Insufficient time given for Compliance: HC quashes order & directs de novo consideration

Indian Education Society Vs ACIT (Exemption) (Bombay High Court)

The recent judgment by the Bombay High Court in the case of Indian Education Society vs. ACIT (Exemption) addresses the issue of time provided for compliance with notices under the Income Tax Act.

The petitioner challenged an order passed under Section 148A(d) of the Income Tax Act, along with a consequential notice issued under Section 148 of the Act. The petitioner argued that they were unable to respond to the notice within the given time frame due to the limited number of working days provided.

The Court noted that the notice was issued on March 11, 2022, which fell on a Friday, and the petitioner was expected to reply by March 21, 2022. However, considering the two weekends within this period, the effective time for compliance was reduced to only six working days. The Court acknowledged the practical difficulties faced by the petitioner, particularly considering that they are a Public Trust running a school.

In light of these circumstances, the Court quashed the impugned order and remanded the matter for de novo consideration. It also set aside the consequential notice issued under Section 148 of the Act. The Court directed the petitioner to reply to the notice within four weeks, allowing the annexation of relevant documents. Additionally, the respondents were instructed to dispose of the notice within six weeks, providing a reasoned order and granting a personal hearing to the petitioner.

Furthermore, the Court clarified that the time from March 11, 2022, until the issuance of the fresh order shall be excluded while calculating the prescribed time period under the Income Tax Act.

Conclusion: The judgment by the Bombay High Court in Indian Education Society vs. ACIT (Exemption) highlights the need for fairness and practicality in compliance matters under the Income Tax Act. By considering weekends and holidays, the Court ensures that parties are given adequate time to respond to notices, thereby upholding the principles of natural justice. This ruling serves as a reminder to authorities to factor in such practical considerations while setting deadlines for compliance.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Petitioner is impugning in this petition an order dated 23^rd March 2022 passed under Section 148A(d) of the Income Tax Act, 1961 (“the Act”) and the consequential notice dated 25^th March 2022 under Section 148 of the Act issued by Respondent No.1. Though various grounds have been raised in the petition, in the impugned order dated 23^rd March 2022, it is observed that Petitioner did not reply to the notice dated 11^th March 2022 issued under Section 148A(b) of the Act. There is an averment in the petition that the time given for responding was only ten days, i.e., the notice was issued late in the evening of 11^th March 2022 which was a Friday and Petitioner was expected to reply by 21^st March 2022. Ms. Halbe submitted that between 11^th March 2022 and 21^st March 2022, there were two weekends and effectively only six working days were given to reply and hence Petitioner was unable to file a reply. Ms. Halbe submitted that if Petitioner is given an opportunity to reply to the notice under Section 148A(b) of the Act, she is confident that Petitioner will be able to satisfy the Assessing Officer (“AO”) that the notice under Section 148A(b) of the Act will have to be dropped.

2. There is an affidavit in reply filed opposing the petition. At the same time, considering the facts and circumstances of the case that Petitioner is a Public Trust and running a school, in our view, Petitioner should be given an opportunity to reply to the notice dated 11^th March 2022.

3. In the circumstances, without expressing any opinion on the merits of the matter, we hereby quash and set aside the impugned order dated 23^rd March 2022 passed under Section 148A(d) of the Act and remand the matter for de novo consideration.  The consequent notice dated 25^th March 2022 under Section 148 of the Act also hereby quashed and set aside.

4. Within four weeks of this order being uploaded, Petitioner shall reply to the notice dated 11^th March 2022 issued under Section 148A(b) of the Act. To the reply, Petitioner may also annex documents which have to be taken into account while deciding the matter.

5. Within six weeks thereafter Respondents shall dispose the notice, but before passing any order which shall be a reasoned order dealing with all submissions of Petitioner, a personal hearing shall also be granted, notice whereof shall be communicated at least five working days in advance. The time from 11^th March 2022 till fresh order that will be passed under Section 148A(d) of the Act shall be treated as excluded period while calculating the time period prescribed under Section 149 read with Section 151 of the Act.

6. Petition disposed.