Doreswamaiah Sureshbabu V. National Faceless Assessment Centre and The Income Tax Officer Ward 1 and TPS Mandya

WP/9167/2023

AI Insights

In this writ petition, the petitioner, Doreswamaiah Sureshbabu, challenged several orders related to the income tax assessment for the assessment year 2017-18, including the assessment order, demand notices, and penalty orders. The primary contention was the violation of the Standard Operating Procedure (SOP) in the issuance of notices under Sections 142(1) and 144 of the Income Tax Act, 1961. The petitioner argued that the notices were issued with insufficient time to respond and were sent to an incorrect email address, despite the correct email being updated and acknowledged by the tax department. The respondents defended the actions by highlighting the petitioner's non-compliance with previous notices and procedural requirements. The court focused on the validity of the initial notice under Section 142(1) and found it to be in violation of the prescribed SOP, leading to the setting aside of all subsequent orders.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 688404 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 19-07-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: ANNAMALAI
• Keywords: Assessment Order; Best Judgment Assessment; Email notification; Natural Justice; Violation of SOP
• Section: 147; 148; 144; 142(1); 144B; 226; 227

Judgement Text

" - 1 - NC: 2023:KHC:25162 WP No. 9167 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 9167 OF 2023 (T-IT) BETWEEN: 1. DORESWAMAIAH SURESHBABU S/O SRI H B DORESWAMAIAH AGED ABOUT 58 YEARS, SURESH SERVICE STATION, M C ROAD MANDYA-571402 KARNATAKA … PETITIONER (BY SRI. ANNAMALAI S., ADVOCATE) AND: 1. NATIONAL FACELESS ASSESSMENT CENTRE REP. BY ADDITIONAL / JOINT / DEPUTY / ASSISTANT 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 2. THE INCOME TAX OFFICER WARD 1 AND TPS MANDYA I.T. OFFICE, MANDYA Digitally signed by VIJAYA P Location: High Court of Karnataka - 2 - NC: 2023:KHC:25162 WP No. 9167 of 2023 CAUVERY PARK ROAD MANDYA-571 401 … 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 ASSESSMENT ORDER PASSED UNDER SECTION 147 R.W.S. 144 R.W.S. 144B OF THE ACT DTD. 28.03.2022 BEARING DIN NO. ITBA/AST/S/147/2021-22/1041851514(1) FOR THE AY. 2017-18 BY THE R1 HEREIN MARKED AS ANNX-A1 AND ETC. THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER Petitioner has sought for setting aside of the assessment order passed under Section 147 read with Section 144 read with Section 144B of the Income Tax Act, 1961 (for short 'the Act') at Annexure-A1; computation sheet at Annexure-A2; demand notice at Annexure-A3; rectification order at Annexure-A4; computation sheet at Annexure-A5; penalty order at Annexure-A6, computation sheet at Annexure-A7; demand notice at Annexure-A8; penalty order at Annexure-A9; computation sheet at Annexure-A10; demand notice at - 3 - NC: 2023:KHC:25162 WP No. 9167 of 2023 Annexure-A11 and the notice under Section 148 of the Act at Annexure-B. 2. Sri. S. Annamalai, learned counsel for petitioner submits that notice was issued under Section 142(1) at Annexure-J1 for the assessment year 2017-18 on 10.03.2022 with an opportunity for filing response on or before 14.03.2022 by 1:29 p.m. It is submitted that time prescribed is in violation of the Standard Operating Procedure (SOP) dated 19.11.2010 at Annexure-T. It is submitted that as the petitioner could not respond to Annexure-J1, a show cause notice came to be issued again as per Annexure-J2 under Section 144 of the Act on 23.03.2022 requiring for a response by 26.03.2022, which also is in violation of the SOP at Annexure-T. 3. It is further submitted that if the petitioner had made out a reply to the notice under Section 142(1) at Annexure-J1, question of proceeding under Section 144 may not have arisen. It is also pointed out that the notices at Annexures-J1 and J2 were addressed to an - 4 - NC: 2023:KHC:25162 WP No. 9167 of 2023 email ID which does not belong to the petitioner and the petitioner's email ID has been updated as [e-mail] as per Annexure-N1 and the same has been confirmed by the Department. Accordingly, it is submitted that on the basis of violation of principles of natural justice, the notice at the first instance at Annexure-J1 requires to be set aside and if that were to so, all other orders that are passed being consequent and pursuant to the non-reply to the notice at Annexure-J1 are required to be set aside. 4. Sri. E. I. Sanmathi, learned counsel appearing for the respondent - revenue submits that the petitioner though is pointing out to the violation of principles of natural justice with respect to Annexures-J1 and J2, he has not been diligent in participating in the proceedings and that is made clear from the observations in the assessment order at Paragraph Nos.3 and 4 which read as follows: - 5 - NC: 2023:KHC:25162 WP No. 9167 of 2023 \"3. The assessee remained non compliant to the notices dated 30.03.2021 and 27.12.2021. But, in response to the notices dated 27.12.2021 the assessee replied on 22.02.2022 much beyond the date of compliance. The assessee has furnished and has submitted that the assessee is a Hindustan Petroleum Dealer. Every day the sales value is calculated on the basis of meter reading in each pump and dip rod in each storage tank. All the sales made is entered for each products by only one entry daily and is credited to the sundry customers account. With reference to the sources of cash deposits, the assessee has submitted that the cash deposits during demonetization were out of cash collected from such sales is taken in to cash book as received from sundry customers. The assessee also makes credit sales to truck/ bus owners and the balance in the sundry customers accounts represent the same. 4. As per information available on record, it is found that the assessee has opened a new account having number 36134690223 on - 6 - NC: 2023:KHC:25162 WP No. 9167 of 2023 28.09.2016 and deposited cash in this account to the tune of Rs.18.81 lac during the demonetization period which was unusual than that of the previous trends. But on perusal of the insight portal of the department, it is found that the assessee has deposited cash as per following information. The assessee vide notice dated 20.11.2021 was asked to furnish the reply with reference to the above. The reply filed by the assessee vide reply dated 22.02.2022 and it is observed that assessee only provided sale register for the F.Y. 2016-17. This document has no authenticity, as it is not signed by any authorized person, and has no details of cash/credits etc. It is also not supported by any cash receipts/cash details bifurcating the receipts as per customer or entities. As such, the source of cash deposit is not justified by the assessee. The assessee again vide notice dated 23.02.2022 was specifically asked to furnish the details of all bank accounts and the deposits made therein, source of deposits year-wise details of cash deposits for the year - 7 - NC: 2023:KHC:25162 WP No. 9167 of 2023 2015-16, 2016-17 and 2017-18, stock register sale register, cash sales, credits sales, bills and vouchers etc. in support of the cash deposits made by the assessee. Despite giving ample opportunity of being heard, and asking the questions specifically, the assessee failed to provide the information as desired. Hence, in the absence of the satisfactory evidences/concrete proof relating to nature and sources of fund, it is clear that the assessee has nothing to say in this regard.\" 5. Heard both sides. 6. What is of relevance is the validity of the notice at Annexure-J1. Though there may have been some lapse on the part of the petitioner at the earlier stages, the Court is required to see as to whether the notice at Annexure-J1 is in order. If it were not to be so, consequential proceedings would go and the earlier defaults may fall into significance as it is only Anenexure- J1 which is of relevance insofar as action has been taken - 8 - NC: 2023:KHC:25162 WP No. 9167 of 2023 construing there is no reply to the notice at Annexure-J1. The SOP at Annexure-T dated 19.11.2020 is clear insofar as the period prescribed for notice under Section 142(1). The Clause-B of the SOP reads as follows: \"B. Process of issuance of notice u/s 142(1) / questionnaire: 1. The notice is to be sent to assessee, through the NeAC, with the approval of the Unit Head of the AU. Normally, a response time of 15 days may be given to the assessee for compliance with the notice u/s 142(1) from the date of issue of the notice. It is advisable that time may be reduced to 7 days for subsequent notices. However, these guidelines must keep in view the limitation date for completing the assessment.\" 7. If it were to be noticed, a period of 15 days normally to be given as a response time, which could be reduced to 7 days in cases of subsequent notices. In the present case, notice at Annexure-J1 has been issued on 10.03.2022, with a date for response as 14.03.2022, - 9 - NC: 2023:KHC:25162 WP No. 9167 of 2023 which is even below 7 days as mandated. It is further to be noticed that limitation for conclusion of the proceedings admittedly did not arise in the present case. There is substantial merit in the contentions raised by the learned counsel for petitioner. 8. The question of resort to best judgment assessment under Section 144 may not have arisen, if the petitioner had made out its reply to Annexure-J1 and the same was considered and the valid points were present as asserted that would be put forth in the reply to Annexure-J1. If that were to be so, the subsequent show cause notice under Section 144 at Annexure-J2 and the orders passed are required to be consequentially set aside. It is also to be noticed that Annexure-J1 has not been sent to the email ID updated as per Annexure-N1. 9. Accordingly, on the sole ground of violation of principles of natural justice, the notice at Annexure-J1 is set aside. All other proceedings resulting in orders passed as adverted to in the preamble paragraph of this order - 10 - NC: 2023:KHC:25162 WP No. 9167 of 2023 (Annexures A1 to A11), are to be treated as consequential orders and the same are also set aside. The matter is remanded back to the stage post Annexure-J1 notice and the petitioner is permitted to file his response to the notice at Annexure-J1 within a period of two weeks from the date of receipt of certified copy of this order. The email portal may be enabled for the petitioner to take the benefit of reopening of the proceedings. All contentions are kept open. 10. Writ petition is disposed off accordingly. Sd/- JUDGE VP "