Case Law Details
Jolarpet Malaya Gounder Rajhenthiran Vs National Faceless Assessment Centre (Madras High Court)
n a landmark judgment, the Madras High Court has mandated the National Faceless Assessment Centre to conduct a fresh assessment for Jolarpet Malaya Gounder Rajhenthiran, focusing on rectifying potential oversights in the initial tax evaluation for the fiscal year 2020-21. This case, pivotal in its implications, underscores the judiciary’s commitment to ensuring that tax assessments are not only transparent but also meticulously fair, especially when the initial proceedings may have inadvertently disregarded vital evidence.
Grounds of Addition Challenged:
- Opening and Closing Balance Discrepancy: The first ground of addition involved a significant difference between the opening and closing balances in the assessee’s ledger account, initially perceived as unexplained income. However, the petitioner argued that the discrepancy was fully accounted for, citing the sale of agricultural land which contributed to the closing balance.
- Interest Income from Axis Bank: The second addition pertained to an alleged failure to disclose interest income of Rs. 2,10,000 received from Axis Bank. The petitioner contested this, demonstrating that the income was indeed disclosed and appropriately reflected after TDS deductions in the relevant financial statements.
- Loan Amount Addition: The third contentious addition involved a loan of Rs. 2,40,000, which the tax authority added back to the income, citing a lack of balance confirmation from the lender as the basis. The petitioner maintained that this was a genuine transaction, now substantiated with all necessary documentation to verify its authenticity.
The High Court’s intervention, prompted by these contested additions, highlighted critical lapses in the assessment process. It was evident that a re-evaluation was imperative, ensuring that all submitted documents and explanations were thoroughly considered.
The Court’s Directive: The court’s directive for a fresh assessment, treating the initial order as a show cause notice, is a testament to the principle of fairness in legal proceedings. It emphasizes the right of the taxpayer to a comprehensive hearing and the consideration of all pertinent documentation before finalizing tax liabilities.
This decision also serves as a reminder of the importance of due diligence and the need for tax authorities to adopt a more nuanced approach in assessing complex financial records. It stresses that each piece of evidence must be weighed with meticulous care to prevent undue financial burden on taxpayers due to administrative oversights.
Conclusion: The Madras High Court’s ruling in favor of Jolarpet Malaya Gounder Rajhenthiran against the National Faceless Assessment Centre is a significant step towards reinforcing trust in the tax assessment process. By mandating a fresh look at the contested additions and ensuring a fair hearing for the petitioner, the court has underscored the necessity for transparency, meticulousness, and fairness in the tax administration system. This judgment not only benefits the petitioner but also sets a precedent for handling similar disputes in the future, promoting a more equitable and reasoned approach to tax assessments.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner assails on assessment order dated 19.09.2022 by which three additions were made to the total income of the assessee and tax was determined on such basis.
2. The petitioner submits that he had filed the return of income for the assessment year 2020-21. In respect thereof, he received a show cause notice on 03.2022 flagging three issues. In response thereto, the petitioner states that he submitted all relevant details. Eventually, the order impugned herein came to be issued.
3. Learned counsel for the petitioner invited my attention to the impugned order and, in particular, paragraph 7 As regards the first addition mentioned therein, learned counsel submits that the opening balance for the relevant year, as per the ledger account, was a sum of Rs.4,15,43,048.75. The closing balance was Rs.19,56,49,669.49. By referring to paragraph-8 of the affidavit, he submits that this difference was duly explained. With specific reference to the sale of agricultural land for the total consideration of Rs.7,91,00,000/-, learned counsel submits that this was duly disclosed. In this connection, he refers to the statement of income which was annexed to the revised return of income. He points out that the entire sale consideration was reflected and that the details thereof are set out under the heading ‘income with full exemption’.
4. As regards the third addition of a sum of 2,10,000/-, learned counsel points out that this was interest income earned from Axis Bank. By drawing reference to the ledger account relating to the interest received from the Axis Bank for the period 01.04.2019 – 31.03.2020, learned counsel submits that this sum of Rs.2,10,000/- is reflected therein after deduction of TDS. As regards the second addition on account of a loan availed of by the petitioner, learned counsel submits that it was a genuine transaction and that the petitioner was unable to obtain a balance confirmation from the lender, at that time, as evidenced by letter dated 19.03.2022. He also submits that all relevant documents are currently available with the petitioner to establish that it was a genuine transaction.
5. These contentions are countered by Mr. R. S. Balaji, learned senior standing counsel. At the outset, Balaji submits that the contentions of the petitioner pertain entirely to the merits of the assessment order. As such, he submits that the petitioner should have availed of the statutory remedy and not approached this Court. Without prejudice to this contention, he submits that the statement of income of the petitioner does not disclose the interest income received from Axis Bank. With regard to the loan of Rs.2,40,000/- he refers to the communication dated 19.03.2022 and points out that the petitioner stated categorically that he is unable to obtain balance confirmation from M. Jose, Vellore. In the absence of such confirmation, learned senior standing counsel contends that the sum of Rs.2,40,000/- was liable to be added to the income. As regards the transaction relating to the sale of agricultural land, he submits that the petitioner did not place all relevant documents on record to establish that the income was duly disclosed and that such income is exempt from income-tax.
6. On examining the impugned assessment order, it appears that the aggregate additional income was arrived at by examining the difference between the opening and closing balance. While undertaking this exercise, the respondent has failed to take into account the fact that the sale consideration of Rs.7,91,00,000/- from the proceeds of sale of agricultural land was duly disclosed in the statement of income read with the schedule thereto. As regards the interest income from Axis Bank, the same is also duly disclosed in the entry relating to TDS under the head ‘Total income’ read with Schedule 18. Thus, it appears that the Assessing Officer did not take into account the material placed on record and, consequently, the order impugned herein is vitiated by non-application of mind.
7. As regards the addition of 2,40,000/-, it appears that the petitioner has not placed all necessary documents on record. Therefore, it is just and necessary to direct the petitioner to place all relevant documents for consideration.
8. For reasons set out above, the writ petition is disposed of by remanding the matter for re-consideration. The assessee is permitted to respond to the assessment order by treating the same as a show cause notice within a maximum period of four weeks from the date of receipt of a copy of this order. Upon receipt thereof, the respondent is directed to provide a reasonable opportunity to the petitioner, including a personal hearing, take into consideration all documents produced by the assessee and issue a fresh assessment order in respect of the three additions dealt with in the impugned assessment order. This exercise shall be concluded within a period of four months from the date of receipt of the assessee’s reply. Consequently, the connected miscellaneous petitions are closed. There shall be no order as to costs.
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