Case Law Details
Mangal Chand Vs Additional/ Joint/ Deputy/ ACIT/ ITO (Madras High Court)
In a recent case before the Madras High Court, a significant issue related to the violation of natural justice has come to the forefront. The case of Mangal Chand vs. ACIT (Additional Commissioner of Income Tax) highlights the importance of considering adjournment requests before making assessment orders.
Background of the Case: The petitioner, in this case, is an individual assessee who owns M/s. Rakhee Aluminium Hardware Centre, engaged in the trading of aluminum materials. The petitioner had filed income tax returns for the assessment year 2018-19, and his case was selected for scrutiny under Section 143(2) of the Income Tax Act, 1962.
Transition to Faceless Assessment: During the assessment process, the petitioner received a notice indicating that the scrutiny assessment for the relevant year would be conducted under the Faceless Assessment Scheme, 2019 (formerly known as the e-Assessment Scheme, 2019).
Adjournment Requests: Throughout the assessment process, the petitioner faced several challenges, including health issues related to COVID-19. The petitioner sought adjournments to provide the necessary details and documents, citing valid reasons. However, these requests were met with limited extensions and strict timelines.
Order Without Considering Adjournment Request: Despite the petitioner’s requests for adjournment, the assessing authority proceeded to pass the assessment order on 19.04.2021. The order stated that the petitioner had failed to establish claims for deductions with the required documentary evidence.
Violation of Natural Justice: The central issue in this case is whether the assessment order violates the principles of natural justice. The petitioner argues that the order was made without considering the request for adjournment made on 03.04.2021, which had sought time until 15.04.2021.
Evidentiary Support: The petitioner relies on a screenshot of the web portal of the Income Tax Department, which clearly shows that the adjournment request was made on 03.04.2021. This evidence contradicts the assessment order’s claim that the petitioner did not respond to the notice dated 30.03.2021.
Court’s Verdict: After careful consideration, the Madras High Court finds merit in the petitioner’s argument that the assessment order was made without taking into account the adjournment request. As a result, it concludes that the order violates the principles of natural justice.
Remand and Opportunity for Hearing: The court sets aside the impugned order and remands the matter back to the 1st Respondent (ACIT) with a direction to pass fresh orders. The 1st Respondent is instructed to afford the petitioner a reasonable opportunity for a hearing on the merits and in accordance with the law. This must be done within a period of 4 months from the date of receipt of the court’s order.
Conclusion: The case of Mangal Chand vs. ACIT serves as a reminder of the significance of adhering to the principles of natural justice in the assessment process. The court’s decision to set aside the assessment order highlights the need for fair and thorough consideration of adjournment requests to ensure a just and lawful outcome for taxpayers.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The writ petition is filed praying for a Writ of Certiorari calling for the records of the 1st Respondent in the assessment order dated 19.04.2021 and quash the same.
2. The petitioner is an individual assessee viz., the propreitor of M/s.Rakhee Aluminium Hardware centre engaged in the business of trading in Aluminium materials. The petitioner filed his income tax returns for the assessment year 2018-19, which was selected for scrutiny vide notice dated 22.09.2019 under Section 143(2) of the Income Tax Act, 1962 (hereinafter referred to as “the Act”). On 15.10.2020, the petitioner was in receipt of a notice stating that scrutiny assessment for the assessment year 2018-19 shall be completed under Faceless Assessment Scheme, 2019 (previously e-Assessment Scheme, 2019). Thereafter, another notice was issued on 10.12.2020 seeking various details and documents relating to the scrutiny assessment. The petitioner sought for an adjournment on account of being tested positive for COVID-19. The respondent vide notice dt. 22.12.2020 granted time only till 05.01.2021. Pursuant thereto, the petitioner submitted his preliminary response on 05.01.2021 along with available details and documents and sought for further time in order to submit the remaining details through his auditor. Thereafter, 1st Respondent issued notices dated 13.01.2021, 20.01.2021 and 02.02.2021. The petitioner sought time to submit his reply as he had not recovered completely from COVID-19. Time was granted till 19.02.2021 to furnish necessary documents. A show cause notice was issued by the 1st Respondent on 19.02.2021 under Section 143(3) of the Act. The petitioner filed his objections to the aforesaid notice on 25.02.2021 along with supporting documents and sought for a personal hearing. Subsequent to the filing of objections by the petitioner against the show cause notice, the 1st Respondent sought for further details vide notice dated 27.02.2021 under Section 142(1) of the Act to be furnished by the petitioner on or before 07.03.2021. The petitioner uploaded his reply on 09.03.2021 since due date for filing reply was 07.03.2021 which falls on Sunday and he tried to file the reply on 08.03.2021 but due to technical glitches documents were not uploaded properly. Thus, the petitioner indicated that the response was submitted on 09.03.2021. Again on 10.03.2021 a notice under section 142 (1) of the Act was issued to furnish the remaining details and documents reply and to submit his reply by 17.03.2021. On 17.03.2021, the petitioner submitted his reply indicating insofar as Mahazar is concerned the same is being pursued with the GST department and shall submit the same on its receipt. One more notice was issued on 18.03.2021 and the petitioner responded to it on 25.03.2021. Thereafter, on 30.03.2021, after a series of notice under Section 142 (1) of the Act a notice was issued and an adjournment was sought by the petitioner on 03.04.2021 upto 15.04.2021. However, the impugned order of assessment came to be passed on 19.04.2021 stating that the petitioner had failed to establish its claim of deductions with the documentary evidence despite repeated notices.
3. The short question that arises for consideration is whether the impugned order of assessment suffers from violation of principles of natural justice inasmuch the impugned order of assessment is made without considering the request for adjournment made on 03.04.2021 in response to the notice dated 03.03.2021 granting them time until 03.04.2021.
4. It is submitted by the learned counsel for the petitioner that without dealing with the petitioner’s request or informing the petitioner as to whether adjournment request was accepted or rejected, the assessing authority proceeded to make the order of assessment. It was thus submitted that the order suffers from violation of principles of natural justice. The petitioner seeks to place reliance upon the screen shot of the web portal of the IT Department which would reveal that adjournment was sought on 03.04.2021 upto 15.04.2021.
5. To the contrary, it is submitted by the learned counsel for the Respondents that the petitioner has been granted several opportunities and the case of the petitioner that they have been handicapped in view of the seizure of accounts/documents by the GST Department is factually incorrect nor supported by any documentary evidence. It is further submitted that the Respondent had proceeded to pass the impugned order only after giving the petitioner adequate opportunity and in this regard they sought to place reliance on the Table at Page 2 of the counter, wherein various communications/ orders / notices exchanged between the department and the assessee has been referred to.
6. On perusal of records, this Court finds that a request for adjournment to the notice dated 30.03.2021 was in fact submitted on 03.04.2021 as evident from the screenshot of the Web portal of the respondent Department. The impugned order and the counter proceeds on an erroneous factual premise that the petitioner did not respond to the notice dated 30.03.2021. The revenue has not questioned the genuineness of the screenshot kept at Page No. 217 of the typed set, which would evidence the petitioner’s request for adjournment. I would think that there is merit in the submission of the learned counsel for the petitioner that the order is made on non-consideration of the petitioner’s request for adjournment and thus suffers from violation of principles of natural justice.
7. In view of the same, the impugned order is set aside and the matter is remanded back to the 1st Respondent to pass fresh orders after affording the petitioner with a reasonable opportunity of hearing on merits and in accordance with law within a period of 4 months from the date of receipt of a copy of this order.
8. The writ petition stands disposed of. No costs. Consequently, the connected miscellaneous petition is closed.
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