Case Law Details
Achuthan Rajarajan Vs Assessment Unit (Madras High Court)
Conclusion: Assessment and penalty orders issued against assessee was set aside considering pathology reports of assessee as a valid reason for failing to respond to various income tax notices.
Held: Assessee was a legal heir of the late Shri Achuthan Nair, had sold an immovable property in February 2014 and deposited the sale proceeds in a bank account. The subsequent creation of fixed deposits totaling ₹60,04,090/- triggered proceedings under the Income Tax Act, 1961. Assessee did not respond to notices issued under Sections 148A(b), 148, and 142(1), nor to subsequent show-cause notices. This led to the issuance of an assessment order on December 29, 2023, and a penalty order on June 20, 2024. Assessee explained the non-compliance by citing a diagnosis of Grade 2 Carcinoma of the tongue in October 2023, supported by pathology reports from the Cancer Institute, Adyar. Since assessee did not respond to several notices issued earlier, on instructions, he agreed to remit a sum of Rs.2,00,000/- towards the income tax demand as a con-dition for remand. It was held that while assessee’s diagnosis occurred after some notices were issued, the show-cause notices in August and December 2023 coincided with the period of illness. The Court found this explanation acceptable for the failure to respond during that time but underlined tassessee’s overall non-compliance since the initiation of proceedings in April 2022. To balance revenue interests and procedural fairness, the impugned order was set aside on the condition that assessee remitted ₹2,00,000/- towards the tax demand within four weeks. Assessee was also allowed to file a reply to the show-cause notice, with AO directed to provide a personal hearing via video conferencing and issue a fresh order within four months.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
By these two writ petitions, an assessment order dated 29.12.2023 and penalty order dated 20.06.2024 in respect of assessment year 2015-16 are challenged. The petitioner and the other legal heirs of the late Shri.Achuthan Nair sold an immovable property by executing sale deed dated 10.02.2014. The petitioner received sale consideration pertaining to his share in the sale proceeds and deposited the same in his bank account. In the following assessment year, the petitioner created fixed deposits for a sum of Rs.60,04,090/-. Proceedings were initiated against the petitioner by issu-ing notice under Section 148A(b) of the Income Tax Act, 1961. The petitioner did not reply to such notice. Therefore, an order under Section 148A(d) and a notice under Section 148 were issued to the petitioner. The said notice was also not replied to. Notices under Section 142(1) and show cause no-tices were issued thereafter. Eventually, impugned assessment order dated 29.12.2023 and im-pugned penalty order dated 20.06.2024 were issued.
2. Learned counsel for the petitioner submitted that the immovable property was sold by the peti-tioner and the other legal heirs of the late Shri. Achuthan Nair, in February 2014, which falls within assessment year 2014-15. She also submits that the petitioner’s share of sale proceeds was received in the same financial year. She further submits that the petitioner was diagnosed with Grade 2 Carci-noma of the tongue. In view thereof, she submits that the petitioner was unable to reply to the show cause notice or participate in proceedings culminating in the impugned assessment and penal-ty orders. Since the petitioner did not respond to several notices issued earlier, on instructions, she submits that the petitioner agrees to remit a sum of Rs.2,00,000/- towards the income tax demand as a condition for remand.
3. Dr. B. Ramaswamy, learned senior standing counsel, accepts notice for the respondents. By refer-ring to the details of
opportunities provided, learned senior standing counsel contends that the notice under Section 148 was issued on 01.04.2022. He points out that the petitioner was diagnosed with cancer in October 2023 and that the Section 148 notice and the Section 142(1) notices were issued much prior there-to. In these facts and circumstances, he submits that the petitioner’s explanation lacks credibility. He also points out that the petitioner did not approach this Court even when the assessment order was issued and waited until the penalty order was issued.
4. The petitioner has placed on record the pathology reports from the Cancer Institute, Adyar. Such reports were issued on 11.10.2023 and 01.11.2023. The report dated 01.11.2023 records the im-pression that the petitioner suffers from Infiltrating Squamous Cell Carcinoma, Grade-2. The show cause notice was issued on 03.08.2023 and 13.12.2023. At least during this period, it appears that the petitioner was suffering from cancer and a diagnosis was also made. Therefore, as regards the failure to respond to the show cause notice, the explanation of the petitioner is acceptable. However, the petitioner failed to respond to all communications commencing from the notice under Section 148A(b). The petitioner also admittedly failed to file the return of income in response to the Section 148 notice, and has approached this Court after the penalty was issued. In these circumstances, it is necessary to protect revenue interest while remanding the matter.
6. For reasons aforesaid, impugned assessment order dated 29.12.2023 and impugned penalty or-der dated 20.06.2024 are set aside on condition that the petitioner remits a sum of Rs.2,00,000/-towards the income tax demand, as agreed to, within four weeks from the date of receipt of a copy of this order. Within the said period, the petition-er is permitted to submit a reply to the show cause notice. Upon receipt of the petitioner’s reply and subject to being satisfied regarding the receipt of the sum of Rs.2,00,000/-, the assessing officer is directed to provide a reasonable opportunity to the petitioner, including a personal hearing by video conferencing, and thereafter issue a fresh order within four months from the date of receipt of the petitioner’s reply. In order to enable the petitioner to upload the reply, the respondents are directed to provide access to the portal. All legal issues are kept open for consideration by the assessing officer.
7. W.P.Nos.19658 and 19661 of 2024 is disposed of on the above terms. No costs. Consequently, W.M.P.Nos.21516, 21517, 21520 and 21522 of 2024 are closed.
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