Case Law Details
Vijayakumar Vs Assessment Unit (Madras High Court)
The case of Vijayakumar Vs Assessment Unit, adjudicated upon by the Madras High Court, revolved around the challenge to an assessment order and a penalty order concerning income tax. The petitioner, an income tax assessee, contested these orders primarily on the grounds of not having been given a reasonable opportunity to contest the matter on merits.
The crux of the issue stemmed from a notice issued to the petitioner under Section 148A(b) of the Income Tax Act 1961, pertaining to an alleged escaped income of Rs. 53,56,000/- for the assessment year 2015-16. The petitioner’s failure to respond to this notice led to the issuance of an order under Section 148A(d) and subsequent notices under Section 148, 142, and a show cause notice, culminating in the impugned orders.
The petitioner’s counsel contended that the respondents (tax authorities) only considered the credits in the petitioner’s bank account and did not account for the debits, which would significantly affect the calculation of the escaped income. Additionally, it was argued that the ‘income chargeable to tax’ should be equal to or more than Rs. 50 lakhs, not merely the income itself.
On behalf of the respondents, it was argued that the reassessment proceedings were initiated in accordance with legal requirements and within the prescribed period. The respondents maintained that they were entitled to consider the entire undisclosed credits for the purpose of reopening the assessment, emphasizing that the petitioner failed to file the return of income.
The court observed that the respondents proceeded ex-parte due to the petitioner’s non-participation in the proceedings and that the aggregate deposits were taken into consideration without factoring in the debits. Recognizing the petitioner’s inability to contest the matter earlier, the court deemed it necessary in the interest of justice to provide the petitioner with an opportunity to respond.
As a result, the impugned orders were set aside, and the matter was remanded for reconsideration. The petitioner was granted 15 days to submit a reply to the show cause notice, and the respondents were directed to provide a reasonable opportunity to the petitioner, including a video conference hearing. A fresh order was to be issued within four months from the date of receipt of the petitioner’s reply.
To facilitate the petitioner’s response, the respondents were instructed to take necessary action to provide access to the portal. Consequently, the writ petitions were disposed of, with no order as to costs.
In essence, the Madras High Court’s judgment emphasized the importance of providing a fair opportunity to contest tax assessment matters and ordered a remand for reconsideration due to the petitioner’s lack of participation and the oversight regarding the consideration of debits in the bank account.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
An assessment order dated 11.03.2023 and a penalty order dated 26.09.2023, respectively, are under challenge in these writ petitions on the ground that the petitioner did not have a reasonable opportunity to contest the matter on merits.
2. The petitioner is an income tax assessee. In relation to assessment year 2015-16, a notice under Section 148A(b) of the Income Tax Act 1961, (I-T Act) was issued to the petitioner on 22.03.2023. Such notice pertained to alleged escaped income of Rs.53,56,000/-. Since the petitioner did not reply to the notice, an order dated 31.03.2022 was issued under Section 148A(d). This was followed contemporaneously by a notice under Section 148. After issuing notices under Section 142 and a show cause notice, the impugned order was issued.
3. Learned counsel for the petitioner submits that the respondents only took into consideration the credits in the bank account and did not take into account the debits therefrom. If such debits had been taken into account, she submits that the escaped amount would be much less than 50 lakhs. She also raised the contention that the ‘income chargeable to tax’ and not merely the income should be equal to or more than Rs.50 lakhs.
4. Mr. D. Prabhu Mukunth Arunkumar, learned junior standing counsel, appears on behalf of the respondent. A counter was also filed on behalf of the respondent. He submits that re-assessment proceedings were duly initiated by complying with all legal requirements in such regard. He also points out that the present writ petitions were filed after the expiry of the prescribed period of limitation. He refuted the contention that the escaped income is less than Rs.50 lakhs by submitting that the respondents are entitled to take into account the entire credits, which were not disclosed, for purposes of reopening the assessment. He also pointed out that the petitioner did not file the return of income.
5. On perusal of the impugned orders, it is evident that the respondents proceeded ex-parte because the petitioner did not reply or otherwise participate in proceedings. It is also evident that the aggregate deposits were taken into consideration. The petitioner contends that the debits from the bank account were not taken into consideration and that if such debits were considered, the alleged escaped income would be less than the prescribed minimum threshold of Rs. 50,00,000/-. Since the petitioner could not contest the matter on merits earlier, the interest of justice warrants that an opportunity be provided to the petitioner. Since I propose to remand the matter, I do not intend to record any findings with regard to the legal arguments raised with regard to the scope of Section 149(1)(b) of the I-T Act.
6. For reasons set out above, the impugned orders are set aside and the matter is remanded for reconsideration. The petitioner is permitted to submit a reply to the show cause notice dated 27.02.2023 within 15 days from the date of receipt of a copy of this order. Upon receipt thereof, the first respondent is directed to provide a reasonable opportunity to the petitioner, including a video conference hearing, and thereafter issue a fresh order within four months from the date of receipt of petitioner’s
7. In order to enable the petitioner to reply to the show cause notice, the respondents are directed to take necessary action to provide access to the portal.
8. W.P.Nos.154 & 235 of 2024 are disposed of on the above terms. Consequently, the connected miscellaneous petitions are closed. There shall be no order as to costs.
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