Case Law Details
M. S. Mohamed Siddique & Co. Vs Assessment Unit/Verification unit/ Technical Unit/Review Unit Income/ Tax Department (Madras High Court)
In a recent ruling, the Madras High Court addressed the implications of personal hearings in tax assessments, specifically in the case of M. S. Mohamed Siddique & Co. vs. Assessment Unit/Verification Unit/Technical Unit/Review Unit of the Income Tax Department. The Court dismissed the writ petition challenging an assessment order, emphasizing that failure to request a personal hearing negates claims of denial of such an opportunity.
Background of the Case
The petitioner, M. S. Mohamed Siddique & Co., is a partnership firm based in Chennai, operating since 1999 in the warehousing services sector. The firm faced a show cause notice under Section 148A(b) of the Income Tax Act concerning the assessment year (AY) 2018-19, issued on March 31, 2022. The notice aimed to reopen the assessment for that year. However, the petitioner did not respond to this initial notice.
A subsequent notice was issued on March 6, 2023, to which the petitioner provided a reply on March 8, 2023. Despite this, the assessment order was issued on March 17, 2023, without granting a personal hearing to the petitioner. This led the firm to challenge the order in the High Court.
Court Proceedings
During the proceedings, the counsel for the petitioner argued that the lack of a personal hearing amounted to a denial of natural justice. The petitioner highlighted that while they had disclosed an income of ₹91,80,856 in their return, the return was filed late under the provisions of Section 144B. They contended that their response to the second notice was disregarded, leading to an incorrect assessment.
The respondent, represented by the Senior Standing Counsel, maintained that two show cause notices were issued and that the petitioner had failed to respond adequately to the first notice. According to the respondent, the petitioner only filed a reply to the second notice within the specified timeframe. Therefore, they argued, the assessment order was justified and that the writ petition should be dismissed.
Key Findings of the Court
The Court, after reviewing the case, noted that:
- Two show cause notices were indeed issued, and the petitioner did not respond to the first one.
- The second notice clearly informed the petitioner of the opportunity to request a personal hearing by utilizing the e-filing portal.
- The absence of a request for a personal hearing indicated that the petitioner did not intend to exercise this option, thus undermining their claim of being denied such an opportunity.
The judgment cited a specific clause from the notice which stated: “If required, in addition to filing written reply you may request for personal hearing so as to make oral submissions or present your case.” The Court interpreted this to mean that the respondent had provided adequate opportunities for the petitioner to present their case, which the petitioner failed to utilize.
Conclusion of the Case
The Madras High Court ultimately dismissed the writ petition, asserting that the denial of a personal hearing could not be claimed when the opportunity was not actively pursued by the petitioner. However, the Court allowed the petitioner to file an appeal against the assessment order. This appeal must be accompanied by a payment of ₹10,000 to the Cancer Institute in Chennai within two weeks. The Court directed that the appeal be resolved within 30 days of filing.
This case underscores the importance of timely responses and the active pursuit of procedural rights within the tax assessment framework. It serves as a reminder to taxpayers of their responsibilities in engaging with tax authorities, particularly regarding opportunities for hearings and submissions.
Implications for Taxpayers
The ruling clarifies the expectations for taxpayers concerning personal hearings during tax assessments. Taxpayers must ensure they not only respond to notices but also actively request hearings when available to protect their rights and interests effectively. The judgment also highlights the judicial stance on procedural compliance and the responsibilities of taxpayers in administrative proceedings.
In summary, the Madras High Court’s ruling reinforces the principle that failing to avail oneself of procedural opportunities negates claims of unfair treatment in tax assessments, emphasizing a balanced approach to taxpayer responsibilities and rights in legal proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Challenging the order dated 17.03.2023 passed by the 1st respondent, the petitioner has filed the present Writ Petition.
2. The case of the petitioner is that the petitioner is a partnership firm established in the year 1999 and engaged in the business of warehousing services, operating from Chennai. The petitioner submits that a show cause notice under Section 148A(b) of the Act for the impugned AY 2018-19 was issued to the petitioner by the 2nd respondent on 31.03.2022 seeking to re-open the assessment for the A.Y.2018-2019. The petitioner submits that they have inadvertently failed to file their submissions with respect to show cause notice issued under Section 148A(b) of the Act.
3. Further, second show cause notice was issued by the 1st respondent on 06.03.2023. The petitioner filed reply to the said notice on 08.03.2023. Without affording an opportunity of personal hearing to the petitioner, the assessment order came to be passed on 17.03.2023.
4. Learned counsel for the petitioner fairly submitted that the petitioner has disclosed the sum of Rs.91,80,856/- in his return, but the return was filed belatedly in terms of second notice issued under Section 144b. The respondent refused to accept the reply by considering the entire income as asset. The assessing officer passed the impugned order without considering the petitioner’s reply dated 08.03.2023. He therefore, pleaded that an opportunity may be provided to the petitioner for personal hearing, setting aside the order passed by the 1st respondent.
5. Learned Senior Standing Counsel appearing for the respondent would submit that in the present case, two show cause notices were issued and the petitioner refused to file reply to the first show cause notice. Thereafter, reply to the second show cause notice was considered and the assessment order has been passed. Therefore, there is no merit in the submission of the petitioner. Hence, he prayed to dismiss the petition.
6. Heard the learned counsel for the petitioner and the learned Senior Standing counsel for the respondent and perused the materials available on record.
7. Admittedly, two show cause notices were issued by the 1st respondent in pursuance to Section 144(1)(9) and 144B(1)(12) and 131 of the Act. It is pertinent to note that no reply was filed by the petitioner for the first notice. Therefore, second notice was issued on 06.03.2023 by providing two days time for filing reply and within two days, the petitioner filed the reply.
8. Now the issue is after considering the reply, the assessment officer decided to take entire receipt as shown in the ITR as income of the petitioner and decided to pass assessment order. On the other hand, the petitioner filed the returns taking 28% as profit out of the total receipt in terms of Section 44A of the Act. When the respondent rejected the reply of the petitioner and decided to take entire receipt as income and proceeded to pass the assessment order, the respondent ought to have afforded an opportunity of personal hearing to the petitioner.
9. However, on perusal of notice dated 06.03.2023, it has been stated as follows:
“3.c. If required, in addition to filing written reply you may request for personal hearing so as to make oral submissions or present your case. The request can only be made by clicking the Seek Video Conferencing button available against the SCN, in the view notices of this proceeding in the e-proceedings tab on e-filing portal. The request can be made only before expiry of compliance date and time through video conference.”
10. Reading the above clause makes it clear that though the respondent has given liberty to the petitioner to request for personal hearing, the petitioner failed to avail such an option. Therefore, the question of violation of natural justice will not arise. Hence, this Court is not inclined to entertain the present writ petition.
11. Accordingly, the writ petition is dismissed. However, liberty is granted to the petitioner to file an appeal subject to the payment of cost of Rs.10,000/-to the Cancer Institute (Regional Cancer Centre), Adyar, Chennai – 600 020, within a period of two(2) weeks from the date of receipt of a copy of this order and thereafter, the respondents are directed to dispose of the appeal within a period of thirty(30) days. No costs. Consequently connected miscellaneous petitions are closed.
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