M/S SAPPHIRE INFRASTRUCTURE DEVELOPMENT PVT LTD vs. CENTRAL BOARD OF DIRECT TAXES

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WP/12576/2023HC KarnatakaKAHC01029561202305 July 2023Author: S SUNIL DUTT YADAV5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the assessment order dated May 19, 2023, passed by the Assessment Unit (Respondent No. 2) for Assessment Year 2016-17, was liable to be set aside on the ground of violation of the principles of natural justice. The Court noted that a show-cause notice was issued on May 9, 2023, with a compliance date of May 16, 2023. The petitioner had indeed made an application for adjournment on May 16, 2023, seeking time until May 23, 2023, to file their reply. However, the assessment order was passed on May 19, 2023, without any order being passed on the adjournment application, and without any reference to its rejection. The Court found this to be a clear violation of natural justice. Consequently, the assessment order and all consequential orders and notices (computation sheet, notice of demand, penalty notices, and notices under Section 148 and 148A) were set aside. The matter was remitted to the stage post the show-cause notice dated May 9, 2023, with the petitioner being at liberty to file their reply along with supporting evidence. All contentions of the petitioner were kept open.

What were the facts?

The petitioner, M/s. Sapphire Infrastructure Development Pvt. Ltd., filed a writ petition challenging an assessment order dated May 19, 2023, passed by the Assessment Unit (Respondent No. 2) under Section 147 read with Section 144B of the Income Tax Act, 1961, for Assessment Year 2016-17. The petitioner also challenged the related computation sheet, notice of demand, penalty notices, and notices issued under Section 148 and 148A of the Act. The core of the petitioner's grievance was that the assessment order was passed in violation of the principles of natural justice. A show-cause notice was issued on May 9, 2023, with a compliance date of May 16, 2023. The petitioner requested an adjournment until May 23, 2023, to gather materials for their reply. However, the assessment order was passed on May 19, 2023, without any record of the adjournment request being considered or rejected.

What were the issues?

1. Whether the assessment order dated May 19, 2023, passed by the Assessment Unit for Assessment Year 2016-17, is liable to be quashed on the ground of violation of the principles of natural justice, specifically concerning the non-consideration of the petitioner's adjournment request? (Question of law and fact, turning on Sections 147 and 144B of the Income Tax Act, 1961). Assessee's contentions: The petitioner argued that the assessment order should be set aside because it was passed in violation of natural justice. A show-cause notice was issued on May 9, 2023, with a compliance date of May 16, 2023. The petitioner requested an adjournment until May 23, 2023, to prepare a reply. However, the assessment order was passed on May 19, 2023, without any mention of the adjournment request being considered or rejected, treating the petitioner's response as 'no reply'. The petitioner sought an opportunity to file their reply. Revenue's contentions: The judgment does not record specific contentions from the revenue.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148,Section 148A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 5TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 12576 OF 2023 (T-IT) BETWEEN: M/S. SAPPHIRE INFRASTRUCTURE DEVELOPMENT PVT. LTD., A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956, REPRESENTED BY ITS GROUP CFO, SRI. G. RAMAKRISHNAN, SON OF SRI. K.R. GANAPATHIRAMAN, AGED ABOUT 61 YEARS, I FLOOR, "CLASSIC COURT", 9/1, RICHMOND ROAD, BANGALORE - 560 025. …PETITIONER (BY SRI. ANNAMALAI S., ADVOCATE) AND: 1. CENTRAL BOARD OF DIRECT TAXES, REPRESENTED BY ITS CHAIRPERSON, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, NORTH BLOCK, NEW DELHI - 110 001. 2. ASSESSMENT UNIT, INCOME-TAX DEPARTMENT, Digitally signed by SUCHITRA M J Location: HIGH COURT OF KARNATAKA

NATIONAL FACELESS ASSESSMENT CENTRE, MINISTRY OF FINANCE, ROOM NO.401, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, DELHI - 110 003. 3. THE PRINCIPAL COMMISSIONER OF INCOME TAX BENGALURU - 1, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU - 560 095. 4. INCOME TAX OFFICER, WARD 6(1)(1), BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU - 560 095. …RESPONDENTS (BY SRI. M. DILIP, ADVOCATE)

THIS W.P IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING THE ASSESSMENT ORDER DATED 19/05/2023 PASSED BY THE R2 UNDER SECTION 147 R W S 144B OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2016-17 BEARING DIN AND ITBA/AST/147/2023-24/1053001198(1) HEREIN MARKED AS ANNEXURE-A1 AND ETC.,

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER The petitioner has sought for setting aside of the assessment order dated 19.05.2023 passed by respondent No.2 under Section 147 read with Section 144B of the Income Tax Act, 1961 (for short 'the Act') for the assessment year 2016-17 at Annexure-A1. The petitioner has also challenged the computation sheet issued by respondent No.2 for the aforesaid assessment year at Annexure-A2 and consequently notice of demand at Annexure-A3. Further, the petitioner has called in question the correctness of the penalty notice at Annexures-A4 and A5 and also sought for setting aside the notice under Section 148 of the Act at Annexure-B1; notice under Section 148A(b) of the Act at Annexure-B2; order under Section 148A(d) of the Act at Annexure-B3 and notice under Section 148 of the Act at Annexure-B4 and has also challenged the validity of the Instruction No.1/2022 at Annexure-C. 2. Learned counsel for the petitioner submits that the impugned assessment order at Annexure-A1 requires to be set aside as being violation of principles of natural justice. It is submitted that the show-cause notice came to be issued on 09.05.2023 fixing the date of compliance as 16.05.2023 and

the petitioner had made a request for adjournment in terms of Annexure-L, seeking for adjournment till 23.05.2023 on the ground that the petitioner was gathering material in order to make out a reply. It is submitted that as per assessment order at Annexure-A1, the reply to the show-cause notice was taken as no reply and assessment order at Annexure-A1 was passed on 19.05.2023. It is further submitted that there is no reference to the rejection of adjournment application in the assessment order and accordingly the assessment order may be set aside, petitioner may be given an opportunity to make out his case by filing reply to the show-cause notice dated 09.05.2023. 3. Perused the assessment order and at Para-2 of the order, there is reference to issuance of show-cause notice on 09.05.2023 with date of compliance being fixed as 16.05.2023. Undisputedly, the petitioner has made out an application for adjournment which details are available at Annexure-L, which would indicate that request for adjournment was made on 16.05.2023 seeking time for reply to the show-cause notice till 23.05.2023 as the petitioner was gathering material. However, in the assessment order at Annexure-A1, no order is passed

rejecting the adjournment application and in fact though the petitioner has sought for time to reply till 23.05.2023, the assessment order has been passed on 19.05.2023 itself. Therefore, only on the ground of violation of principles of natural justice, assessment order at Annexure-A1 is set aside and consequently order and notice at Annexures-A2, A3, A4 and A5 are set aside. 4. The matter is remitted to the stage post show- cause notice dated 09.05.2023. The petitioner is at liberty to make out his reply to the said show-cause notice along with supporting evidence. Accordingly, petition is disposed off. All contentions of the petitioner are kept open. Sd/- JUDGE SMJ List No.: 1 Sl No.: 19

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