MUHAMMED KALLAT, vs. INCOME TAX OFFICER,

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WP(C)/24777/2023HC KeralaKLHC01054284202312 January 2024Bench: HONOURABLE MR. JUSTICE D. K. SINGH8 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the petitioner had indeed filed an objection on June 30, 2023, but it was in the wrong form (Form 34BC instead of Form 35A). The Court found that the petitioner ought to have been given an opportunity to cure this defect, which was curable. Since this opportunity was not provided, the Dispute Resolution Panel and the Assessing Officer committed an error of law and violated the principles of natural justice. Consequently, the writ petition was allowed. The petitioner was permitted to file the objection dated June 30, 2023, in the correct form (Form 35A) within two weeks. The DRP was directed to consider this objection and pass an order after hearing the petitioner. Thereafter, the AO was to finalize the assessment for the assessment years 2013-14 and 2014-15.

What were the facts?

The petitioner, Muhammed Kallat, a Non-Resident Indian (NRI), is an "eligible assessee" under Section 144C(15)(b)(ii) of the Income Tax Act, 1961. For assessment years 2013-14 and 2014-15, he did not file his income tax returns. The Assessing Officer (AO) prepared draft assessment orders, which were served on the petitioner online on May 30, 2023, with a 30-day window to file objections before the Dispute Resolution Panel (DRP). The petitioner filed an objection on June 30, 2023, but it was not in the correct form. Consequently, the DRP did not consider the objections, and the impugned assessment orders were passed. The petitioner filed these writ petitions challenging the assessment orders.

What were the issues?

1. Whether the petitioner, an eligible assessee, was denied an opportunity to cure a curable defect in filing his objection to the draft assessment order, thereby violating principles of natural justice? Assessee's Contention: The petitioner argued that he had filed an objection within the stipulated 30 days. Although it was not in the correct form due to an inadvertent mistake, this defect was curable. The petitioner contended that he should have been provided an opportunity to rectify the form, which was not done. He further argued that no opportunity of hearing was provided on the ground that no objection was filed under Section 144C(3) of the Act. The petitioner sought setting aside of the assessment orders and remand for filing fresh objections or curing the defect. Revenue's Contention: The Income Tax Department's counsel submitted that the objection was filed in Form 34BC instead of the prescribed Form 35A for objections to draft assessment orders under Section 147(3) (this appears to be a typographical error in the judgment, likely referring to Section 144C(3)). Therefore, the AO took the view that no objection was filed as mandated under Section 144C(3).

Which sections of the Income-tax Act were involved?

Section 144C(3),Section 144C(15)(b)(ii)

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

WP(C) NO. 24777 OF 2023
WP(C).24872/2023

Read from the judgment's own cause title. This page is filed under one of them.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH FRIDAY, THE 12TH DAY OF JANUARY 2024 / 22ND POUSHA, 1945 WP(C) NO. 24777 OF 2023 PETITIONER: MUHAMMED KALLAT, KALLAT VILLA, NEAR MCF SCHOOL, BYE PASS ROAD, KALPETTA, WAYANAD, KERALA, PIN – 673121. BY ADVS. SRI. ANIL D. NAIR SMT. TELMA RAJU SMT. AADITYA NAIR RESPONDENTS: 1 INCOME TAX OFFICER, WARD INTERNATIONAL TAXATION , AAYAKAR BHAVAN, NORTH BLOCK, NEW ANNEXE BUILDING, MANANCHIRA, KOZHIKODE, PIN – 673001. 2 DISPUTE RESOLUTION PANEL-2, BENGALURU, 'A' WING, 4TH FLOOR, KENDRIYA SADAN, KORAMANGALA, BANGALORE, PIN – 560034. BY ADVS. SRI. JOSE JOSEPH – SC - INCOME TAX DEPARTMENT SRI. KEERTHIVAS GIRI - SC SRI. P. G. JAYASHANKAR - SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12.01.2024, ALONG WITH WP(C).24872/2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NOS. 24777 & 24872 OF 2023 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH FRIDAY, THE 12TH DAY OF JANUARY 2024 / 22ND POUSHA, 1945 WP(C) NO. 24872 OF 2023 PETITIONER: MUHAMMED KALLAT, KALLAT VILLA, NEAR MCF SCHOOL, BYE PASS ROAD, KALPETTA, WAYANAD, KERALA, PIN – 673121. BY ADVS. SRI. ANIL D. NAIR SMT. TELMA RAJU SMT. AADITYA NAIR RESPONDENTS: 1 INCOME TAX OFFICER, WARD INTERNATIONAL TAXATION , AAYAKAR BHAVAN, NORTH BLOCK, NEW ANNEXE BUILDING, MANANCHIRA, KOZHIKODE, PIN – 673001. 2 DISPUTE RESOLUTION PANEL-2, BENGALURU, 'A' WING, 4TH FLOOR, KENDRIYA SADAN, KORAMANGALA, BANGALORE, PIN – 560034. BY ADVS. SRI. JOSE JOSEPH – SC - INCOME TAX DEPARTMENT SRI. KEERTHIVAS GIRI - SC SRI. P. G. JAYASHANKAR – SC THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 12.01.2024, ALONG WITH WP(C).24777/2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NOS. 24777 & 24872 OF 2023 3 DINESH KUMAR SINGH, J. -------------------------- W.P.(C) Nos. 24777 & 24872 of 2023 ------------------------- Dated this the 12th day of January, 2024 JUDGMENT 1. Petitioner/assessee is a Non Resident Indian (NRI). In respect of the relevant assessment years i.e. 2013-14 and 2014-15, the assessee did not file return of his income. The petitioner/assessee along with Mr. Aboobacker had constructed a Mall at Mananthavady in the name and style of M/s. Mall of Kallat. In the said Mall, the petitioner/assessee owns 75% share. ADIT Investigation wing, Kozhikode conducted verification on 18.04.2019 and information was gathered relating to the information made by the petitioner in the said Mall. As per the details obtained, total investment in the Mall from 2012 to 2014 was Rs. 3.97 crores and the assessee had invested more than Rs. 40,00,000/- in the assessment year 2013-14 and Rs. 50,00,000/- during the assessment year 2014-15. 2. The petitioner being an NRI, he is an “eligible assessee” under Sub-Section 15 (b) (ii) of Section 144 C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short). The draft assessment order was prepared by the assessing authority and the same was served on the petitioner on 30.05.2023 online, giving thirty days time

WP(C) NOS. 24777 & 24872 OF 2023 4 for him to file objection, if any, before the Disputes Resolution Panel against the said draft assessment order. It appears that the petitioner filed objection to the draft assessment order on 30.06.2023 but, the said objection was not filed in the correct form. The objections in respect of the two draft assessment orders with respect to the assessment years 2013-14 and 2014-15 has not been taken into consideration and the impugned assessment orders in Exhibit P-9 have been passed. 3. Mr. Anil D. Nair, learned Counsel for the petitioner submits that the petitioner had filed objection to the draft assessment orders in Exhibit P-1 within thirty days. However, by inadvertent mistake, the objection was not filed in the correct form but, this was a defect which could have been cured by the petitioner if it was pointed out to him. Therefore, it cannot be said that the petitioner had not filed the objection within thirty days as observed in the impugned assessment orders. The petitioner should have been provided an opportunity for curing the defects in filing the objections to the draft assessment order which was not done and no opportunity of hearing was provided to the petitioner on the said ground that no objection against the draft assessment order under Section 144C(3) of the Act was filed. He therefore, submits that the impugned assessment

WP(C) NOS. 24777 & 24872 OF 2023 5 orders in Exhibit P-9 may be set aside and the matter may be remanded back for giving one opportunity to the petitioner to file fresh objection to the draft assessment orders in Exhibit P-1 or allowing him to cure the defect and file the objection to the draft assessment orders in correct form. 4. Mr. P. G. Jayashankar, learned Senior Standing Counsel for the Income Tax Department has submitted that Form No. 35A is provided for filing the objection to the draft assessment order under Section 147(3). However, the objection was filed in Form 34BC and, therefore, the assessing authority has taken the view that no objection was filed as mandated under Section 144C(3). 5. I have considered the submissions. It is not in dispute that the petitioner had filed the objection on 30.06.2023. However, the said objection was filed in Form 34BC instead of 35A. The petitioner ought to have been given an opportunity to cure the defects. However, this opportunity was not given to the petitioner for curing the defects and the Disputes Resolution Panel considered that no objection was filed within thirty days as it was not filed in the proper form. 6. There was objection filed by the petitioner. The defect was curable defect and the petitioner ought to have been given an

WP(C) NOS. 24777 & 24872 OF 2023 6 opportunity to file objection in the correct form. Therefore, I am of the view that by not giving an opportunity to cure the defect in filing the objection to the draft assessment order, the Dispute Resolution Panel as well as the Assessing Officer have committed an error of law and there has been a violation of the principles of natural justice. Thus, the present writ petition is allowed. The petitioner is permitted to file objection dated 30.06.2023 in respect of the assessment years 2013-14 and 2014-15 within a period of two weeks and if the objection dated 30.06.2023 is filed within two weeks in correct form i.e. Form 35A, the Disputes Resolution Panel shall consider the objection and, thereafter, pass an order after hearing the petitioner. Once the Disputes Resolution Panel passes an order after taking objection on the draft assessment order, the assessing authority shall proceed to finalise the assessment in respect of the assessment years 2013-14 and 2014-15. With the aforesaid directions, the present writ petition is allowed. Sd/- DINESH KUMAR SINGH JUDGE Svn

WP(C) NOS. 24777 & 24872 OF 2023 7 APPENDIX OF WP(C) 24777/2023 PETITIONER’S EXHIBITS EXHIBIT P1 TRUE COPY OF DRAFT ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2013-14 DATED 30.5.2023 ISSUED BY THE 1ST RESPONDENT EXHIBIT P2 TRUE COPY OF THE PASSPORT OF THE PETITIONER EXHIBIT P3 TRUE COPY OF THE LETTER DATED 30.06.2023 ADDRESSED TO THE 2ND RESPONDENT BY THE PETITIONER EXHIBIT P4 TRUE COPY OF OBJECTION FILED BY THE PETITIONER EXHIBIT P5 TRUE COPY OF THE REPLY FILED IN FORM 34BC BY THE PETITIONER EXHIBIT P6 TRUE COPY OF THE E-MAIL ADDRESSED TO THE PETITIONER BY THE 2ND RESPONDENT EXHIBIT P7 TRUE COPY OF THE LETTER DATED 19.07.2023 ADDRESSED TO THE 2ND RESPONDENT BY THE PETITIONER EXHIBIT P8 TRUE COPY OF THE LETTER DATED 20.07.2023 ADDRESSED TO THE PETITIONER BY THE 2ND RESPONDENT EXHIBIT P9 TRUE COPY OF THE ASSESSMENT ORDER DATED 19.07.2023 ISSUED BY THE 1ST RESPONDENT 1ST RESPONDENT’S ANNEXURES ANNEXURE R1(A) TRUE COPY OF THE ACKNOWLEDGEMENT SLIP ANNEXURE R1(B) TRUE COPY OF THE SPEED POST TRACKING PRINTOUT ANNEXURE R1(C) TRUE COPY OF THE SCREEN SHOT ANNEXURE R1(D) TRUE COPY OF THE SCREEN SHOT

WP(C) NOS. 24777 & 24872 OF 2023 8 APPENDIX OF WP(C) 24872/2023 PETITIONER’S EXHIBITS EXHIBIT P1 TRUE COPY OF DRAFT ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2014-15 DATED 30.5.2023 ISSUED BY THE 1ST RESPONDENT EXHIBIT P2 TRUE COPY OF THE PASSPORT OF THE PETITIONER EXHIBIT P3 TRUE COPY OF THE LETTER DATED 30.06.2023 ADDRESSED TO THE 2ND RESPONDENT BY THE PETITIONER EXHIBIT P4 TRUE COPY OF OBJECTION FILED BY THE PETITIONER DATED NIL EXHIBIT P5 TRUE COPY OF THE REPLY FILED IN FORM 34BC BY THE PETITIONER DATED 9.7.2023 EXHIBIT P6 TRUE COPY OF THE LETTER DATED 25.07.2023 ADDRESSED TO THE 2ND RESPONDENT BY THE PETITIONER EXHIBIT P7 TRUE COPY OF THE LETTER DATED 19.07.2023 ADDRESSED TO THE 2ND RESPONDENT BY THE PETITIONER EXHIBIT P8 TRUE COPY OF THE LETTER DATED 20.07.2023 ADDRESSED TO THE PETITIONER BY THE 2ND RESPONDENT EXHIBIT P9 TRUE COPY OF THE ASSESSMENT ORDER DATED 19.07.2023 ISSUED BY THE 1ST RESPONDENT

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