Case Law Details
HIROTEC India Private Limited Vs Assessing Officer (Madras High Court)
Introduction: In the case of HIROTEC India Private Limited vs. Assessing Officer, the Madras High Court’s recent judgment emphasizes the importance of upholding principles of natural justice in the assessment process under the Income Tax Act, 1961. This article delves into the details of the case, highlighting the violation of these principles and the subsequent quashing of the assessment order.
Impugned Assessment Order and Show Cause Notice: The petitioner contested the impugned Assessment Order dated September 21, 2022, with reference to DIN:ITBA/AST/S/143(3)/2022-2023/1045749202(1). This order was issued under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for the Assessment Year 2020-2021. It followed a Show Cause Notice dated September 5, 2022, which required a response by September 9, 2022.
Late Response and Video Conferencing Request: The petitioner responded to the Show Cause Notice on September 19, 2022, which was belated. On the same day, the petitioner also requested a video conferencing session. The petitioner successfully sent the video conferencing request, but the respondent proceeded to pass the impugned order on September 21, 2022.
Challenging the Assessment Order: The petitioner swiftly approached the Court, alleging that the impugned Assessment Order had been passed in gross violation of the principles of natural justice.
Respondent’s Perspective: The Senior Standing Counsel for the respondent argued that ample opportunity was given to the petitioner to respond to the Show Cause Notice, particularly regarding the Foreign Exchange Loss. However, the petitioner failed to provide sufficient reasons for dropping the proposal mentioned in the notice dated September 5, 2022.
Disallowance of Loss on Foreign Exchange: The respondent’s Counter Affidavit clarified that the case pertained to the disallowance of loss on foreign exchange. An inquiry in this regard was initiated for the first time during the assessment proceedings. Despite the petitioner having ample time, the response given on August 8, 2022, was considered incomplete.
Violation of Natural Justice: The Court noted prima facie indications that the petitioner’s reply dated September 19, 2022, had not been considered when the impugned order was passed. Furthermore, the petitioner’s successful video conferencing request was granted on September 19, 2022, just two days before the impugned order was issued. This clear violation of principles of natural justice led to the quashing of the order.
Conclusion: The Madras High Court has set aside the impugned Assessment Order and remitted the case to the respondent. The respondent is instructed to pass a fresh order based on merits and in accordance with the law within eight weeks from the receipt of this order. Importantly, the petitioner will be given an opportunity to be heard through video conferencing, and the reply dated September 19, 2022, must be submitted before the hearing is scheduled.
This case serves as a reminder of the essential nature of principles of natural justice in the assessment process. Violations of these principles can result in the quashing of assessment orders, emphasizing the significance of fair and transparent proceedings under the Income Tax Act, 1961.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner is aggrieved by the impugned Assessment Order in DIN:ITBA/AST/S/143(3)/2022-2023/1045749202(1) dated 21.09.2022 passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961 for the Assessment Year 2020-2021.
2. The impugned Assessment Order precedes a Show Cause Notice dated 05.09.2022. The petitioner was to respond to the Show Cause Notice by 09.09.2022 with a request for time.
3. The petitioner has also responded to the Show Cause Notice dated 05.09.2022 and has uploaded the reply belatedly on 19.09.2022. A further request was made by the petitioner on the same day for video conferencing, which was also uploaded by the petitioner as is evident from the screenshot from the web portal indicating that the petitioner had successfully sent a request for video conferencing. However, the respondent has proceeded to pass the impugned order on 21.09.2022.
4. The petitioner has thus approached this Court almost immediately challenging the impugned Assessment Order stating that the impugned order has been passed gross violation of principles of natural justice.
5. That apart, the learned counsel for the petitioner would submit that even otherwise on merits also, there is no scope for upholding the demand. Hence, prays for allowing this writ petition.
6. The learned Senior Standing Counsel for the respondent on the other hand would submit that sufficient opportunity was given to the petitioner to reply to the Show Cause Notice relating to the Foreign Exchange Loss. However, the petitioner failed to give sufficient reasons for dropping the proposal in the aforesaid Show Cause Notice dated 05.09.2022.
7. The learned Senior Standing Counsel for the respondent has drawn attention to Paragraph 3 of the Counter Affidavit wherein, it has been stated that the case pertains to the disallowance of loss on foreign exchange. It is submitted that enquiry was made in this regard vide letter dated 18.07.2022 for the first time during the course of assessment proceedings. It is submitted that there is no compliance by the petitioner and that the reply that was given on 08.08.2022 was incomplete, despite sufficient time being given to the petitioner.
8. It is submitted that the petitioner had taken about 53 days in submitting an incomplete reply.
9. I have considered the arguments advanced by the learned counsel for the petitioner and the learned Senior Standing Counsel for the respondent.
10. Prima facie, there are indications that the petitioner’s reply dated 19.09.2022 has not been considered while passing the impugned order.
11. The petitioner had also successfully made a request for video conferencing on 19.09.2022. However, the impugned order has been passed with two days thereafter i.e., on 21.09.2022. Thus, there is a clear violation of principles of natural justice.
12. Considering the above, the impugned order is set aside and the case is remitted back to the respondent to pass a fresh order on merits and in accordance with law within a period of eight weeks from the date of receipt of a copy of this order after giving the petitioner an opportunity of being heard through video conferencing. The petitioner shall file a copy of reply dated 19.09.2022 before the date is fixed for a hearing through video conferencing.
13. This Writ Petition is disposed of with the above observations. No costs. Consequently, connected Writ Miscellaneous Petitions are closed.
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