Petitioner cannot repeatedly ask for time in response to successive show cause notices

Shaju Pachelil Pathrose Vs ACIT (Kerala High Court)

Introduction: The recent judgment by the Kerala High Court in the case of Shaju Pachelil Pathrose vs ACIT delves into the validity of an income tax assessment order dated 24.05.2023. The petitioner challenges the assessment order passed under Section 147 of the Income Tax Act, 1961, and a penalty notice issued under Section 271(1)(c). The central contention revolves around the denial of time requests by the assessee in response to show cause notices.

Detailed Analysis: The case originated from the flagging of information in accordance with the risk management strategy formulated by the Central Board of Direct Taxes. The assessment was reopened with a notice under Section 148 on 28.06.2021, citing high-value cash transactions by the assessee. The petitioner responded to the notice under Section 148A(b) of the IT Act, 1961, citing the decision of the Hon’ble Supreme Court in the case of Union of India & Ors. v. Ashish Aggarwal [2022 SCC Online SC 543].

The impugned assessment order, dated 24.05.2023, determined the total taxable income to be Rs. 6,48,29,2113/- with an addition of Rs. 6,36,70,393/- under Section 69A. The demand notice for tax payment and a penalty notice were issued, leading to the petitioner’s challenge.

The petitioner, through their counsel, argued that they responded to the show cause notice and requested time, as evidenced by Exhibit P-8. Despite this, the impugned assessment order was passed on 24.05.2023. The court noted that the petitioner did not file a reply even within the extended time granted until 20.05.2023. The petitioner, when issued a second show cause notice, requested further time until 07.06.2023.

The court emphasized that the authority was well within its power to deny further time requests, stating that the petitioner cannot repeatedly ask for time in response to successive show cause notices. The judgment underscores that there was no violation of the principles of natural justice. The court advised the petitioner to file an appeal against the assessment order and permitted the filing of the appeal within fifteen days. During this period, no coercive steps shall be taken against the petitioner in pursuance of the impugned assessment order.

Conclusion: The Kerala High Court’s decision reinforces the principle that an assessee cannot indefinitely seek time in response to show cause notices. The denial of repeated time requests was deemed justified, and the court directed the petitioner to pursue the appropriate remedy by filing an appeal. The judgment underscores the importance of timely and substantive responses in tax proceedings, emphasizing the need for compliance with statutory timelines.

FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT

1. The present writ petition has been filed by the petitioners impugning the assessment order dated 24.05.2023 in Exhibit P-11 passed under Section 147 read with Section 144B of the Income Tax Act, 1961 and Exhibit P-14 penalty notice dated 24.05.2023 issued under Section 274 read with Section 271 (1) (c) of the Income Tax Act, 1961.

2. Information was flagged in the case of the petitioner in accordance with the risk management strategy formulated by the Central Board of Direct Taxes. The assessment in the case was re­opened by issuing notice under Section 148 dated 28.06.2021. The reasons for re-opening of the assessment was assigned as under;

“The assessee has made high value cash transactions. Total credit during the period 01.01.2015 to 31.12.2015 is amounted to Rs. 6.91 crores out of which cash deposits is Rs. 5.88 crore, clearing is Rs. 41.22 lakhs, RTGS is Rs. 38.59 lakhs, NEFT is Rs. 19.55 lakhs.

In view of the decision of Hon’ble Supreme Court in the case of Union of India & Ors. v. Ashish Aggarwal [2022 SCC Online SC 543], the said notice was treated to be a notice under Section 148A (b) of the IT Act, 1961. The Information/material relied upon for receiving the said notice was provided to the petitioner/assessee by the Assessing Authority on 24.05.2022 and the petitioner was asked to file reply to the said notice. In response to the said notice, the petitioner has furnished his reply. After considering the reply furnished by the petitioner to the notice under Section 148A (b) of the Income Tax Act, the Authority was of the opinion that it was a fit case for reopening and the case was reopened issuing notice under Section   148
dated 29.06.2022.”

3. After considering the reply and the submissions the impugned assessment order has been passed and total taxable income has been determined to be Rs. 6,48,29,2113/- with addition of Rs. 6,36,70,393/- under Section 69A of the Income Tax Act. The demand notice for payment of tax was also annexed with the assessment order and direction was issued to initiate penalty proceedings.

4. The learned Counsel for the petitioner submits that the Show Cause Notice issued to the petitioner on 03.05.2023 asking the petitioner to file reply by 06.05.2023 was responded by the petitioner/assessee and request for time to file the reply was made up to 20.05.2023. This fact is evident from Exhibit P-8, print out taken from the website of the Department. The petitioner was issued against a notice on 17.05.2023 and the petitioner asked for further time to 07.06.2023. In the meantime, the impugned assessment order has been passed on 24.05.2023.

5. The petitioner admittedly did not filed reply even up to the extended time asked by him up to 20.05.2023. Though the second Show Cause Notice was issued again the petitioner asked time and did not filed reply. It is relevant to take note of the fact that in respect of the first show cause notice the petitioner had asked time up to 20.05.2023 and it was granted to him, which is evident from Exhibit P-8. The petitioner did not file reply and therefore, the Authority was well within its power not to grant further time for the petitioner. Therefore, I do not find much substance in the submission that there is violation of the principles of natural justice. Petitioner cannot go on asking for time one after another in response to the show cause notice issued one after another. Therefore I do not find any ground to interfere with the impugned order or notice. The petitioner has remedy of filing the appeal against the assessment order. Petitioner instead of filing the appeal has approached this Court in this writ petition. Considering the fact that this writ petition has remained pending on file of this Court, the petitioner is permitted to file the appeal within period of fifteen days from today before the Appellate Authority and if the petitioner files the appeal against the assessment order within fifteen days, the Appellate Authority shall proceed to examine the appeal on merit as well as the stay application if any, filed along with the appeal. It is made clear that the Appellate Authority will not get into the question of limitation and the appeal should be heard and decided on merit inasmuch as this writ petition has been remain pending in the file of this Court. For a period of fifteen days no coercive steps shall be taken against the petitioner in pursuance to Exhibit P-11 impugned assessment order. The stay application should be decided expeditiously, preferably within a period of two months from the date of its filing.