Bombay HC Warns Tax Officers on delays in serving assessment orders

Nirjay Securities P. Ltd. Vs ITO (Bombay High Court)

The Bombay High Court recently delivered a judgment in the case of Nirjay Securities P. Ltd. vs. Income Tax Officer (ITO), shedding light on a significant legal matter involving the Income Tax Act of 1961. This article delves into the details of the case, analyzing the petitioner’s claims, the court’s response, and the implications for taxpayers.

1. Allegations of Delay: The petitioner alleged that they responded to a notice under Section 142(1) of the Income Tax Act on 9th and 16th March 2021. Surprisingly, the 2nd respondent took no action for six months, until 3rd September 2021, leaving the petitioner in a state of uncertainty.

2. Rushed Assessment Order: The petitioner received a draft assessment order on 23rd September 2021, providing only three working days to respond. The petitioner requested a short adjournment and personal hearing through video conferencing, which was denied. The court condemned the 2nd respondent’s actions and expressed disappointment at the lack of diligence in handling the case. It urged the Central Board of Direct Taxes (CBDT) to sensitize its officers to prevent such treatment of assessees.

3. Setting Aside the Assessment Order: In response to the petitioner’s grievances, the Bombay High Court decided to quash and set aside the assessment order dated 29th September 2021. The matter was remanded to the Jurisdictional Assessing Officer (JAO) with clear instructions to follow the directions given by the Income Tax Appellate Tribunal (ITAT) and grant a personal hearing to the petitioner. Notice of the hearing should be communicated at least five working days in advance.

4. Supplementary Response: The petitioner was given the liberty to file a supplementary response to the draft assessment order due to the limited time provided. This supplementary response should be submitted by 16th October 2023. The time for filing the response would begin once the Assessing Officer provides copies of the notices issued under Section 133(6) of the Income Tax Act to various parties and the responses received from those parties.

5. Timely and Reasoned Assessment Order: The court emphasized that the new assessment order should be a reasoned one, addressing every submission made by the petitioner. The order must be passed by 31st December 2023, ensuring that justice is served promptly.

6. Conclusion: In conclusion, the Bombay High Court’s judgment in the case of Nirjay Securities P. Ltd. vs. ITO highlights the importance of adhering to principles of natural justice and timely action in the assessment process. This case serves as a reminder for assessing officers to act diligently and considerately. It also reinforces the need for taxpayers’ rights to be upheld. While this judgment does not delve into the merits of the case, it provides clarity on the process and timelines for assessment in accordance with ITAT directions.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1 In the petition, in paragraph 4.3.1(v), petitioner has alleged that it had, in reply to notice under Section 142(1) of the Income Tax Act, 1961 (the Act), responded on 9^th March 2021 and 16^th March 2021 but thereafter, 2^nd respondent for six months, until 3^rd September 2021, did not take any steps. In response to a notice dated 3^rd September 2021, petitioner filed voluminous documentary evidences and also inquired if any further details were required. Thereafter, a draft assessment order dated 23^rd September 2021 was issued. Effectively only three working days time was given to respond to the draft assessment order and petitioner sought short adjournment and personal hearing through video conferencing, which was not given. In the affidavit in reply, there is no denial of these allegations but according to respondents, no prejudice has been caused to petitioner.

2 We would have expected the 2^nd respondent to atleast work with diligence and alacrity. 2^nd respondent slept over the matter for six months between March 2021 and September 2021 and then gives only three working days to respond to the draft assessment order and passes an order without giving a personal hearing because there was no time left to give personal hearing. It is most unfortunate stand being taken by Union of India through its officers which requires to be condemned, which we hereby do. We hope the CBDT would sensitize its officers so that they do not treat assessees in this manner. The least we would have expected in the affidavit in reply or atleast the counsel, as an officer of the Court, to tell us is the Assessing Officer should have been more considerate and should have started working on this file much before 3^rd September 2021 so that principles of natural justice are met. We think it is high time we start imposing substantial costs to be recovered from the salary of such Assessing Officers. We should note that it is also petitioner’s case that the assessment order traveled beyond the directions given by ITAT. We have not gone into that aspect.

3 In the circumstances, we hereby quash and set aside the assessment order dated 29^th September 2021 and remand the matter to the Jurisdictional Assessing Officer (JAO) who shall pass a fresh assessment order strictly in accordance with the directions given by ITAT and after giving a personal hearing to petitioner, notice whereof shall be communicated atleast five working in advance.

4 Ms. Hariya states that as only three working days were given to respond to the draft assessment order, petitioner should be given liberty to file a supplementary response to the draft assessment order. Ms. Hariya is justified in making this request. Petitioner may, therefore, file a supplementary response to the draft assessment order on or before 16^th October 2023. The time to file supplementary response will start upon the Assessing Officer providing copies of the notices issued under Section 133(6) of the Act to various parties and responses received from those parties. The Assessing Officer shall also make a statement in the forwarding letter that apart from those responses made available to petitioner, no other party has responded.

5 The assessment order to be passed shall be a reasoned order dealing with every submission of petitioner. The assessment order to be passed by 31^st December 2023.

6 Petition disposed.

7 We clarify that we have not made any observation on the merits of the matter.