AFEEF CASHEW COMPANY vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

WP(C)/869/2019HC KeralaKLHC01002363201919 March 2019Author: HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE6 pages

AI SummaryRemanded

What did the High Court hold?

The High Court held that the petitioner should be given an opportunity to explain the differences in the duty drawback claimed and admitted. While the Court could have relegated the petitioner to the appellate remedy, it was of the view that this would serve no purpose without the petitioner furnishing an explanation. Therefore, the Court directed the petitioner to appear before the assessing authority on April 5, 2019, to raise objections. The assessing authority was then directed to conclude the proceedings within a further period of one month. The Court imposed a cost of Rs. 25,000/- on the petitioner, payable within three weeks. The ratio decidendi is that procedural lapses, particularly those leading to a denial of natural justice, can be rectified by the High Court in its writ jurisdiction, even if an alternative remedy exists, to ensure a fair opportunity for explanation, albeit with a cost penalty.

What were the facts?

The petitioner, Afef Cashew Company, an assessee of the Income Tax Department, filed a writ petition challenging an assessment order (Ext.P4) passed by the Assistant Commissioner of Income Tax, Circle-I, Kollam. The petitioner contended that the assessment order was passed without following due procedure, thereby denying them natural justice. The assessment proceedings were concluded due to the petitioner's lack of response to a communication regarding a difference in the duty drawback claimed. The petitioner's explanation for the non-response was that the communication, sent via email, landed in their spam folder and was only discovered after the assessment order was passed. The petitioner also claimed their email had changed subsequently, a fact they did not inform the Income Tax Officer about. The disputed amount related to a difference between the claimed duty drawback of Rs. 1,07,33,846/- and the admitted amount of Rs. 68,33,568/-.

What were the issues?

1. Whether the assessment order was passed in violation of principles of natural justice, specifically concerning the opportunity to explain the difference in duty drawback claimed and admitted? Assessee's Contention: The petitioner argued that the assessment order was passed without following due procedure and that natural justice was denied. They claimed the communication regarding the proposed assessment was missed because it went into their spam folder, and they only found it after the order was passed. They also stated their email had changed subsequently. Revenue's Contention: The judgment notes that there was no response from the petitioner to the communication soliciting objections. The assessment was concluded in the absence of any explanation from the petitioner. The revenue's specific arguments are not explicitly detailed beyond the fact that the petitioner did not respond.

Which sections of the Income-tax Act were involved?

Section 143(2)

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 A.MUHAMED MUSTAQUE TUESDAY ,THE 19TH DAY OF MARCH 2019 / 28TH PHALGUNA, 1940 WP(C).No. 869 of 2019 PETITIONER: AFEEF CASHEW COMPANY VP IX 415 C VP IX/415 C, THATTAMALA - 691 020, KERALA REPRESENTED BY ITS MANAGING PARTNER. BY ADV. SMT.NISHA JOHN RESPONDENTS: 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-I, KOLLAM AYAKAR BHAVAN, INCOME TAX OFFICE, NEAR KARBALA JUNCTION, R.S.ROAD, KOLLAM- 691 001. 2 ADDITIONAL/JOINT COMMISSIONER KOLLAM RANGE, AYAKAR BHAVAN, NEAR KARBALA JUNCTION, RAILWAY STATION ROAD, KOLLAM- 691 001. BY ADVS. SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 19.03.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 869 of 2019 ..2..

JUDGMENT The writ petitioner is an assessee of the Income Tax Department. They challenge Ext.P4 assessment order. The Petitioner's case is that the assessment order has been passed without following due procedure. Therefore, the petitioner submitted that natural justice has been denied.

As seen from the impugned proceedings there was no response on the side of the petitioner. The petitioner was communicated about the proposed assessment, on account of difference in the draw back claimed by the petitioner. It is to be noted that in terms of Sec.143(2) of the Income Tax Act, the assessment proceedings can be concluded in e-proceedings. As seen from Ext.R(b), the petitioner was communicated. The petitioner's further case is ..3.. that this communication was placed in spam folder and the petitioner could trace out only after the passing of the assessment order.

As seen from the proceedings, though objection was solicited from the petitioner, there was no response. In the absence of response, the assessment was concluded. It is to be noted that after the issuance of notice, no further hearing was offered to the petitioner. Petitioner has also a case that their E.mail has been changed subsequently. If the E.mail had been changed, it should have be informed to the Income Tax Officer. As seen from the impugned order, it was passed noting that the petitioner claimed duty draw back for Rs.1,07,33,846/- and they admitted only Rs.68,33,568/- and there was no explanation in regard to the differences.

Taking note of the above, I am of the ..4.. view that the petitioner should be given an opportunity to explain the differences. Though this Court could have relegated the petitioner to move an appeal, it will serve no purpose in the absence of explanation being furnished by the petitioner. However, this court is of the view that cost of Rs.25,000/- shall be imposed on the petitioner. The petitioner shall pay the costs of Rs.25,000/- within three weeks. Petitioner shall appear before the assessing authority on 05.04.2019, and thereafter raise objections, the proceedings shall be concluded within a further period of one month. The Writ Petition is disposed as above. A.MUHAMED MUSTAQUE JUDGE PR/19.03.2019 ..5..

Appendix — schedule of exhibits

APPENDIX PETITIONER'S EXHIBITS: EXHIBIT P1 TRUE COPY OF THE NOTICE UNDER SECTION 143 (2) DATED 18/09/2017 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P2 TRUE COPY OF THE NOTICE DATED 04/05/2018 ISSUED U/S.142(1) BY THE 1ST RESPONDENT. EXHIBIT P3 TRUE COPY OF THE REPLY DATED 15/05/2018 GIVEN BY PETITIONER TO EXT.P2 NOTICE. EXHIBIT P4 TRUE COPY OF THE ASSESSMENT ORDER ALONG WITH DEMAND NOTICE DATED 17/12/2018. EXHIBIT P5 TRUE COPY OF NOTICE UNDER 274 R/2 271(1) (C). EXHIBIT P5 A TRUE COPY OF NOTICE UNDER SECTION 274 R/W 271 (B). EXHIBIT P5 B TRUE COPY OF NOTICE UNDER SECTION 274 R/W 271 F. EXHIBIT P6 TRUE COPY OF THE DOCUMENT SHOWING THE MAIL ID AS GIVEN IN THE INCOME TAX RETURN FILED. EXHIBIT P7 TRUE COPY OF THE MAIL DATED 31/05/2018. EXHIBIT P8 TRUE COPY OF THE MAIL DATED 04/12/2018. WP(C).No. 869 of 2019 ..6.. RESPONDENTS EXHIBITS EXHIBIT R(a) TRUE COPY OF THE RETURN OF INCOME FOR THE AY 2016-17 EXHIBIT R(b) TRUE COPY OF LETTER DATED 4-12-2018 SENT IN THE EMAIL ID FURNISHED IN THE RETURN OF INCOME

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