Case Law Details
KBB Nuts Private Limited Vs National Faceless Assessment Centre Delhi (Delhi High Court)
Introduction:
♦ In the case of the KBB Nuts Private Limited V/s National Faceless Assessment Centre Delhi (NFAC) assessment proceedings and directed the revenue to grant a personal hearing to the authorised representative of the petitioner, before proceeding to pass a fresh assessment order.
Fact of the Case:
♦ Return of income for the concerned AY, i.e., 2017-2018 was filed on 30.11.2017, and that thereupon, a notice under Section 143(2) of the Act was issued on 26.09.2018 followed by a notice issued under Section 142(1) of the Act, on 16.10.2019.
♦ Reply to the said notice was filed, via the designated e-portal, on 07.12.2019.The case was referred to the Transfer Pricing Officer under Section 92 CA (1) of the Act.
♦ Notices were once again issued under Section 142(1) of the Act, between 15.02.2021 and 07.04.2021. In response to the said notices, requisite information and documents sought for were submitted, as on the earlier occasion, via the e-portal.
♦ A show-cause notice, along with the draft assessment order dated 19.04.2021, was served on the assesse, whereby, the assesse was called upon to file its response by 23:59 hours on 21.04.2021.
♦ The assesse filed an application via the e-portal, seeking a day’s adjournment, i.e., till 22.04.2021 but no response was received by it with respect to the request for adjournment. The objections to the aforementioned show-cause notice were filed on 22.04.2021 at 15.22 hours.
♦ The assessment order was passed on 22.04.2021 resulting in an enhance imposition of demand of approximately Rs.15.62 crores towards tax and also led to initiation of penalty proceedings.
♦ The assesse claims that no response was received by it with respect to the request for adjournment. There has been a breach of the principles of natural justice as the objections filed on 22.04.2021 were not taken into account by the NFAC before passing the assessment order.
Judgement of the High Court:
♦ Without getting into the tenability of the objections on merits, in our view, the best course forward would be to set aside the impugned assessment order.
♦ NFAC will pass a fresh assessment order after taking into account the objections filed to the show cause notice.
♦ Grant a personal hearing to the authorised representative of the assesse, before proceeding to pass a fresh assessment order.
Comment:
♦ It has been observed in many cases the final assessment order is passed without issue of Show cause notice. In cases where Show cause notice has been issued but final order has been issued without considering the objection filled by the assesse or the personal hearing request has been denied.
♦ The are other courts judgment as well where the assesse were granted relief from the such impugned assessment order on the ground of breach of the principles of natural justice:
- K L Trading Corporation vs National E-Assessment Centre Delhi (Delhi HC)
- SAS Fininvest LLP v National E-Assessment Centre Income Tax Department, New Delhi. (Delhi HC)
- Magick Woods Exports Private Limited v National e-Assessment Centre, Delhi. ( Madras HC)
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FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
CM No. 16066/2021
1. Allowed, subject to the petitioner curing the deficiencies referred to in the captioned application within three days of this Court resuming its normal functioning.
CM No. 16067/2021
2. Allowed, subject to just exceptions.
W.P.(C) 5234/2021, CM No. 16065/2021
3. Issue notice.
3.1. Ms. Vibhooti Malhotra, who appears on advance notice, accepts service on behalf of the respondents.
3.2 In view of the order that we propose to pass, Ms. Vibhooti Malhotra says, she does not wish to file a counter-affidavit in the matter, and that she will proceed on the basis of the record presently made available with the Court.
4. The instant writ petition is directed against the assessment order dated 22.04.2021, passed by respondent no. 1, under Section 143(3) read with Section 144B of the Income Tax Act, 1961 (in short “the Act”). The impugned assessment order concerns the assessment year (in short „AY‟) 2017-2018. Furthermore, the petitioner also seeks setting aside of the notice of demand of even date, i.e., 22.04.2021, issued under Section 156 of the Act, as well as the notice of the same date issued for initiation of penalty proceedings under Section 274 read with Section 270A and 271 AAC (1) of the Act.
4.1 Briefly, the grievance articulated and the assertions made on the behalf of the petitioner are as follows:
(i) The petitioner claims that the return of income for the concerned AY, i.e., 2017-2018 was filed on 30.11.2017, and that thereupon, a notice under Section 143(2) of the Act was issued by respondent no. 2. This notice, according to the petitioner, was issued on 26.09.2018.
(ii) The said notice, the petitioner claims, was followed by a notice issued under Section 142(1) of the Act, on 16.10.2019. The petitioner avers that a reply to the said notice was filed, via the designated e-portal, on 07.12.2019.
(iii) Evidently, the petitioner‟s case was referred to the Transfer Pricing Officer (in short „TPO‟) under Section 92 CA (1) of the Act.
(iii)(a) Resultantly, the assessment proceedings were kept in abeyance, for the period spanning between December 2019 and January 2021.
(iv) It appears that, thereafter, notices were once again issued under Section 142(1) of the Act, between 15.02.2021 and 07.04.2021 by the Deputy Commissioner of Income Tax, Circle-3, Amritsar (in short „DCIT‟). The petitioner claims that, in response to the said notices, requisite information and documents sought for were submitted, as on the earlier occasion, via the e-portal.
(v) It is also averred by the petitioner that a show-cause notice, along with the draft assessment order dated 19.04.2021, was served on the petitioner by respondent no. 1, whereby, the petitioner was called upon to file its response by 23:59 hours on 21.04.2021.
(vi) It is the petitioner‟s case that the said show cause notice was received by it via e-mail on 20.04.2021 at 03:06 hours. Since the time for compliance was short, the petitioner, it appears, filed an application via the e-portal, seeking a day‟s adjournment, i.e., till 22.04.2021. The petitioner claims that no response was received by it with respect to the request for adjournment.
(vii) The petitioner avers that respondent no. 1, as noticed above, passed the impugned assessment order on 22.04.2021. The petitioner also states that since it had not received a response quathe request for adjournment, the objections to the aforementioned show-cause notice were filed on 22.04.2021 at 15.22 hours.
4.2 In effect, based on the aforesaid facts and circumstances, the petitioner claims that there has been a breach of the principles of natural justice. It is the petitioner‟s case that the objections filed on 22.04.2021 were not taken into account by respondent no. 1 before passing the impugned assessment order.
4.3 The impugned assessment order has not only resulted in an enhanced imposition of demand of approximately Rs.15.62 crores towards tax but has also, as noticed above, led to initiation of penalty proceedings. The impugned assessment order has pegged the petitioner‟s taxable income at approximately Rs.19.19 crores.
5. Malhotra, on the other hand, submits that, only because there was no formal response to the request for adjournment, the petitioner could not have assumed that the time to respond to the aforesaid show cause notice would not be extended. Ms. Malhotra contented that, as a matter of fact, in this case, although, the reply had to be filed by 21.04.2021, the respondent no. 1 waited till 22.04.2021, to pass the impugned assessment order.
5.1 This argument of Ms. Malhotra, to our minds, would have perhaps jelled with us, if the impugned assessment order was passed on 22.04.2021, albeit, after 23:59 hours. The petitioner has claimed that the objections qua the show cause notice dated 19.04.2021 were filed on 22.04.2021 at about 15:23 hours.
5.2. Therefore, without getting into the tenability of the objections on merits, in our view, the best course forward would be to set aside the impugned assessment order dated 22.04.2021, and have respondent no.1 pass a fresh assessment order after taking into account the objections filed qua the show cause notice dated 19.04.2021 on behalf of the petitioner. It is ordered accordingly.
6. The impugned assessment order is set aside. The respondent no. 1 will issue a notice viae-mail to the petitioner, and grant a personal hearing to the authorised representative of the petitioner, before proceeding to pass a fresh assessment order.
6.1 Needless to add, respondent no. 1 will consider the objections dated 22.04.2021, filed qua the show-case notice dated 19.04.2021.
7. The writ petition is disposed of in the aforesaid terms. Pending application shall also stand closed.
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Author: CA. Ajit Kumar, in Practice from Patna and can be contacted at office@caajitkumar.in.
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