RNS Infrastructure Limited Vs DCIT (Karnataka High Court)
The batch of writ petitions challenged Show Cause Notices issued for the Assessment Years 2006-07 to 2012-13, Assessment Orders dated 03.02.2017 for the Assessment Years 2006-07 to 2012-13, and Penalty Notices issued under Section 274 read with Section 271(1)(c) of the Income-tax Act, 1961. The assessment proceedings arose after proceedings before the Settlement Commission. Following a search conducted under Section 132 on 16.02.2012, the petitioner filed returns on 24.01.2014 and an application before the Settlement Commission in Form 34B. In the first round of litigation, the Revenue unsuccessfully challenged the Settlement Commission’s order admitting the application. Thereafter, the Settlement Commission passed an order on 27.05.2016, which was separately challenged on the ground that it was passed beyond the prescribed period. Subsequently, a Division Bench held that the Settlement Commission ought to have passed its order on or before 10.12.2015, whereas it was actually passed on 27.05.2016. The writ appeal was disposed of on 06.12.2021. Based on these developments, the petitioner challenged the impugned assessment orders, show cause notices and penalty notices.
The petitioner advanced three principal grounds: (i) the assessment orders were passed beyond the prescribed limitation period; (ii) they violated the principles of natural justice; and (iii) they were without jurisdiction due to non-issuance of the mandatory notice under Section 143(2) of the Income-tax Act. On limitation, it was contended that after the Settlement Commission proceedings abated, the maximum period available for completing the assessment was one year, to be reckoned from 10.12.2015, the date by which the Settlement Commission ought to have passed its order as observed by the Division Bench. Consequently, the assessment orders dated 03.02.2017 were stated to be beyond the permissible period. The petitioner relied upon the Division Bench decision in Commissioner of Income-tax, (Central) Vs. RNS Infrastructure Ltd., which computed the last permissible date for the Settlement Commission’s order as 10.12.2015 after excluding the period during which an interim stay operated. The petitioner also relied on the Division Bench judgment in Commissioner of Income-tax (Central) and another Vs. M/s. C. Ramaiah Reddy, which held that issuance of notice under Section 143(2) is mandatory and that, in the absence of such notice, an assessment under Section 143(3) read with Section 147 is void. It was further submitted that the show cause notice dated 02.02.2017, requiring a reply by 5:00 p.m. on 03.02.2017, did not provide reasonable opportunity to respond.
