Case Law Details
S.B. Distributors Acting Through Its Partners And 4 And Ors Vs ITO (Delhi High Court)
Introduction: In a recent landmark judgement by the Delhi High Court, it was ruled that the income revision under section 147 of the Income Tax Act, initiated by the Income Tax Officer (ITO) against SB Distributors, was invalid due to the absence of a Show Cause Notice (SCN) issued prior to the revision. The court quashed the impugned assessment order and offered respite to the petitioner.
Analysis: The bone of contention in the SB Distributors vs ITO case was the assessment order dated 29.05.2023 passed under Section 147 read with Section 144 of the Income Tax Act, 1961. The order, according to the petitioner, was flawed since it lacked a SCN cum draft assessment order proposing income variation. This misstep resulted in the issuance of an unsupportable demand notice, which eventually led to the present legal dispute.
The Delhi High Court, after perusal of the impugned assessment order and understanding the situation, agreed with the petitioner’s viewpoint. It recognized the failure to issue a show cause notice cum draft assessment order before enhancing the petitioner’s taxable income as a fundamental flaw, thereby nullifying the assessment order. The court has allowed the AO to pass a fresh assessment order only after issuing a SCN cum draft assessment order, detailing the proposed income variation.
Conclusion: This judgement underscores the significance of due process in taxation matters. By nullifying the assessment order due to the absence of a SCN, the Delhi High Court has emphasised that every procedural aspect should be meticulously followed to uphold the principle of natural justice. This decision could potentially influence similar cases in the future, where procedural lapses may lead to the invalidation of the assessment orders.
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