ESSENCE REALTY LLP vs. NATIONAL FACELESS ASSESSMENT CENTRE

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WP/16877/2024HC KarnatakaKAHC01034450202425 September 2024Bench: S.R.KRISHNA KUMAR6 pages
AI SummaryRemanded

What did the High Court hold?

The High Court allowed the petition. It held that the impugned ex-parte assessment order dated March 23, 2024, and the consequential penalty notices dated March 23, 2024, and April 26, 2024, were to be set aside. The court reasoned that while it is undisputed that the petitioner did not submit replies to the notice dated February 22, 2024, and the show-cause notice dated March 12, 2024, and did not contest the proceedings, the petitioner's assertion of inability to do so was due to bonafide reasons, unavoidable circumstances, and sufficient cause. Adopting a justice-oriented approach, the court decided to provide one more opportunity to the petitioner. The matter was remitted back to the respondents for reconsideration from the stage of the petitioner submitting its replies to the aforementioned notices. The respondents were directed to provide a sufficient and reasonable opportunity to the petitioner and hear it before proceeding further in accordance with law. Liberty was also granted to the petitioner to submit pleadings and documents.

What were the facts?

The petitioner, Essence Reality LLP, is challenging an ex-parte assessment order for Assessment Year 2022-23, passed under Section 143(3) read with Section 144B of the Income Tax Act, 1961, dated March 23, 2024, by the National Faceless Assessment Centre. The petitioner also challenges penalty notices issued under Sections 270A, 271B, and 274 of the Act. The petitioner contends that despite submitting replies to earlier notices under Section 142(1), it could not respond to a subsequent notice dated February 22, 2024, and a Show Cause Notice dated March 12, 2024, due to bonafide reasons and unavoidable circumstances. This failure led to the ex-parte order and penalty notices without a sufficient opportunity to be heard, violating principles of natural justice.

What were the issues?

1. Whether the ex-parte assessment order passed for Assessment Year 2022-23 under Section 143(3) read with Section 144B of the Income Tax Act, 1961, is liable to be quashed on the grounds of violation of principles of natural justice. Assessee's contention: The petitioner argues that the ex-parte assessment order and subsequent penalty notices were passed without providing a sufficient and reasonable opportunity to submit replies to the notices dated February 22, 2024, and March 12, 2024, due to bonafide reasons and unavoidable circumstances. This failure to provide a hearing violates the principles of natural justice. Revenue's contention: The revenue submits that there is no merit in the petition and it is liable to be dismissed.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144B,Section 142(1),Section 270A,Section 271B,Section 274

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC:39950 WP No. 16877 of 2024

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 25TH DAY OF SEPTEMBER, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO.16877 OF 2024 (T-IT) BETWEEN:

ESSENCE REALITY LLP, 52/A, 1/20 2 RAJ COMPLEX, 4TH FLOOR, 7TH B MAIN, 4TH BLOCK, JAYANAGARA, BENGALURU – 560 011. REG. UNDER THE LIMITED LIABILITY PARTNERSHIP ACT, 2008. REP. BY MR. SHAH SANJAY, AGED ABOUT 55 YEARS. (DESIGNATED PARTNER) …PETITIONER (BY SMT. BORKAR SHEETAL SUBODH, ADVOCATE)

AND:

1.

NATIONAL FACELESS ASSESSMENT CENTRE ASSESSMENT UNIT, ROOM NO.401, 2ND FLOOR, E RAMP, JAWAHARLAL NEHRU STADIUM, DELHI – 110 003.

2.

DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7(1)(1), BMTC BUILDING, 80 FT ROAD, KORAMANGALA, BENGALURU – 560 095. …RESPONDENTS (BY SRI.E.I. SANMATHI, ADVOCATE)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED EX-PARTE ASSESSMENT ORDER PASSED FOR THE ASST. YEAR 2022-23 UNDER SECTION 143(3) READ WITH SECTION 144B OF THE INCOME TAX ACT DATED 23.03.2024 BY THE R-1 BEARING DIN AND ORDER NO.ITBA/AST/S/143(3)/2023- 24/1063278456(1) VIDE ANNX-D AND ETC.,

Digitally signed by LEELAVATHI S R Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC:39950 WP No. 16877 of 2024

THIS WRIT PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR

ORAL ORDER

In this petition, petitioner seeks the following reliefs: “i) Issue a writ of certiorari or a declaration in the nature of writ of certiorari quashing the impugned ex-parte assessment order passed for the Asst. year 2022-23 under section 143(3) read with section 144B of the Income Tax Act dated 23.03.2024 by the respondent No.1 bearing DIN and order No.ITBA/AST/S/143(3)/2023-24/1063278456(1) vide ANNEXURE-D;

ii) Issue a writ of certiorari or a declaration in the nature of writ of certiorari quashing the penalty notice issued for the Asst. year 2022-23 under section 270A, 271B of the Income Tax Act dated 26.04.2024 by the respondent bearing DIN and Order No. ITBA/PNL/F/270A/2024-25/1064394929(1) and ITBA/PNL/F/271B/2024-25/1064394971(1) ANNEXURE- G1 & G2.

iii) Issue a writ of certiorari or a declaration in the nature of writ of certiorari quashing the penalty notice issued for the Asst. year 2022-23 under section 274 read with section 271B of the Income Tax Act dated 23.03.2024 by the Respondent No.1 bearing DIN and Order No. ITBA/PNL/S/271B/2023-24/1063278635(1) vide ANNEXURE-F;

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NC: 2024:KHC:39950 WP No. 16877 of 2024

iv) Issue a Writ of Mandamus, directing the concerned respondent authorities to refrain any further activities and such initiatives in respect of coercive recovery in respect of impugned demand under the impugned ex-parte assessment order, under section 143(3) read with section 144B of the Income Tax Act dated 23.03.2024 by the Respondent No.1 bearing DIN and Order No. ITBA/AST/S/143(3)/2023-24/1063278456(1) of the Act in respect of the relevant assessment year 2022-23 under the Income Tax Act, 1961 vide ANNEXURE-D passed by the respondent no.1 authority.

v) Issue Writ of Prohibition, prohibiting the concerned respondent authorities in taking further action, measures or steps and such initiatives in respect of recovery in respect of impugned demand under section 143(3) read with section 144B of the Income Tax Act dated 23.03.2024 by the respondent no.1 bearing DIN and Order No. ITBA/AST/S/143(3)/2023-24/1063278456(1) of the Act in respect of the relevant assessment year 2022-23 under the Income Tax Act, 1961 vide ANNEXURE-D passed by the respondent no.1 authority.;

vi) Issue any other writ, order or direction in favour of the Petitioner, which this Hon’ble Court may deem fit and proper in the facts and circumstances of the case in the interest of justice.”

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NC: 2024:KHC:39950 WP No. 16877 of 2024

2.

Heard the learned counsel for the petitioner and the learned counsel for the respondents and perused the material on record.

3.

In addition to reiterating various contentions urged in the petition and referring to the material on record, the learned counsel for the petitioner submitted that pursuant to the notices dated 04.11.2023 and 16.11.2023 issued by the respondents under Section 142(1) of the Income Tax Act, petitioner submitted replies dated 14.11.2023 and 02.02.2024, subsequent to which the respondents issued one more notice dated 22.02.2024 and a Show Cause Notice dated 12.03.2024 calling upon the petitioner to show cause as to why variation proposed in the notice should not be made to its income. It is contended that due to bonafide reasons, unavoidable circumstances and sufficient cause, the petitioner could not submit his reply to the said notice dated 22.02.2024 and show-cause notice dated 12.03.2024, as a result of which, the respondents proceeded to pass the impugned exparte assessment order followed by the impugned notices, etc., without providing sufficient and reasonable opportunity to the petitioner nor hearing it thereby violating principles of natural justice and as such, the petitioner is before this court by way of the present petition.

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NC: 2024:KHC:39950 WP No. 16877 of 2024

4.

Per contra, learned counsel for the respondents submits that there is no merit in the petition and the same is liable to be dismissed.

5.

A perusal of the material on record will indicate that it is an undisputed fact that the impugned order is an exparte assessment order and the petitioner did not submit its reply to the notice dated 22.02.2024 and show-cause notice dated 12.03.2024 and did not contest the proceedings. Under these circumstances, in the light of the specific assertion on the part of the petitioner that its inability and omission to submit replies to the aforesaid notices and contest the proceedings was due to bonafide reasons, unavoidable circumstances and sufficient cause, I am of the considered opinion that the impugned order, consequential notices, etc., deserve to be set aside by adopting justice oriented approach and to provide one more opportunity to the petitioner to submit replies to the notice and Show Cause Notice and with a direction to the respondents to consider the same and proceed further in accordance with law.

6.

In the result, I pass the following: ORDER (i) The petition is hereby allowed.

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NC: 2024:KHC:39950 WP No. 16877 of 2024

(ii) The impugned order at Annexure – D dated 23.03.2024 and the impugned notice at Annexures – F dated 23.03.2024 and the impugned notices at Annexures-G1 and G2 both dated 26.04.2024 are hereby set aside.

(iii) The matter is remitted back to concerned respondents for re-consideration afresh to the stage of the petitioner submitting its replies to the notice dated 22.02.2024 and show-cause notice dated 12.03.2024 and in accordance with law.

(iv) Liberty is reserved in favour of the petitioner to submit replies to the notice dated 22.02.2024 and show-cause notice dated 12.03.2024, pursuant to which the concerned respondents shall provide sufficient and reasonable opportunity to the petitioner and hear it and proceed further in accordance with law. (v) Liberty is also reserved in favour of the petitioner to submit pleadings, documents, etc., before the concerned respondents, which shall consider the same and proceed further in accordance with law.

Sd/- (S.R.KRISHNA KUMAR) JUDGE

SV/BMC List No.: 1 Sl No.: 66

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