M/S M E FORGE TECH vs. THE DEPUTY COMMISSIONER OF INCOME TAX

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WP/14823/2024HC KarnatakaKAHC01028965202419 June 2024Bench: S SUNIL DUTT YADAV4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the period of four days granted for compliance with the show cause notice, from March 11, 2024, to March 15, 2024, was insufficient. The Court found merit in the petitioner's contention that prejudice was caused due to this short window. Consequently, the Court set aside the assessment order dated March 22, 2024, and the penalty notices dated March 22, 2024. The matter was remitted for fresh consideration to the stage of filing a reply to the show cause notice dated March 11, 2024. The Court emphasized that the petitioner must be afforded sufficient opportunity to make their reply. All contentions were kept open for fresh consideration.

What were the facts?

The petitioner, M/s M E Forge Tech, a partnership firm, filed a writ petition before the High Court of Karnataka challenging an order passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for Assessment Year 2022-23, dated March 22, 2024. The petitioner also challenged penalty notices dated March 22, 2024. The assessment order was issued by the National Faceless Assessment Centre. The petitioner's grievance was that a show cause notice dated March 11, 2024, provided only four days for compliance, with the reply due by March 15, 2024. The petitioner contended that this period was inadequate, especially due to the illness of the managing partner, and that prejudice was caused.

What were the issues?

1. Whether the period of four days granted for filing a reply to the show cause notice dated March 11, 2024, was sufficient, thereby not causing prejudice to the assessee? (Question of mixed law and fact, turning on Section 144B of the Income Tax Act, 1961). Assessee's Contentions: The petitioner argued that the four-day period for responding to the show cause notice was inadequate, particularly given the illness of the managing partner. This insufficient time prejudiced the petitioner, preventing a proper reply. The additions and disallowances made in the assessment order were based on the assessee being treated as non-responsive, which was a consequence of this short notice period. Revenue's Contentions: The judgment does not record specific contentions made by the revenue. However, the revenue was represented by a Junior Standing Counsel.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144B

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:21938 WP No. 14823 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF JUNE, 2024 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 14823 OF 2024 (T-IT) BETWEEN: 1. M/S M E FORGE TECH A PARTNERSHIP FIRM REPRESENTED BY ITS PARTNER MR GEORGE ROBINSON PLOT NO. 234, 11TH MAIN, 3RD CROSS, 3RD PHASE PEENYA INDL. AREA, BANGALORE - 560 058, ALSO AT: G. ROBINSON, S/O GEORGE, AGED 58 YEARS NO. 35A AND 36, GRAPHS GARDEN, PRIMER PATTEL HOTEL, S M ROAD, BANGALORE NORTH, BANGALORE-560 057 … PETITIONER (BY SRI. RAVI SHANKAR S V., ADVOCATE) AND: 1. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-6(1)(1) BANGALORE-560 095 2. NATIONAL FACELESS ASSESSMENT CENTRE, ADDITIONAL/JOINT/DEPUTY/ASSISTANT Digitally signed by VIDYA G R Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:21938 WP No. 14823 of 2024 COMMISSIONER OF INCOME TAX/ INCOME TAX OFFICER, INCOME TAX DEPARTMENT, MINISTRY OF FINANCE, ROOM NO.401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI-110 003 … RESPONDENTS (BY SRI. M. DILIP, JUNIOR STANDING COUNSEL)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASHING THE ORDER PASSED U/S 143(3) R.W.S 144B DTD 22.03.2024 BEARING ITBA/AST/S/143(3)/2023-24/1063144592(1) ISSUED BY THE R-2 FOR THE ASSESSMENT YEAR 2022-23 HERIEN MARKED AS ANNEXURE-A AND ETC.

THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has called in question the validity of the order passed under Section 143(3) read with Section Annexure 144B of the Income Tax Act, 1961 for the Assessment Year 2022-2023 at Annexure-'A' dated 22.03.2024. The petitioner has also challenged the penalty notices at Annexures-'A1' and 'A2', both dated 22.03.2024.

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NC: 2024:KHC:21938 WP No. 14823 of 2024

2.

Learned counsel for the petitioner submits that during the assessment proceedings, the show cause notice came to be issued on 11.03.2024 fixing the date of compliance by making out reply on 15.03.2024.

3.

It is submitted that the period of four days was inadequate and in light of illness of the Managing partner within such time, no reply could have made out, though reply was made out to the earlier notice.

4.

It is submitted that the order is passed while observing that assessee is non-responsive to the show cause notice and there have been additions as detailed in para-7.1 and disallowance of expenditure as per the observations made in para 7.2.

5.

In light of the admitted fact borne out from the records that show cause notice is dated 11.03.2024 and time for compliance is given only till 15.03.2024, the time period made available being insufficient, the contention of learned counsel for the petitioner that prejudice is caused by such short window provided, requires acceptance.

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NC: 2024:KHC:21938 WP No. 14823 of 2024 6. In light of the nature of conclusion drawn which according to the petitioner could be explained as being untenable on facts, the matter requires to be remitted for fresh consideration. 7. Accordingly, the order at Annexure-'A' dated 22.03.2024 and the penalty notices at Annexures-'A1' and 'A2', both dated 22.03.2024 are set aside. The matter is remitted for fresh consideration to the stage of reply to the show cause notice dated 11.03.2024. 8. However, it is needless to state that the petitioner needs to be afforded sufficient opportunity to make out his reply to the show cause notice. All contentions are kept open.

Accordingly, the petition is disposed off. Sd/- JUDGE VGR

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