M/S FORTIUS INFRADEVELOPERS LLP vs. ASSISTANT COMMISSIONER OF INCOME-TAX

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WP/8863/2021HC KarnatakaKAHC01019060202105 October 2021Bench: S SUNIL DUTT YADAV4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the assessment order dated 22.04.2021, passed by Respondent No. 2 under Section 143(3) read with Section 144B, was in violation of the principles of natural justice. The court found that the three-day period granted to the petitioner to respond to the show cause notice and draft assessment order was not adequate. The rejection of the petitioner's request for a ten-day extension, solely based on the administrative compulsion to conclude proceedings by 30.04.2021, was deemed unreasonable. The court reasoned that the need to conclude proceedings cannot override the fundamental right of the assessee to receive a fair opportunity to present their explanation. Consequently, the impugned assessment order (Annexure-A) was set aside. The demand notice (Annexure-B) and penalty notices (Annexures-C and D) were also set aside as they were consequential to the assessment order. The matter was restored to the stage of the reply to the show cause notice, with Respondent No. 2 directed to proceed as per law. Other contentions on merits raised by the petitioner were kept open.

What were the facts?

The petitioner, M/s. Fortius Infradevelopers LLP, filed a writ petition challenging an assessment order dated 22.04.2021 passed by Respondent No. 2 under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for Assessment Year 2018-19. The petitioner also challenged a demand notice and penalty notices issued on the same date. The core of the challenge was a violation of principles of natural justice. The petitioner received a show cause notice along with a draft assessment order on 16.04.2021, with a compliance deadline of 19.04.2021. The petitioner requested ten days to furnish their explanation, but this request was rejected by the Assessing Officer, who cited the impending deadline of 30.04.2021 for concluding proceedings.

What were the issues?

1. Whether the assessment order passed by the respondent No. 2 under Section 143(3) read with Section 144B of the Income Tax Act, 1961, for AY 2018-19 is liable to be quashed on the ground of violation of principles of natural justice, specifically concerning the adequacy of the opportunity provided to the petitioner to respond to the show cause notice and draft assessment order. Assessee's Contention: The petitioner argued that the three-day period granted to furnish an explanation to the show cause notice and draft assessment order was grossly inadequate and unreasonable. The request for an extension of ten days was rejected by the Assessing Officer, who cited the need to conclude proceedings by 30.04.2021. This, the petitioner contended, deprived them of a sufficient opportunity to present their case, thereby violating the principles of natural justice. Revenue's Contention: The judgment does not record any specific contentions made by the revenue on this issue. The court proceeded to decide based on the facts presented by the petitioner.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144B,Section 156

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF OCTOBER, 2021 BEFORE THE HON'BLE MR. JUSTICE S. SUNIL DUTT YADAV WRIT PETITION NO.8863/2021 (T - IT) BETWEEN: M/s. Fortius Infradevelopers LLP., (Represented by Mr.Gopikrishnan Kunju Kunju Yesodharan, Designated Partner, S/o Mr. Yesodharan K., Aged about 55 years), Level 4, Raheja Paramount No.138, Residency Road, Bangalore - 560 025. …Petitioner (By Sri.Chythanya K.K., Advocate) AND: 1. Assistant Commissioner of

Income-Tax (e-verification),

Office of the Prescribed Authority,

Income Tax Department, E-2

Mezzanine Floor, A.R.A. Centre,

Jhandewalan Extension,

New Delhi - 110 055. 2. Additional /Joint Deputy Assistant

Commissioner of Income Tax/

Income Tax Officer,

National E -Assessment Centre,

Delhi, Room No.401, 2nd Floor,

E-Ramp, Jawaharlal Nehru Stadium,

Delhi - 110 003. 3. The Deputy Commissioner

of Income Tax,

Circle - 7(1)(1), BMTC Building,

80ft Road, 6th Block,

Koramangala,

Bengaluru - 560 095. ...Respondents (By Sri.Sanmathi E.I., Advocate) ***** This Writ Petition is filed under Articles 226 and 227 of the Constitution of India praying to quash as far as the petitioner is concerned by an appropriate writ or order in the nature of certiorari or otherwise, the impugned assessment order passed by the R-2 under Section 143(3) read with Section 144B dated 22.04.2021 for AY 2018-19 vide Annexure - A and etc., This Writ Petition coming on for Preliminary Hearing in 'B' Group this day, the Court made the following: O R D E R The petitioner has filed the present petition calling in question the validity of the impugned Assessment Order dated 22.04.2021 passed by the respondent No.2 under Section 143(3) R/w Section 144B enclosed at Annexure- A and has challenged the impugned Demand Notice dated 22.04.2021 issued by respondent No.2 under Section 156 at

3 Annexure- B and also the impugned Penalty Notices dated 22.04.2021 at Annexures- C and D. 2. The petitioner has raised various grounds assailing the validity of the impugned Assessment Order and submits that there is a gross violation of principles of natural justice as the Show Cause Notice is issued to the Assessee on 16.04.2021 along with Draft Assessment Order and compliance was sought to be completed by 19.04.2021. It is submitted that the petitioner has sought for ten days time to furnish explanation on the proposed additions as proposed to be made in the Draft Assessment Order. 3. However, while passing the impugned Assessment Order, the Assessing Officer has observed that as the proceedings were to be concluded by 30.04.2021, further time could not be given. Obviously, the time granted to the petitioner of three days cannot be stated to be adequate opportunity and rejection of his request for further time is clearly unreasonable. The compulsion of the Assessing Authority to complete the proceedings cannot

4 result in lack of sufficient opportunity for the petitioner to put forth his explanation as regards the proposed additions. 4. Accordingly, on the sole ground of violation of principles of natural justice in light of the facts as noticed above, the impugned Assessment Order dated 22.04.2021 at Annexure- A is set aside and the matter is restored to be continued from the stage of reply to the Show Cause Notice. Consequent to setting aside the order at Annexure- A, the Notices at Annexures- B, C and D are set aside. Other contention of the petitioner on merits raised in the present petition is kept open. Respondent No.2 to proceed to pass appropriate orders as per law. Sd/- JUDGE PN

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