Case Law Details
Lulu International Shopping Malls Pvt Ltd. Vs DCIT (Kerala High Court)
Introduction: In a recent development, the Kerala High Court issued a significant ruling in the case of Lulu International Shopping Malls Pvt Ltd. vs. DCIT concerning the quashing of an assessment order. The court’s decision provides relief to Lulu International, as it found that the assessment order had been issued in the absence of proper consideration of their reply. This article delves into the details of the case, the legal arguments presented, and the implications of the court’s decision.
Detailed Analysis: The case involves Lulu International Shopping Malls Pvt Ltd., an assessee under the provisions of the Income Tax Act, 1961. The Income Tax Authorities initiated proceedings under Section 148 of the Income Tax Act, 1961, related to the assessment year 2016-2017. The third respondent issued a show cause notice, referred to as Exhibit P15, dated May 10, 2023, proposing a variation of Rs.21,86,27,050/- to the total income and computing losses at Rs.46,93,51,692/-.
The show cause notice required Lulu International to respond by May 15, 2023, through their registered e-filing account. In response, Lulu International requested an extension until May 22, 2023, to submit their reply, as indicated in Exhibit P16 on the Income Tax Department’s web page. However, no decision was communicated to Lulu International regarding the extension request, and the status of the application remained ‘open.’
Subsequently, when Lulu International attempted to upload their response, labeled as Exhibit P17, and requested an opportunity for a hearing before finalizing the assessment, they were unable to do so because the window for submission had closed. As a result, Lulu International sent emails to specified addresses on May 22, 2023, highlighting their inability to upload the reply and requesting the reopening of the e-proceedings facility on the web portal. Additionally, they addressed the matter with the Grievance Cell of the Faceless Assessment scheme, as evident from Exhibit P20. Despite these efforts, the assessment order, referred to as Exhibit P21, was issued without addressing Lulu International’s concerns.
The counsel for Lulu International argued that the denial of an extension of seven days and the issuance of the assessment order without addressing their request violated their constitutional rights under Article 14 of the Indian Constitution. They contended that they should have been given an opportunity to file a reply to the show cause notice by May 22, 2023.
The learned Standing Counsel representing the Revenue acknowledged that Lulu International had not responded to various notices issued to them. However, they could not deny that Lulu International’s request for a one-week extension until May 22, 2023, had not been addressed, and no decision had been made regarding the extension.
The court considered these arguments and found that the assessing officer had proceeded hastily to some extent, thereby violating the principles of natural justice. Consequently, the court set aside the assessment order (Exhibit P21) and directed the respondents to reopen the window for Lulu International to upload their response (Exhibit P17) to the show cause notice. The court did not grant any further extension of time to Lulu International for this purpose. It instructed that the assessment proceedings should be finalized, and a fresh assessment order should be passed in accordance with the law. Lulu International was to be provided with a new date for filing their reply to the show cause notice.
Conclusion: The Kerala High Court’s decision in the case of Lulu International Shopping Malls Pvt Ltd. vs. DCIT underscores the importance of adhering to principles of natural justice in tax assessment proceedings. The court found that the assessment order had been issued prematurely without considering Lulu International’s reply or addressing their request for an extension.
This ruling has significant implications, particularly in cases where taxpayers are seeking reasonable extensions to respond to show cause notices or participate in assessment proceedings. It reinforces the principle that taxpayers must be given a fair opportunity to present their case and respond to tax authorities’ inquiries.
In essence, the court’s decision upholds the principles of fairness and procedural justice in taxation matters, ensuring that taxpayers are not unduly prejudiced by the hasty actions of tax authorities. It serves as a reminder of the need for tax authorities to exercise due diligence and follow established procedures to protect the rights of taxpayers and maintain the integrity of the tax assessment process.
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The present writ petition has been filed seeking to quash Exhibit P21 order dated 23.05.2023 passed by the third respondent by adding an amount of Rs.21,86,27,050/- to total income under Section 198 of the Income Tax Act, 1961 (‘Act, 1961’ for short), and losses have been computed at Rs.46,93,51,692/-.
2. The petitioner company is an assessee under the provisions of the Act, 1961. The Income Tax Authorities initiated proceedings under Section 148 of the Act, 1961 with respect to the assessment year 2016-2017. The third respondent has issued Exhibit P15 show cause notice dated 10.05.2023 asking the petitioner assessee to show cause as to why the proposed variation of Rs.21,86,27,050/- should not be made and directing the petitioner to submit its response through registered e-filing account at www.incometax.gov.in by 11.00 hours of 15.05.2023. In response to the same, the petitioner has requested the third respondent to grant time till 22.05.2023 to submit its reply, as is evident from Exhibit P16 web page of the Income Tax Department. But, no decision was communicated to the petitioner in respect of the said request for extension of time and the status of the said application was shown as ‘open’.
3. Thereafter, when the petitioner tried to upload his Exhibit P17 response pointing out its objections and requesting an opportunity of hearing before finalisation of assessment, it could not upload the same, since the window was closed. Accordingly, the petitioner has sent an e-mail to [email protected] and [email protected] on 22.05.2023 pointing out its inability to upload reply and requesting to open the e-proceedings facility in the web portal, and the Delhi Samadhan Faceless Assessment forwarded the said email to the third respondent. The petitioner has also addressed the issue before the Grievance Cell of the Faceless Assessment scheme on 22.05.2023, as is evident from Exhibit P20. However, without redressing the grievance of the petitioner, Exhibit P21 assessment order has been issued. Hence this writ petition.
4. The learned counsel for the petitioner submits that the denial of extension of seven days’ time sought for and the issuance of the impugned assessment order without passing any orders on the request of the petitioner, are in violation of the constitutional rights guaranteed under Article 14 of the Constitution of India. The petitioner ought to have been given an opportunity to file a reply to the show cause notice within the time sought i.e., upto 22.05.2023.
5. Even the request of the petitioner was not conceded and without passing any order on the petitioner’s request for extension of time to file reply, assessment order has been passed. The learned counsel for the petitioner submits that the petitioner’s reply is ready and if this Court directs the third respondent to open the window for filing the reply, the petitioner will immediately upload the same.
6. John Joseph, the learned Standing Counsel appearing for the Revenue, submits that the petitioner was given enough and more opportunities in respect of various notices issued to him and the petitioner has failed to avail those opportunities and it culminated in passing of the Exhibit P21 assessment order. However, he is not in a position to deny that the petitioner’s request for grant of one week’s time i.e., upto 22.05.2023 was not addressed and no decision was taken for extending the time for filing reply to the show cause notice.
7. I have considered the rival submissions made across the Bar.
8. The liability of the tax is a civil liability. Principles of natural justice ought to be adhered to, while finalizing the assessment proceedings in respect of tax. It is not in dispute that the petitioner is issued with Exhibit P15 show cause notice dated 10.05.2023. In fact, it is admitted that the petitioner has not submitted any reply to the same. The petitioner sought one week’s time till 22.05.2023 for filing reply and no decision was taken on the petitioner’s request for extension of time and the window was closed and finally assessment order was passed in the absence of any reply from the petitioner.
9. Considering the facts and circumstances, I am of the view that the assessing officer has proceeded in a hurried manner to some extent, which is in violation of the principles of natural justice. Therefore, the impugned Exhibit P21 order is set aside and the respondents are directed to open the window for uploading Exhibit P17 objection to the show cause notice. No further time will be granted to the petitioner for the purpose. The assessment proceedings should be finalised and a fresh assessment order be passed in accordance with law. The petitioner should be intimated a fresh date for filing reply to the show cause notice.
With the aforesaid directions, this writ petition stands allowed.
Let this order be communicated to the concerned authorities for compliance.
