HC upholds importance of timely compliance with legal notices in tax assessments

Shaju Pachelil Pathrose Vs ACIT (Kerala High Court)

In a recent judgment by the Kerala High Court, a writ appeal filed against the assessment of high-value transactions by a spice trader was dismissed. This case, Shaju Pachelil Pathrose Vs ACIT, highlights the complexities of income tax assessments and the critical importance of adhering to legal notices and deadlines.

Case Background: The appellant, engaged in the spice trade, found himself in a legal tangle after failing to respond adequately to income tax assessment notices. These notices were part of an investigation into high-value transactions made during the 2015 calendar year. Despite being given multiple extensions to submit the necessary documents and explanations, the appellant failed to comply, leading to an adverse assessment order.

Court Proceedings and Judgment: The case proceeded to the Kerala High Court, where the appellant challenged the assessment order on the grounds of a violation of the principles of natural justice. However, the court found that the appellant had been given sufficient time to respond to the notices but had failed to do so. Consequently, the appeal was dismissed, reinforcing the principle that legal deadlines must be respected to ensure fairness in the judicial process.

Implications of the Judgment: This judgment underscores the importance of timely compliance with legal notices in tax assessments. It also highlights the judiciary’s role in upholding the principles of natural justice by providing appellants with ample opportunities to present their case. For businesses, particularly in sectors like the spice trade with significant high-value transactions, this case serves as a crucial reminder of the need for diligent legal and financial management.

Conclusion: The dismissal of the writ appeal by the Kerala High Court in the case of Shaju Pachelil Pathrose Vs ACIT marks a significant moment in the legal landscape surrounding income tax assessments in India. It emphasizes the criticality of respecting procedural timelines and the role of the judiciary in balancing the scales of justice, even in complex financial disputes. Businesses must take heed of this judgment and ensure that they are fully compliant with all legal requirements to avoid similar legal challenges.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

1. This writ appeal has been filed challenging the judgment of the learned Single Judge in WP(C) No.20400/2023 dated 8/12/2023.

2. The appellant is engaged in the business of arranging the purchase of spices for inter-state dealers. The appellant’s income tax assessment for the year 2016-17 was reopened on the ground that he made high-value transactions during the period 1/1/2015 to 31/12/2015. The assessing officer issued a show cause notice dated 3/5/2023 to the appellant, giving three days’ time to respond. The appellant filed an application for extension of time till 20/5/2023 to give the In the meanwhile, the assessing officer issued a second show cause notice dated 17/5/2023 that was identical in all respects to the earlier notice with a direction to respond to the same within two days. The appellant sought a further time extension till 2/6/2023. However, Ext.P11 assessment order was passed on 24/5/2023, holding that there was no response from the appellant to the show cause notice, and accordingly, the proposal was confirmed. The appellant challenged Ext.P11 before the learned Single Judge, who dismissed the same as per the impugned judgment.

3. We have heard SrAbraham Joseph Markos, the learned counsel for the appellant and Sri.P.R.Ajith Kumar, the learned standing counsel for the respondents.

The first show cause notice was issued on 3/5/2023, giving the appellant three days’ time to respond. The appellant sought time till 20/5/2023. The records would show that the assessing officer virtually allowed the said request. Since the second notice dated 17/5/2023 was identical to the earlier notice but with a different date thereon and required the appellant to respond to the notice before 20/5/2023. Again, the appellant asked for time and did not file a reply. Thus, the appellant admittedly did not file any reply to the show cause notice even within the extended period of time sought for by him. Therefore, there is no substance to the contention of the appellant that there is a violation of the principles of natural justice. The learned Single Judge rightly dismissed the writ petition, giving liberty to the appellant to file a statutory appeal within a period of fifteen days before the appellate authority. We find no merit in the writ appeal, and accordingly, it is dismissed. However, we extend the fifteen days’ time the learned Single Judge granted to prefer appeal and the stay petition till 31/1/2024. The appellate authority shall consider the stay application within a period of two months thereafter. Till orders are passed on the stay application or the appeal and the order communicated to the appellant, no coercive steps shall be taken against the appellant pursuant to Ext.P11 assessment order.