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‘The Government of India has introduced E-Governance for the conduct of assessment proceedings electronically. It is laudable steps taken by the Income Tax Department to pave way for an objective assessment without human interaction. At the same time, such proceedings can lead to erroneous assessment if officers are not able to understand the transactions and statements of accounts of an assessee without a personal hearing. The respondent should have to be therefore at least called for an explanation in writing before proceeding to conclude that the amount collected by the petitioner was unusual.’

The above statement was made by The Hon’ble High Court of Judicature at Madras on 04-02-2020 while deciding writ petition no. W.M.No. 1732 of 2020 and W.P.Nos. 2006 & 2007 of 2020. In the case of Salem Sree Ramavilas Chit Company, Private Limited vs. The Deputy Commissioner of Income Tax, Circle 1(1) Salem.


A writ of Certiorari was filed by the assessee under Article 226 of the Constitution of India calling for the records in ITBA/AST/S/143(3)2019-20/1023185233(1) dated 27 December 2019 relating to the assessment year 2017-18 for court’s review and quashing the said order.

Certiorari: means “to certify”. The writ of certiorari is an order issued to an inferior court or tribunal to transmit to it the records of proceedings pending with them for scrutiny and if necessary, for quashing the same. The writ of certiorari may be issued whenever anybody of persons having legal authority to determine questions affecting the right of subjects, act in excess of their legal authority.

In this case, the petitioner is a chit fund company and is governed by the provisions of Chit Fund Act, 1982 and Tamil Nadu Chit Funds Rules, 1984. Under these rules, the chit fund companies are required to maintain ledger details of all subscribers giving details of deposits made by them. The records thus mandated by the petitioner were maintained as required under the Act.

The petitioner filed a regular return of income for the assessment year 2017-18 on 07.11.2017. During the assessment proceedings, which went through various stages, a question was raised about the cash deposit of Rs. 67,37,500/- collected during the demonetization period and deposited into the bank account. The petitioner replied to all the notices with the details required and tried to satisfy the assessing officer in all possible ways. The petitioner also filed papers as evidence to prove that in the business of chit funds usually cash gets generated which is deposited in the bank account or a part of it remains as cash in hand as is evident from the month-wise movement of cash shown in tabulated form submitted along with other documents for current and previous year.

On the other hand, the assessing officer remained unmoved from his view that the details provided were not sufficient to his satisfaction and added back the disputed part of the cash to the petitioners income as unexplained money under section 69A making the petitioner liable to pay tax at the maximum marginal rate of tax by invoking Section 115BBE of the income tax act. The department was of the view even if the petitioner is aggrieved by the order of the assessing officer, he may prefer an appeal to Commissioner of Income Tax Appeals for review.

But the petitioner insisted on quashing the order of the assessing officer as it was felt that the Commissioner of Income Tax Appeals will act upon the findings of the assessing officer thus there are chances of upholding the order of the assessing officer.

The Hon’ble High Court observed that due to electronic processing of the assessment the assessing officer need to understand the nature of the business of the assessee thus needs adequate time for processing of returns after verifying and understanding the online correspondence in detail. In case it is not possible for the assessing office, due to any reason, the assessee may be provided a chance to explain his submission in person. Accepting the arguments of the petitioner the Hon’ble court remanded back the case to assessing officer to revisit his assessment order by passing a fresh order and complete the assessment within a period of sixty days.

From the above order, it is evident that though government’s initiative to start contactless assessment of income tax with the help of electronic assessment is laudable but it still needs proper training of the manpower and to establish a well-defined and well-designed system with adequate timelines for flawless assessments in the best interests of the state and the assessees in order to avoid wastage of time and resources which otherwise get lost in the follow up of litigations.

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May 2024