Madras HC raps I-T dept for not providing sufficient time for assessees to file replies to notices

Justice Krishnan Ramasamy pointed out that the real intention of section 144 B of the Income-Tax Act is to provide an opportunity for the assessee to be heard before passing any orders.
Madras High Court. (File photo)
Madras High Court. (File photo)

CHENNAI: Madras High Court has rapped the Income Tax (I-T) department for not providing sufficient opportunity for tax assesses to present their cases before passing any orders on assessment of income tax and thereby depriving them of the right to defend. 

The observations were made by Justice Krishnan Ramasamy recently while pronouncing orders on a writ petition filed by Gemini Film Circuit, a cinema production company, challenging the order of the I-T department on the assessment of tax for the assessment year 2017-18.

Pointing out that the real intention of section 144 B of I-T Act is to provide an opportunity to the assessee to be heard before passing any orders, the judge said, “It is with such motive the law has been enacted to safeguard the interest of the assessee, but, it is very unpleasant to see that in umpteen number of writ petitions, the assessment orders were assailed on the very ground of violation of principles of natural justice- audi alteram partem.”

Instructing the department to avoid giving only a short time for the assessee to file a reply for show cause notices, he said if done so, ‘the object of enacting the Act will not be achieved and the same would deprive the legal rights of the assessees’.

Concurring with the contentions of advocate Suhrith Parthasarathy, representing the petitioner, the judge said even if the petitioner has failed to file a reply/objection to the show cause notice, it would not per se deprive of the rights of an opportunity of a personal hearing.

Referring to the short span of time provided for the petitioner to file the reply to the show cause notice, the judge felt it should have been provided at least 21 days initially for filing the reply and thereafter the opportunity for a personal hearing should be given.

The assessment officer shall also conduct a ‘full-fledged enquiry’ and shall conclude the assessment proceedings by dealing with the queries/points in detail along with the reason for rejection of the reply, if any, and thereafter, shall pass the final assessment order, he stated.

If these aspects are not followed scrupulously, it would pave the way for the assessee to go an appeal, and then to the High Court and the Supreme Court. If the assessment order is set aside, the department will lose its revenue, the judge said.

“Therefore, it is the bounden duty of the assessing officer to pass a detailed order, providing reasons for rejection of the contention of the assessee.  If any cryptic order is passed without touching upon the queries/contentions of the assessee, ultimately, it would be fatal to the assessee and also cause huge revenue loss to the department,” Justice Ramasamy said in the order.
Setting aside the assessment order, he remanded it to the assessing officer for fresh consideration and passed fresh orders after perusing the documents of the petitioner and conducting a full-fledged hearing.

The petitioner’s case is that a show cause notice dated September 11, 2021, was served and was directed to file a reply/objection by September 16, 2021. Since it could not file a reply within such a short time, the assessing officer confirmed the tax proposals without giving further opportunity. It contended that such an action was against natural justice and to the spirit of section 144 B of the I-T Act, 1961.

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