Delhi HC Quashes 9-Year-Delayed Tax Notice Due to Lack of Proper Service

APS Hydro Private Limited Vs Union of India & Ors. (Delhi High Court)

The case before the Delhi High Court concerned the validity of a notice dated 16.02.2022 and a corresponding order dated 12.05.2022 issued by the Income Tax Department, treating the petitioner as an assessee in default under Section 220(1) of the Income Tax Act, 1961.

The petitioner contended that no prior orders or intimations under Sections 154, 143(1)(a), or 271(1)(c) were ever served upon it. According to the petitioner, it became aware of the alleged tax demands only upon receipt of the impugned notice. It was argued that if such significant demands had actually been raised earlier, the petitioner would have taken appropriate remedial action.

The Department, in response, claimed that the relevant intimations and orders had been sent via email. However, no specific dates of such communications were provided. The Court noted that this absence of details made it difficult to accept the Department’s assertion of proper service.

The impugned notice included multiple demands spanning several assessment years from 2011–12 to 2019–20, with amounts running into lakhs of rupees. The earliest demand dated back to 09.02.2013. The Court observed that even if it were assumed that emails had been sent, it would be contrary to normal conduct for an assessee to ignore such substantial liabilities without taking any remedial steps.

Further, the Court found it implausible that the Department would remain inactive for nearly nine years despite such large outstanding demands. It held that it was difficult to believe that the Department would “sleep over the matter” and initiate action only after such a prolonged period.

In light of these considerations, the Court quashed the impugned notice and related communication in the interest of justice.

However, the Court granted liberty to the petitioner to seek copies of all relevant documents and information from the jurisdictional Assessing Officer, who was directed to provide the same within 15 days. The petitioner was also given 90 days to file objections or pursue remedies against the demands mentioned in the notice.

Importantly, the Court directed that if the petitioner initiates any statutory remedy, such as rectification or appeal, within the specified period, the same shall be considered on merits without raising limitation issues, as the limitation period stood extended by the Court’s order.

The Court also clarified that the petitioner may raise submissions regarding liability to pay interest under Section 220, which the Assessing Officer must consider in accordance with law.

Finally, the Court observed that if the Department considers it necessary, it is free to initiate fresh proceedings under Section 220, provided such action is taken in accordance with law.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. By way of the present writ petition, the petitioner has challenged the notice dated 16.02.2022 and corresponding order/communication dated 12.05.2022 issued by the Assistant Commissioner of Income Tax holding the petitioner to be an assessee in default under Section 220(1) of the Income Tax Act,1961 (hereinafter referred to as ‘the Act of 1961’).

2. The petitioner has approached this Court with a specific plea that none of the orders passed under Section 154, Section 143(1)(a) and Section 271(1)(c) of the Act of 1961 were ever served upon it and the petitioner came to know about the pendency of the demand only when it received the impugned notice dated 16.02.2022.

3. Learned counsel for the petitioner argued that had any demand been raised by the respondent-Department, as indicated in the table given in the notice dated 16.02.2022, the petitioner-assessee would certainly have taken remedial measures against such huge demands. And even if it is presumed that it had intentionally not taken such remedies, the Department would not have slept over the matter for years together, inasmuch as the first demand shown in the impugned notice which relates to Assessment Year 2011-12 was raised on 09.02.2013.

4. He pointed out that though the respondents have filed a reply and taken a plea that these intimations or orders were sent to the petitioner on its e-mail but no date of the mail has been mentioned. He thus, argued that it is difficult to accept the contention of the respondent that the same were ever served upon the petitioner.

5. Mr. Sanjeev Menon, learned Junior Standing Counsel for the Department, on the other hand submitted that the assertion of the petitioner is incorrect inasmuch as the Department has also filed a counter affidavit asserting that the copies of the intimations were sent to the petitioner-assessee/Assessment Officer.

6. Before proceeding with the matter, it will be apt to reproduce the particulars of various orders and demands given in the impugned notice dated 16.02.2022:

7. A simple look at the aforesaid table reveals that that the demand of various years running into lakhs of Rupees has been shown to be due against the petitioner and the intimation as mentioned therein ranges from 09.02.2013 to 09.11.2020.

8. Even if for the sake of arguments, the Department’s plea is taken to be correct that the intimation and orders under Section 154 were served upon the petitioner-assessee by way of e-mail, we are of the view that it is against natural conduct that an assessee, having been visited with a huge tax liability of lakhs of Rupees (as indicated in the table above), would not take any remedy.

9. In any case we would like to observe that it is difficult nay impossible to believe that despite having a huge pending demand against an assessee since 2013 the department will keep quiet and will get up from its slumber only after 9 years.

10. The impugned notice dated 16.06.2026 is hereby quashed and set aside for the reasons aforesaid and in the interest of justice.

11. Petitioner shall be free to move a representation before the Jurisdictional Assessing Officer seeking copies of the relevant documents/information for each year, which the Jurisdictional Assessing Officer shall supply within a period of 15 days of receiving such request.

12. We allow ninety days’ time (from today) to the petitioner-assessee to file any objection against any demand indicated in the notice dated 16.06.2022 and/or seek any remedy against orders/intimations mentioned and supplied to the petitioner alongwith the counter affidavit.

13. In case the petitioner takes any statutory remedy including rectification application or appeal, on or before 30.06.2026, the same shall be considered on their own merit without raising any ground of limitation, as the period of limitation stands extended by the order instant.

14. So far as the liability of the petitioner to pay interest under Section 220 of the Act of 1961 is concerned, the petitioner-assessee shall be free to make a submission in this regard, which the Assessing Officer shall consider in accordance with law and record a finding in relation to the petitioner’s default in accordance with law.

15. With these observations, the writ petition stands disposed of.

16. Needless to observe that in case, the respondent is of the view that a fresh proceeding under Section 220 of the Act of 1961 is required to be undertaken, they shall be free to do so, in accordance with law.