Introduction: The Kerala High Court, in the case of Aneesh vs Union of India, recently rendered a judgment challenging the validity of an Income Tax assessment order dated 31.03.2022. The petitioner, who failed to file the return for the assessment year 2017-2018, faced scrutiny for receiving Rs. 1,42,48,884/- from M/s Smart Way India Enterprises LLP during the financial year 2016-2017. The court’s focus on the adequacy of response time becomes pivotal in this context.
Detailed Analysis: The petitioner’s case was reopened under Section 147 of the Income Tax Act, with a notice under Section 148 issued on 28.03.2021. Despite several notices, the petitioner did not respond until a final notice on 29.03.2022. Astonishingly, the petitioner was granted only one day, until 30.03.2022, to respond to the proposed additions to the income, a duration deemed insufficient by the court.
The court, while addressing other grounds, found no substance to challenge the assessment order’s validity, except for the violation of natural justice principles due to the inadequate response time. The judgment emphasized that the 24-hour period granted to the petitioner was unreasonable, leading to the allowance of the writ petition.
The consequences of this decision involve the setting aside of the assessment order and a remand of the matter to the National Faceless Assessment Centre, Delhi. The court directs the activation of a link for the petitioner to file a reply within seven days. It explicitly states that no further opportunity will be provided. The National Faceless Assessment Centre is then instructed to finalize the assessment under Section 147 r/w Section 144 of the IT Act.
Conclusion: In conclusion, the Kerala High Court’s decision in Aneesh vs Union of India sheds light on the importance of reasonable response time in income tax proceedings. The court’s intervention, setting aside the assessment order, underscores the significance of upholding principles of natural justice. The case not only impacts the petitioner but also establishes a precedent for fair procedures in income tax assessments. If the petitioner opts for a personal hearing, the court mandates providing the opportunity for a fair and just resolution.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
1. The present writ petition has been filed impugning the assessment order dated 31.03.2022 under Section 147 r/w Section 144 of the Income Tax Act, 1961 (‘the IT Act’ for short), in respect of the assessment year 2017-2018. The assessee did not file the return of his income for the said assessment year. As per the information received through the Multi-layer NMS cases in AIMS module of ITBA, it was seen that the assessee during the financial year 2016-2017, received Rs. 1,42,48,884/- from M/s Smart Way India Enterprises LLP on which TDS was deducted under Section 194H for Rs.8,26,336/-.
2. Notice under Section 133(6) of the IT Act was issued after taking approval of the competent authority. The assessee did not furnish details regarding the receipt of commission of Rs.1,42,48,884/- neither any of other particulars.
3. The petitioner’s case was reopened for the assessment under Section 147 of the IT Act after obtaining approval from the competent authority. Notice under Section 148 of the IT Act was issued on 28.03.2021. Several notices were issued to the petitioner but he did not respond to any of the notices and finally, notice dated 29.03.2022 was issued asking the petitioner to show cause why the proposed addition should not be made. The draft assessment order was forwarded to the National Faceless Assessment Authority. The final notice was sent to the petitioner on 29.03.2022 and the petitioner was given only one day time for filing the reply i.e., on 30.03.2022. Thereafter, the assessment order was passed on 31.03.2022, assessing the total income for Rs.1,42,48,884/-. as evidenced by Ext.P12. Tax was calculated after giving credit for the prepaid taxes after due verification. Interest charged under Section 234A, 234B and 234C was demanded and penalty proceedings under Section 271F of the IT Act for not filing ITR and under Section 271A of the IT Act for failure to maintain books of accounts were directed to be initiated.
4. I have heard the learned counsel for the petitioner and Sri. Jose Joseph, the learned Standing Counsel for the respondents.
5. Though some other grounds besides the violation of the principles of natural justice have been urged. However, I find no substance in those grounds to assail the validity of the assessment order. The ground of violation of principles of natural justice does not have some substance as only one day time was granted to the petitioner to file the reply to the show cause notice of the proposed additions to the income of the petitioner. This court is of the view that 24 hrs time granted to the petitioner to file response to the show cause notice dated 29.03.2022, was not a reasonable opportunity to the petitioner, and therefore, on the said ground, the writ petition is allowed. The impugned assessment order and further proceedings are set aside. The matter is remanded back to the National Faceless Assessment Centre, Delhi to provide an opportunity to the petitioner for filling reply to the show cause notice dated 29.03.2022 and thereafter, to proceed with the final order.
6.The National Faceless Centre, Delhi is directed to active the link for filing the reply to the show cause notice by the petitioner. After the link is activated, the petitioner shall file the reply within seven days. It is made clear that no further opportunity shall be granted to the petitioner and thereafter, the National Faceless Assessment Centre, Delhi shall proceed to finalise the assessment under Section 147 r/w under Section 144 of the IT Act.
This writ petition is allowed as per the aforementioned directions. If the petitioner requests for personal hearing, he should be provided with the opportunity of being heard.