SMILE Microfinance Limited Vs ACIT (Madras High Court)
The petitioner, SMILE Microfinance Limited, a registered Non-Banking Financial Company (NBFC-MFI) licensed by the RBI, filed a writ petition before the Madras High Court seeking to quash the assessment order dated 31.12.2019 passed under Section 143(3) of the Income Tax Act for Assessment Year 2017–18. The petitioner primarily argued that the order was issued without providing an opportunity for a personal hearing and was, therefore, violative of the principles of natural justice.
The company, engaged in microfinance operations through 100 branches and catering to nearly three lakh women borrowers, had deposited cash collected as loan repayments during the demonetization period (08.11.2016 to 31.12.2016). It declared that the cash deposits were from existing balances and loan repayments. The petitioner filed its return of income under Section 139(1) and later revised it under Section 139(4), maintaining the same declared income of ₹16.07 crore while including previously omitted bank account details. The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) were issued.
During scrutiny, several hearings were held, and the petitioner submitted details electronically. The Assessing Officer, however, completed the assessment without granting a final hearing and made an addition of ₹99.50 lakh under Section 68, treating it as unexplained cash credit out of total deposits of ₹1.18 crore in Specified Bank Notes (SBNs). Applying Section 115BBE, a 60% tax rate was levied, raising a demand of ₹1.30 crore, including interest. The officer had relied on bank information obtained under Section 133(6), which was not shared with the petitioner, forming the core of its challenge.
