Hosdurg Beedi Workers Industrial Service Type Co-operative Society Ltd vs. THE INCOME TAX OFFICER, WARD-1 & TPS, KASARAGOD

PDF · subscribers
WP(C)/13984/2023HC KeralaKLHC01030288202323 August 2023Author: HONOURABLE MR.JUSTICE C.S.DIAS7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the notice issued by the Income Tax Officer under Section 148A(b) of the Income Tax Act, 1961, was invalid because it did not provide the mandatory seven clear days for the assessee to file a reply. The Court noted the concession made by the revenue's counsel, acknowledging the validity of the petitioner's contentions regarding the short notice period. Consequently, the Court quashed the impugned notices (Exts.P1, P2, P3) and the assessment order (Ext.P6). The Court directed the respondents to issue a fresh notice to the petitioner in accordance with the mandate of Section 148A(b) and in due course of law. The petitioner would then be required to submit its objections, which the respondents would consider and dispose of as per law. The issue of the validity of the show-cause notice under Section 144B(7)(ii) was implicitly addressed by quashing the entire assessment proceedings due to the initial defect in the Section 148A(b) notice.

What were the facts?

The petitioner, Hosdurg Beedi Workers Industrial Service Type Co-operative Society Ltd, filed a writ petition challenging notices and an order issued by the Income Tax Officer, Ward-1 & TPS, Kasaragod. The petitioner contended that it was unaware of a notice (Ext.P1) issued under Section 148A(b) of the Income Tax Act, 1961, for the assessment year 2018-19, alleging escaped income. Consequently, an order (Ext.P2) was passed, followed by a notice (Ext.P3) under Section 148. The petitioner filed a return of income. Subsequently, an assessment order (Ext.P6) was passed on March 11, 2023, making an addition of Rs.3,33,49,052/-. The petitioner argued that a show-cause notice (Ext.P7) and draft assessment order were not served as per Section 144B(7)(ii) of the Act, and Ext.P1 notice did not provide the mandatory seven clear days for a reply, rendering the subsequent proceedings illegal.

What were the issues?

1. Whether the notice issued by the Income Tax Officer under Section 148A(b) of the Income Tax Act, 1961, which provided less than seven clear days for the assessee to reply, is invalid, thereby rendering consequential orders and notices illegal? Assessee's Contention: The petitioner argued that Ext.P1 notice under Section 148A(b) was issued on March 18, 2022, requiring a reply by March 24, 2022, which is short of the statutory mandate of seven clear days. This procedural defect invalidates Ext.P1 and consequently Exts.P2 and P3. Revenue's Contention: The learned Standing Counsel for the respondents fairly conceded that the petitioner's contentions appeared to be valid. They acknowledged that the notice under Section 148A(b) was indeed sent with a reply deadline of less than seven clear days, violating the statutory mandate.

Which sections of the Income-tax Act were involved?

Section 148A(b),Section 148A(d),Section 148,Section 144B(7)(ii)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.S.DIAS WEDNESDAY, THE 23RD DAY OF AUGUST 2023 / 1ST BHADRA, 1945 WP(C) NO. 13984 OF 2023 PETITIONER/S: HOSDURG BEEDI WORKERS INDUSTRIAL SERVICE TYPE CO- OPERATIVE SOCIETY LTD BALLA PO, HOSDURG TK, KASARAGOD REPRESENTED BY ITS SECRETARY VINEETH K, PIN - 671531 BY ADVS. S.ARUN RAJ C.T.SUJA ARJUN S.RAJ RESPONDENT/S: 1 THE INCOME TAX OFFICER, WARD-1 & TPS, KASARAGOD AAYAKAR BHAVAN, VIDYANAGAR, KASARAGOD, PIN - 671123 2 ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX/INCOME TAX OFFICER, ASSESSMENT UNIT, NATIONAL E-ASSESSMENT CENTRE, DELHI INCOME TAX DEPARTMENT, 2ND FLOOR, E- RAMP, JAWAHARLAL NEHRU STADIUM, NEW DELHI, PIN - 110003 3 THE PRINCIPAL COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE, PIN - 673001 BY ADVS. JOSE JOSEPH, SC, INCOME TAX DEPARTMENT, KERALA CHRISTOPHER ABRAHAM THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 23.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 13984 OF 2023 2

JUDGMENT The writ petition is filed, inter-alia, to quash Exts.P1 notice, P2 order and P3 notice issued by the 1st respondent.

2.

The petitioner's case is that it is a Co-operative Society, registered under the Kerala Co-operative Societies Act. The 1st respondent had issued Ext.P1 notice under Section 148 A(b) of the Income Tax Act, 1961 (in short, “Act”), alleging that the petitioner's chargeable income for the assessment year 2018-19 has escaped assessment. The petitioner was unaware of Ext.P1 notice and could not file its objection. Subsequently, the 1st respondent issued Ext.P2 order under Section 148A(d) of the Act stating that as the petitioner did not respond to Ext.P1 notice, it is assumed that the petitioner has no explanation to offer. With the afore-cited finding, the 1st respondent issued Ext.P3 notice under Section 148 of the Act. The petitioner filed its return of income on 22.04.2022

WP(C) NO. 13984 OF 2023 3 declaring total income as 'nil' in response to Ext.P3 notice. It is then that the petitioner came to learn about the issuance of Ext.P4 notice. The petitioner submitted Ext.P5 reply to the same. Then, the 2nd respondent completed the assessment on 11.03.2023 and passed Ext.P6 assessment order making an addition of Rs.3,33,49,052/-. On a perusal of Ext.P6 order, the petitioner learnt that a show-cause notice along with a draft assessment order was issued on 15.02.2023, calling for objections to be filed on or before 22.03.2023. Ext.P7 show cause notice was not served on the petitioner as contemplated under sub-clause (ii) of sub-section (7) of Section 144B of the Act before completing Ext.P6 assessment. The said provision specifically provides that every notice has to be placed in the registered account of the assesee or sent to his registered email or mobile phone number, which is to be followed by a real time alert. The sending of the real time alert is a mandatory requirement, failing which the WP(C) NO. 13984 OF 2023 4 notice become ineffective and notice shall not be treated as served. The petitioner was denied an opportunity of filing its objection to the show cause notice and draft assessment order. Ext.P1 notice was issued by the 1st respondent without giving seven clear days time to the petitioner to reply to the show cause notice as per the mandate under Section 148A(b), which renders Ext.P1 notice and the consequential Exts.P2 order and P3 notice as illegal and invalid. Hence, the writ petition.

3.

The learned Standing Counsel appearing for the respondents has filed a statement, inter-alia, fairly conceding that the contentions of the petitioner appears to be valid. A perusal of Ext.P1 notice issued under Section 148A(b) shows that the notice dated 18.03.2022 was send to the petitioner with a requirement to submit a reply on or before 24.03.2022, which is short of seven clear days and in turn is against the statutory mandate under Section 148A(b). Therefore Ext.P1 notice is to be WP(C) NO. 13984 OF 2023 5 declared invalid and the consequential Exts.P2 and P3 orders are to be set aside.

4.

Heard; Sri.Arun Raj, the learned Counsel appearing for the petitioner and Sri.Christopher Abraham, the learned Standing Counsel appearing for the respondents.

5.

On a consideration of the pleadings and materials on record, and particularly taking note of the stand of the respondents in the statement filed before this Court, I am of the definite view that Exts.P1 to P3 and P6 assessment order have to be quashed and the petitioner has to be served with a fresh notice following the mandate under Section 148A(b) of the Act and in accordance with law. Resultantly, I order the writ petition as follows: (i) Exts.P1 notice, P2 order, P3 notice and P6 assessment order are quashed.

WP(C) NO. 13984 OF 2023 6 (ii) The respondents would be at liberty to serve a fresh notice to the petitioner as per the mandate under Section 148A(b) of the Act and in accordance with law. (iii) If such notice is served on the petitioner, the petitioner shall place its objection to the same, and the respondents shall consider and dispose of the notice in accordance with law. C.S.DIAS JUDGE rkc/23.08.23

WP(C) NO. 13984 OF 2023 7

Appendix — schedule of exhibits
APPENDIX OF WP(C) 13984/2023 PETITIONER EXHIBITS Exhibit P1 THE TRUE COPY OF THE NOTICE DATED 18-3- 2022 ISSUED UNDER SECTION 148A (B) OF THE IT ACT FOR THE AY 2018-19 OF THE 1ST RESPONDENT Exhibit P2 A TRUE COPY OF THE ORDER DATED 30-3-2022 OF THE 1ST RESPONDENT U/S 148A (D) OF THE ACT FOR THE AY 2018-19 Exhibit P3 A TRUE COPY OF THE NOTICE DATED 30-3- 2022 OF THE 1ST RESPONDENT U/S 148 OF THE ACT FOR THE AY 2018-19 Exhibit P4 A TRUE COPY OF THE NOTICE DATED 8-12- 2022 U/S 142 (1) OF THE IT ACT ISSUED BY THE 2ND RESPONDENT Exhibit P5 A TRUE COPY OF THE REPLY DATED 10-1-2023 E-FILED BY THE PETITIONER IN RESPONSE TO EXHIBIT P-4 NOTICE U/S 142 (1) OF THE ACT Exhibit P6 A TRUE COPY OF THE ASSESSMENT ORDER DATED 11-3-2023 PASSED U/S 147 R.W.S144B OF THE ACT BY THE 2ND RESPONDENT FOR THE AY 2018-19 Exhibit P7 A TRUE COPY OF THE SHOW CAUSE NOTICE DATED 15-2-2023 WITH THE DRAFT ASSESSMENT ORDER Exhibit P8 A TRUE COPY OF THE JUDGMENT DATED 12-4- 2022 IN WP(C) NO. 7385 OF 2022 PASSED BY THE HIGH COURT OF DELHI Exhibit P9 A TRUE COPY OF THE JUDGMENT DATED 20-9- 2022 IN WRIT PETITION NO. 2154 OF 2022 PASSED BY THE HIGH COURT OF MUMBA

More judgments on Section 148A(b)

All 524 judgments and leading authorities on Section 148A(b) →

Recent GST High Court judgments

Search GST case law →