JESNA STEEFAN, vs. ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX/INCOME TAX OFFICER,

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WP(C)/28152/2022HC KeralaKLHC01059521202220 December 2023Bench: HONOURABLE MR. JUSTICE D. K. SINGH6 pages
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What did the High Court hold?

The High Court held that the assessment order and subsequent notices were liable to be set aside due to a violation of the principles of natural justice. The Court found that granting only one day's time to the petitioner to file a reply to the show cause notice dated 30.03.2022, along with the draft assessment order, constituted virtually no opportunity. The Court reasoned that this short timeframe violated the fundamental right to be heard. Consequently, the Court permitted the petitioner to file a reply to the show cause notice dated 30.03.2022 within seven days from the date of the order. The petitioner was to be granted seven days from the date a link is provided for uploading the reply. After receiving the reply, the final assessment order was to be passed after giving an opportunity of hearing. The Court directed that the link for uploading the reply should be intimated on the petitioner's registered email ID. The petitioner was also directed not to raise the objection regarding time-barred assessment as the matter was remanded. The assessment order in Exhibit P-7 and subsequent notices were set aside.

What were the facts?

The petitioner, Jesna Steefan, an assessee, filed a writ petition challenging assessment orders and notices related to assessment year 2017-18. The petitioner had not filed a return for AY 2017-18. Based on information received regarding a large financial transaction in FY 2016-17, the Assessing Officer (AO) formed the belief that income had escaped assessment under Section 147 of the Income Tax Act. A notice under Section 148 was issued on 29.03.2021. The petitioner did not file a return. Notices under Section 142(1) were issued on 19.07.2021 and 16.03.2022, to which the petitioner did not respond. A final show cause notice along with a draft assessment order was issued on 30.03.2022, granting only one day for compliance. The assessment order dated 31.03.2022, passed under Section 147 read with Section 144B, determined the assessable income at ₹4,00,98,170/- and initiated penalty proceedings.

What were the issues?

1. Whether the assessment order passed under Section 147 read with Section 144B of the Income Tax Act, 1961, for assessment year 2017-18, is liable to be set aside on the grounds of violation of principles of natural justice, specifically concerning the inadequate opportunity provided to the assessee to respond to the show cause notice and draft assessment order. Assessee's Contention: The assessee argued that the final opportunity granted on 30.03.2022, with only one day's time to reply to the show cause notice and draft assessment order, was insufficient and violated the principles of natural justice. The assessee contended that virtually no opportunity was granted. Revenue's Contention: The judgment does not record any specific contentions made by the revenue in response to the violation of natural justice argument. The revenue's role was primarily in issuing the notices and assessment order.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148,Section 142(1),Section 270A,Section 271B,Section 272A(1)(d),Section 271F

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH WEDNESDAY, THE 20TH DAY OF DECEMBER 2023 / 29TH AGRAHAYANA, 1945 WP(C) NO. 28152 OF 2022 PETITIONER: JESNA STEEFAN, AGED 33 YEARS, 12/234 BIJUS COTTAGE, KANNIAMPURAM, OTTAPPALAM, PALAKKAD, PIN - 679104. BY ADV. SMT. AMMU CHARLES RESPONDENT: ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX/INCOME TAX OFFICER, NATIONAL FACELESS ASSESSMENT CENTRE, DELHI, PIN - 110001. BY ADVS. SRI. JOSE JOSEPH - SC - INCOME TAX SRI. P. K. RAVINDRANATHA MENON (SR.) SRI. P. G. JAYASHANKAR SRI. KEERTHIVAS GIRI THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 20.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

WP(C) NO. 28152 OF 2022 2 DINESH KUMAR SINGH, J. -------------------------- W.P.(C) No.28152 of 2022 ------------------------- Dated this the 20th day of December, 2023 JUDGMENT 1. The present writ petition has been filed by the petitioner who is an assessee under the provisions of the Income Tax Act, 1961 impugning Exhibits P-2, P-4, P-5 to P-10. Exhibit P-7 is the assessment order passed under Section 147 read with Section 144B of the Income Tax Act dated 31.03.2022 in respect of the assessment year 2017-18. 2. The petitioner did not file return of income for the assessment year 2017-18. As per the information received through Multiyear NMS cases in AIMS module of ITBA, the petitioner had carried out financial transaction of huge amount during the financial year 2016- 17. On analysis of the said information, it was concluded that the income of the petitioner has escaped income within the meaning of Section 147 of Income Tax Act and, therefore, the assessing authority concluded that there was reason to believe that the income chargeable to tax are escaped assessment in the case of the petitioner/assessee for the assessment year 2017-18. Accordingly,

WP(C) NO. 28152 OF 2022 3 after approval of the competent authority, notice under Section 148 of the Income Tax Act was issued to the petitioner/assessee on 29.03.2021. despite service of the said notice, the petitioner did not file return of his income in response to the said notice and thereafter, a notice under Section 142 (1) of the Income Tax Act was issued on 19.07.2021 and 16.03.2022 for compliance with. But the petitioner/assessee did not file any reply in response to the said notice. As the petitioner was not coming forth despite having been given two opportunities for uploading the documents and replies to the Show Cause Notices, the assessing authority was left with no other alternative but, to make addition on the basis of the information available to the department and accordingly the total assessable income was found to be 4,00,98,170/- on which tax was demanded and penalty proceedings under Section 270A, 271B, 272A(1)(d) and 271F were ordered to be initiated. 3. The assessment order notes that the final opportunity was given to the assessee on 30.03.2022 by issuing a show cause notice along with draft assessment order for compliance. Only one day time was granted to the petitioner to file reply to the Show Cause Notice and draft assessment order.

WP(C) NO. 28152 OF 2022 4 4. Considering the fact that only one day time was granted to the petitioner in the notice dated 30.03.2022, I am of the considered view that virtually no opportunity was granted to the petitioner against the draft assessment order and there has been violation of the principles of natural justice from the stage of issuing the Show Cause Notice dated 30.03.2022 whereby the draft assessment order was communicated to the petitioner. 5. In the above circumstances, the petitioner is permitted to file reply to the Show Cause Notice dated 30.03.2022 within seven days from today. The petitioner shall be granted seven days time form the date the link is provided to the petitioner to for uploading the reply to the Show Cause Notice dated 30.03.2022 and thereafter the final assessment order shall be passed after giving an opportunity of hearing to the petitioner. The link for uploading the reply should be intimated on the registered E-mail id of the petitioner as mentioned in Exhibit P-1. If the petitioner does not avail the opportunity of filing the reply to the Show Cause Notice dated 30.03.2022 as directed above, no further opportunity shall be granted to the petitioner and it would be presume that the petitioner has nothing to say in response to the Show Cause Notice dated 30.03.2022 and

WP(C) NO. 28152 OF 2022 5 the impugned order and subsequent notices shall be held to be valid and the authority would be free to proceed to realise the tax and penalty amount from the petitioner. 6. The petitioner shall not raise the objection regarding the time barred assessment as the matter has been remanded back by this Court in exercise of its jurisdiction under Article 226 of the Constitution of India. With the aforesaid directions, this writ petition is allowed to the extent of setting aside the assessment order in Exhibit P-7 and subsequent notices thereafter. Sd/- DINESH KUMAR SINGH JUDGE Svn

WP(C) NO. 28152 OF 2022 6 APPENDIX OF WP(C) 28152/2022 PETITIONER'S EXHIBITS EXHIBIT P1 TRUE COPY OF THE SCREENSHOT OF THE PROFILE OF THE PETITIONER IN THE INCOME TAX E-PORTAL EXHIBIT P2 TRUE COPY OF THE SHOW CAUSE NOTICE FOR PENALTY UNDER SECTION 271F OF THE INCOME TAX ACT 1961 DATED 28.07.2022 EXHIBIT P3 TRUE COPY OF THE SCREENSHOT OF EMAIL COMMUNICATION WHICH ATTACHED EXHIBIT P2 SHOW CAUSE NOTICE EXHIBIT P4 TRUE COPY OF THE NOTICE DATED 02.08.2022 ISSUED UNDER SECTION 274 READ WITH SECTION 271B OF THE INCOME TAX ACT 1961 EXHIBIT P5 TRUE COPY OF SECTION 148 NOTICE DATED 29.03.2021 EXHIBIT P6 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 30.03.2022 EXHIBIT P7 TRUE COPY OF THE ASSESSMENT ORDER DATED 31.03.2022 EXHIBIT P8 TRUE COPY OF THE DEMAND NOTICE DATED 31.03.2022 EXHIBIT P9 TRUE COPY OF THE SECTION 270A PENALTY NOTICE DATED 31-3-2022 EXHIBIT P10 TRUE COPY OF THE SECTION 271 B PENALTY NOTICE DATED 31.3.2022 EXHIBIT P11 TRUE COPY OF THE SCREENSHOT OF EMAIL COMMUNICATION WHICH ATTACHED EXHIBIT P5 NOTICE UNDER SECTION 148 OF INCOME TAX ACT, 1961 EXHIBIT P12 TRUE COPY OF THE SCREENSHOT OF EMAIL COMMUNICATION WHICH ATTACHED EXHIBIT P10 PENALTY NOTICE EXHIBIT P13 TRUE COPY OF THE BOMBAY HIGH COURT JUDGMENT IN GSTAAD HOTELS PRIVATE LIMITED V. ASSESSING AUTHORITY NATIONAL FACELESS ASSESSMENT CENTRE, DELHI & ANR. [WRIT PETITION NO.2253 OF 2021]

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