S.B. DISTRIBUTORS ACTING THROUGH ITS PARTNERS PETITIONER 2, 3 AND 4 AND ORS vs. INCOME TAX OFFICER WARD 35( 1) DELHI & ORS.

PDF · subscribers
W.P.(C)/8949/2023HC DelhiDLHC01025357202307 July 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MR. JUSTICE GIRISH KATHPALIA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the impugned assessment order dated 29.05.2023 was indeed flawed and set it aside. The reasoning was based on the admitted fact that no show cause notice cum draft assessment order was issued prior to the upward revision of the petitioner's income, which is a mandatory procedural requirement. The Court directed the Assessing Officer (AO) to issue a show cause notice cum draft assessment order indicating the proposed variation in income within four weeks. The petitioner would then have four weeks to file a response, after which the AO would grant a personal hearing and pass a speaking assessment order. As a consequence of setting aside the assessment order, the demand notice and penalty notices were also rendered unsustainable and collapsed. The Court expressly left undecided any substantive issues regarding the assessment itself, as the matter was disposed of on procedural grounds.

What were the facts?

The petitioners, S.B. Distributors and its partners, filed a writ petition before the Delhi High Court challenging an assessment order dated 29.05.2023, passed under Section 147 read with Section 144 of the Income Tax Act, 1961. They contended that the assessment order was fundamentally flawed because no show cause notice cum draft assessment order, proposing a variation in income, was served upon them. Consequently, they argued that the demand notice dated 29.05.2023 and penalty notices dated 29.05.2023 and 30.05.2023, which arose from the assessment order, were also unsustainable. The Revenue, represented by its senior standing counsel, conceded that the law requires the issuance of such a notice before proposing variations in income.

What were the issues?

1. Whether the assessment order dated 29.05.2023, passed under Section 147 read with Section 144 of the Income Tax Act, 1961, is flawed and liable to be set aside due to the non-issuance of a show cause notice cum draft assessment order proposing variation in income. Assessee's Contention: The petitioner argued that the assessment order was fundamentally flawed as no show cause notice cum draft assessment order was served, proposing any variation in income. They relied on the principle that such a notice is a mandatory procedural requirement before making additions or variations to the assessed income. Revenue's Contention: The Revenue, through its senior standing counsel, accepted that the law mandates the Assessing Officer to issue a show cause notice cum draft assessment order proposing variation in income. They did not dispute the petitioner's assertion regarding the non-issuance of this notice.

Which sections of the Income-tax Act were involved?

Section 147,Section 144

AI-generated summary — verify with the full judgment below

W.P.(C) 8949/2023

Pg. 1 of 3 $~186 * IN THE HIGH COURT OF DELHI AT NEW DELHI %

Decision delivered on:07.07.2023 + W.P.(C) 8949/2023 S.B. DISTRIBUTORS ACTING THROUGH ITS PARTNERS PETITIONER 2, 3 AND 4 AND ORS

..... Petitioners Through: Dr Rakesh Gupta, Mr Somil Agarwal and Mr Anshul Mittal, Advocates

versus

INCOME TAX OFFICER WARD 35( 1) DELHI & ORS. ..... Respondents Through: Mr Zoheb Hossain, Sr Standing Counsel with Mr Sanjeev Menon, Jr Standing Counsel for Revenue.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MR. JUSTICE GIRISH KATHPALIA [Physical Hearing/Hybrid Hearing (as per request)]

RAJIV SHAKDHER, J. (ORAL): CM No.33933/2023 1. Allowed, subject to just exceptions. W.P.(C) 8949/2023 & CM Appl. 33932/2023 [Application filed on behalf of the petitioner seeking interim relief] 2. Issue notice. 2.1 Mr Zoheb Hossain, learned senior standing counsel, accepts notice on behalf of the respondents/revenue. 3. In view of the directions that we propose to pass, Mr Zoheb Hossain says that counter-affidavit need not be filed in the matter, and that he will argue the matter based on the record presently available with the court. 4. Dr Rakesh Gupta, who appears on behalf of the petitioner, says that apart from Digitally Signed By:NEELAM SHARMA Signing Date:11.07.2023 11:47:04 Signature Not Verified

W.P.(C) 8949/2023

Pg. 2 of 3 anything else, the impugned assessment order dated 29.05.2023 passed under Section 147 read with Section 144 of the Income Tax Act, 1961 [in short, “the Act”] is flawed, as no show cause notice cum draft assessment order was served on the petitioner, proposing variation in income. 5. Dr Gupta says that on account of this fundamental flaw, the consequent steps taken by the Assessing Officer (AO), i.e., the issuance of demand notice dated 29.05.2023 and the penalty notices dated 29.05.2023 and 30.05.2023, are also unsustainable in law. 6. Mr Zoheb Hossain, learned senior standing counsel, who appears on behalf of respondent/revenue, cannot but accept that the law requires the AO to issue a show cause notice cum draft assessment order, proposing variation in income. 7. A perusal of the impugned assessment order shows that additions have been made, enhancing the taxable income of the petitioner. 8. Given the fact that no show cause notice cum draft assessment order was issued prior to upward revision of the petitioner’s income, the impugned assessment order is set aside, albeit with liberty to the AO to pass a fresh assessment order. 9. Before the AO passes a fresh assessment order, he will issue a show cause notice cum draft assessment order, indicating therein the proposed variation in income. 10. This exercise will be completed by the AO within the next four (4) weeks. 11. The petitioner will be at liberty to file a response. The response will be filed within four (4) weeks of receipt of the draft show cause notice cum draft assessment order. 12. The AO will, thereafter, accord personal hearing to the authorized representative of the petitioner. For this purpose, the AO will issue a notice to the petitioner, whereby the date and time of the hearing will be indicated. 13. Needless to say that the AO will pass a speaking assessment order, which would deal with the contentions embedded in the reply, if any, filed by the petitioner. 14. As a result of the directions issued hereinabove, the demand notice dated 29.05.2023, and the penalty notices dated 29.05.2023 and 30.05.2023, shall also collapse. 15. The above-captioned petition is disposed of, in the aforesaid terms. Digitally Signed By:NEELAM SHARMA Signing Date:11.07.2023 11:47:04 Signature Not Verified

W.P.(C) 8949/2023

Pg. 3 of 3 16. Consequently, the pending application shall stand closed. 17. Parties will act based on the digitally signed copy of the order.

(RAJIV SHAKDHER) JUDGE

(GIRISH KATHPALIA) JUDGE

JULY 7, 2023/as

Click here to check corrigendum, if any

Digitally Signed By:NEELAM SHARMA Signing Date:11.07.2023 11:47:04 Signature Not Verified

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →