In a recent development, the Madras High Court has passed a significant judgment in the case of Devendran Coal International Private Limited versus the Income Tax Officer (ITO). The court’s decision revolves around the assessment order dated 30.03.2022, which the petitioner found contentious. The assessment in question had initially been completed on 20.12.2019 under Section 143(3) of the Income Tax Act, 1961, following the petitioner’s filing of an Income Tax Return on 27.10.2017 under Section 139 of the same act.
Reopening of Assessment: During the period when the country was grappling with the Covid-19 pandemic and subsequent lockdowns, the Income Tax Department sought to reopen the petitioner’s assessment. This was done through a notice issued under Section 148 of the Income Tax Act on 31.03.2021.
Contention and Notice: The petitioner’s primary argument was that they had not received the reopening notice. In contrast, the Income Tax Department claimed to have posted the notice on a web portal, shifting the responsibility to the petitioner for responding to it.
Subsequent Notices: Following the Section 148 notice, the petitioner received another notice under Section 142 of the Income Tax Act on 12.11.2021. The petitioner duly replied and attempted to upload their return of income. They eventually succeeded in uploading the return on 09.02.2022 and informed the authorities through a second reply on the same date.
Reasons for Reopening: The Income Tax authorities subsequently provided the reasons for reopening the assessment on 17.03.2022. This was followed by a Show Cause Notice dated 27.03.2022.
Last-Minute Notice: Notably, the Show Cause Notice was uploaded and sent to the petitioner at approximately 2.50 am on 28.03.2022, with a tight deadline for response by 29.03.2022, as the assessment was approaching the time bar on 30.03.2022.
Procedural Violation: The Madras High Court identified a significant procedural issue with the Impugned Order. It was clear that the order was passed to prevent the assessment from becoming time-barred under Section 153 of the Income Tax Act, 1961. However, the court noted that the procedure outlined in Section 144B of the Income Tax Act, 1961, between 01.04.2021 and 30.03.2022, had not been fully adhered to.
No Draft Assessment Order: In particular, the court highlighted that no Draft Assessment Order had been issued by the Assessing Unit, as required by Section 144B of the Income Tax Act, 1961. This omission represented a substantial violation of the prescribed procedure.
Court’s Directive: Consequently, the Impugned Order was set aside, and the case was remitted back to the authorities with specific instructions. The respondents were directed to pass a fresh order on merits and in accordance with the law, within a period of six (6) months from the date of receipt of the court’s order. The Impugned Order, which was quashed, would be treated as a Draft Assessment Order/Show Cause Notice for the petitioner’s response. The respondent was also instructed to ensure the petitioner could upload the reply through suitable arrangements in the portal. The procedure under Section 144B of the Income Tax Act, 1961, was to be followed.
The Madras High Court’s ruling in the case of Devendran Coal International Private Limited versus ITO emphasizes the importance of adherence to prescribed procedures in income tax assessments. In this instance, the court found a significant procedural violation due to the absence of a Draft Assessment Order under Section 144B of the Income Tax Act, 1961. As a result, the court directed the authorities to pass a fresh assessment order in line with the law and within a stipulated timeframe. This case serves as a reminder of the meticulous procedural requirements in the realm of income tax assessments.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner is aggrieved by the Impugned Assessment Order dated 30.03.2022. Earlier, the assessment was completed on 20.12.2019 under Section 143(3) of the Income Tax Act, 1961 after the petitioner had filed a Return of Income on 27.10.2017 under Section 139 of the Income Tax Act, 1961.
2. During the period when the country was under lock down due to outbreak of Covid-19 pandemic, the Department had sought to reopen the assessment by issuing a notice under Section 148 of the Income Tax Act on 31.03.2021.
3. The case of the petitioner is that petitioner has not received the notice although it would be the contention of the Department that the said notice was posted in a web portal and therefore it was for the petitioner to respond to the same.
4. After the aforesaid notice was issued under Section 148 of the Income Tax, 1961 on 31.03.2021, the petitioner was also issued with the notice under Section 142 of the Income Tax Act, 1961 on 12.11.2021 to which the petitioner had replied and had also attempted to upload the return of income. Thereafter, the petitioner had successfully uploaded return of income pursuant to notice issued under Section 142(1) of the Income Tax Act, 1961 on 09.02.2022 and intimated the same to the respondents along with the second reply dated 09.02.2022.
5. Thereafter, the respondents have also issued the reasons for reopening of the assessment on 17.03.2022. It was followed by a Show Cause Notice dated 27.03.2022.
6. The notice has been uploaded and sent to the petitioner at about 2.50 am on 28.03.2022 calling upon the petitioner to respond by 29.03.2022 by 23.59 Hours as the assessment was getting time barred on 30.03.2022.
7. It is clear that the Impugned Order has been passed to ensure that the assessment does not get barred by limitation under Section 153 of the Income Tax Act, 1961. The procedure under Section 144B of the Income Tax Act, 1961, as in force between 01.04.2021 till 30.03.2022 was required to be followed. It has not been fully followed.
8. In this case, no Draft Assessment Order has been passed by the Assessing Unit as is contemplated under Section 144B of the Income Tax Act, 1961. Thus, there is a material violation of the procedure prescribed under Section 144B of the Income Tax Act, 1961.
9. Consequently, the Impugned Order is set aside and the case is remitted back to the respondents to pass a fresh order on merits and in accordance with law within a period of six (6) months from the date of receipt of a copy of this order. The Impugned Order which stands quashed shall be treated as a Draft Assessment Order/Show Cause Notice for the petitioner to respond to the same. Respondent shall make suitable arrangements in the portal to ensure the petitioner is able to upload the reply by giving prior notice to the petitioner. The respondent shall follow the procedure under Section 144B of the Income Tax Act, 1961.
10. The writ petition stands disposed of with the above observations and directions. No cost. Consequently, connected miscellaneous petitions are closed.