Calcutta HC Sets Aside Assessment Order due to Violation of Natural Justice

Kunal Daga Vs Union of India (Calcutta High Court)

Assessee submitted two replies dated 24.03.2022 to both the show cause notices totally denying knowledge of the alleged person with whom the assessee is alleged to have had transactions. On 30^th March, 2022 the order was passed under Section 148A(d) of the Act. Thereafter notices under Sections 143 and 142(1) was issued for which a detailed reply was given by the assessee on 21.02.2023. Subsequently show cause notice was issued on 23.02.2023 giving less than three days time to the assessee to respond, in fact, the show cause notice runs to 11 pages. Before the assessee could respond the assessment has been completed and orders have been passed on 24.03.2023. The chain of events have been set out to show that there has been violation of principle of natural justice at different stages of the matter. The reopening of an assessment is a very serious matter and if such power is resorted to the assessee is entitled to an adequate opportunity to put forth their submissions. One more point which has been raised by the learned advocate for the appellant is that in the order passed under Section 148A(d) of the Act dated 30^thMarch, 2022 names of 12 companies have been mentioned which was never the allegation when the show cause notice under Section 148A(d) of the Act was issued and, therefore, it is submitted that the assessing officer proceeded on entirely a new set of facts which were never put to the assessee.

In the light of the above, HC held that the reassessment proceedings has to be redone and even if the assessment order has been passed, the same is required to be set aside and the matter is to be restored to the assessing officer for a fresh consideration.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

1. This intra court appeal by the writ petitioner is directed against the order dated 04.04.2023 passed by the learned Single Bench in WPA 6501 of 2023. The said writ petition was filed challenging an order passed by the assessing officer under Section 148A(d) of the Income Tax Act, 1961 dated 30^thMarch, 2022. The writ petition was filed on 16^th March, 2023. However, the same was heard on 4th April, 2023. In the interregnum the assessing officer has completed the reassessment proceedings and passed the order on 24.03.2023.

2. The learned Single Bench dismissed the writ petition on the ground that the appellant if advised can file an appeal as against the assessment order.

3. Aggrieved by such order, the appellant has filed the present appeal.

4. We have heard the learned advocates for the parties.

5. The first issue that needs to be pointed out is that the correctness of the order passed under Section 148A(d) of the Act cannot be questioned by the appellant in an appeal that he may prefer against the reassessment order dated 24.03.2023.

6. The appellant questions the said order stating that no enquiry was conducted by the enquiry officer independently and the assessment could not have been even proposed to be reopened.

7. The correctness of this contention of the appellant needs to be decided and the only remedy available to an assessee to test the correctness of an order under Section 148A(d) of the Act is by filing the writ petition before the High Court. One more fact which needs to be taken into account is that the assessing officer issued show cause notice dated 18.03.2022 under Section 148A(b) of the Act. Subsequently on 27.03.2022 a corrigendum was issued with a different allegation or in other words alleging that the assessee had entered into bogus transactions with a different person than the person who was named in show cause notice dated 18.03.2022. Subsequently another show cause notice was issued on 22.03.2022 and it is not clear as to whether the first show cause notice dated 18.03.2022 was dropped or otherwise.

8. The assessee submitted two replies dated 24.03.2022 to both the show cause notices totally denying knowledge of the alleged person with whom the assessee is alleged to have had transactions. On 30^thMarch, 2022 the order was passed under Section 148A(d) of the Act. Thereafter notices under Sections 143 and 142(1) was issued for which a detailed reply was given by the assessee on 21.02.2023. Subsequently show cause notice was issued on 23.02.2023 giving less than three days time to the assessee to respond, in fact, the show cause notice runs to 11 pages. Before the assessee could respond the assessment has been completed and orders have been passed on 24.03.2023. The chain of events have been set out to show that there has been violation of principle of natural justice at different stages of the matter. The reopening of an assessment is a very serious matter and if such power is resorted to the assessee is entitled to an adequate opportunity to put forth their submissions. One more point which has been raised by the learned advocate for the appellant is that in the order passed under Section 148A(d) of the Act dated 30^thMarch, 2022 names of 12 companies have been mentioned which was never the allegation when the show cause notice under Section 148A(d) of the Act was issued and, therefore, it is submitted that the assessing officer proceeded on entirely a new set of facts which were never put to the assessee.

9. In the light of the above, we are of the view that the reassessment proceedings has to be redone and even if the assessment order has been passed, the same is required to be set aside and the matter is to be restored to the assessing officer for a fresh consideration.

10. Accordingly, the appeal is allowed.

11. The order passed in the writ petition is set aside and the writ petition is allowed and the order passed under Section 148A(d) of the Act dated 30t^hMarch, 2022 and the consequential assessment order dated 24.03.2023 are quashed and the matter is restored to the file of the assessing officer at the stage of the show cause notice dated 22.03.2022.

12. The assessee is directed to submit a comprehensive and detailed reply to all the allegations which were made against the assessee, produce documents in support of their claim within a period of 15 days from the date of receipt of the server of this order.

13. Thereafter the assessing officer shall afford an opportunity to the assessee and redo the proceedings in accordance with law.

14. The assessee in order to submit a detailed reply is entitled to seek for documents and if the department requires time to supply those documents then the period of ten days fixed in this order shall commence from the date on which the assessee receives those documents.