024, at around 18.37 hrs. As such 7 clear days time was not afforded to the petitioner.

3. In any event, it is submitted that the petitioner ought to have been granted 7 clear working days time and the time period of 7 days is only the minimum period which has been provided for. He submits that admittedly, in this case after expiry of the time specified for submitting the response, the “submit response” button on the portal was deactivated and as such the petitioner had no opportunity to file her response. The aforesaid constitutes violation of principles of natural justice. In support of his contention Mr. Kanodia has placed reliance on a judgment delivered by the Hon’ble Division of this Court rendered in the case of Girdhar Gopal Dabnia —versus- Union of India reported in (20221 141 taxmann.com 251 (Calcutta).

4. In the facts and circumstances of the case, this Court may be pleased to set aside the assessment order and remand the matter back to the Faceless Assessing Unit so that the petitioner can file her response and a fresh order can be passed on the basis thereof, after giving an opportunity of hearing to the petitioner.

5. Bhattacharjee, learned advocate appearing for the respondents submits that due opportunity of hearing was afforded to the petitioner. From the show cause notice it would transpire that if not 7 clear days, 7 days time had been provided to the petitioner to file response. The order of assessment was passed on March 2024. If the petitioner was so interested, the petitioner could have filed her reply with the grievance cell. The aforesaid cannot constitute to be a valid ground for remand. By referring to the judgment of the Hon’ble Division Bench in the case of Girdhar Gopal Dalmia (supra) he submits that the said judgment had been delivered in the facts and circumstances of that particular case where the Holi festival had intervened and as such, the said judgment does not apply in the present case. Mr. Bhattacharjee, however, candidly acknowledges the fact that Saraswati puja had intervened in the present case.

6. Heard the learned advocates appearing for the respective parties and considered the materials on record. Since, it appears that the petitioner has given up her right to challenge the notice issued under Section 148A(b) and the order passed under Section 148A(d) of the said Act as also to the issuance of notice under Section 148 of the said Act issued by the jurisdictional assessing officer, the present writ petition is only confined to the challenge to the show cause notice dated 13^th February 2024 for the assessment year 2019-20 and the order of assessment dated 7^th March 2024. Having regard to the aforesaid, this Court proceeds to examine the case made out by the petitioner.

7. From the show cause notice issued on the petitioner it would transpire that the said notice had been issued on 13′ February, 2024 and the petitioner was afforded an opportunity to respond by 17.34 hours of 20t^h February, 2024. At the first blush, although, it would appear that 7 days had been provided to the petitioner, however, upon scrutinizing the said notice it would appear that such notice had been digitally signed on 13t^h February, 2024 at around 18.37 hours. As such, it cannot be said that the petitioner was afforded 7 clear days notice to respond.

8. It appears that in terms of Section 144B(6)(vii) of the said Act in case a variation is proposed in the income or loss determination proposal or the draft order, an opportunity is required to be provided to the assessee by serving a notice calling upon the assessee to show cause as to why the assessment should not be completed as per such income or loss determination proposal. Admittedly in this case it would appear that the respondents had issued such notice. However, such notice is not in consonance with the SOP for assessment unit, under the faceless assessment provision of Section 144B of the said Act which has been circulated vide notification dated 3r^d August 2022.

9. It would appear that in terms of clause N.1.3 of the SOP it has been provided that the principles of natural justice must be followed and in clause N.1.3.1 thereof the response time for the show cause has been identified as 7 days. At the same time, however, it has also been provided that keeping in view the limitation date for completion of assessment, the response time may be curtailed. Admittedly, in this case limitation for completion of assessment proceeding do not intervene for not providing of clear days response time. It may be noticed that the object of show cause is to offer an opportunity to respond. Admittedly, in this case it would appear that Saraswati Puja was on 14′ February, 2024 and as such, the same coupled with the short response time as indicated hereinabove, may have made it unviable for the petitioner to offer response, within the specified time. The above constitutes violation of the principles of natural justice.

10. Taking into consideration the aforesaid and since, the assessment order was passed without considering the petitioner’s response, the matter is remanded back to the Faceless Assessment Unit. The petitioner is directed to submit her response with the Faceless Assessment Unit within a period of 15 days from date. For such purpose, the Faceless Assessment Unit shall re­activate the “submit response” button in the portal within a week from date and communicate the same to the petitioner via e­mail.

11. In the event, the petitioner submits her response within the time specified, the Faceless Assessment Unit upon considering the petitioner’s response and if any request is made, upon giving an opportunity of hearing to the petitioner via video conferencing facility, shall hear out and pass an assessment order within a period of 8 weeks from the date of communication of this order.

12. As a sequel thereto, the assessment order dated 7^th March 2024 for the assessment year 2019-20 issued under Section 147 read with Section 144 and 144B of the said Act and other consequential notices dated 7^th March, 2024 and 10^th April, 2024 are accordingly set aside.

13. It is made clear that the petitioner has waived her right to challenge the notice issued under Section 148A(b) of the said Act dated 12^th March, 2023 for the Assessment Year 2019-20 as also other challenges as indicated hereinabove.

14. The tax paid by the petitioner, if any, shall be adjusted by the assessing officer while passing the assessment order.

15. This Court has not gone into the merits of the case and the assessing officer shall pass the assessment order on merits being uninfluenced by any of the observations made by this Court.

16. With the above observations and directions, the writ petition being WPA 13993 of 2024 is disposed of.

17. All parties shall act on the basis of the server copy of this order duly downloaded from this Court’s official website.