EASTERN MATTRESSES (P) LTD. V. THE ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX,

WP(C)/11540/2021

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The case involves Eastern Mattresses (P) Ltd., which challenged an assessment order issued by the Income Tax Department under the Faceless Assessment Scheme. The petitioner alleged that the assessment was completed without providing a reasonable opportunity to respond, as required under the principles of natural justice and specific provisions of the Income Tax Act, 1961. The petitioner had sought an extension to respond to a show cause notice but did not receive a formal acknowledgment or decision on the extension request before the assessment was finalized. The court found that the lack of response to the extension request constituted a violation of natural justice, leading to the setting aside of the assessment order.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 751487 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 15-03-2022
• Assessment Year: misc
• Other Referred Cases: M S Jewellery vs. Assistant Commissioner (Assessment)
• Laws Referred To: Income Tax Act, 1961, Article 226 of the Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: JOSE JOSEPH
• Assessee Lawyers: JOSEPH MARKOSE; V MARKOS; ABRAHAM MARKOS; ISAAC ALEXANDER; JOSEPH SHARAD
• Keywords: Assessment Order; Extension of time; Faceless Assessment Scheme; Natural Justice; Show cause notice
• Section: 144B(xvi); 144B(1)(vii); 144B(1)(xxii)

Judgement Text

"IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS TUESDAY, THE 15TH DAY OF MARCH 2022 / 24TH PHALGUNA, 1943 WP(C) NO. 11540 OF 2021 PETITIONER: EASTERN MATTRESSES (P) LTD. III,33 AND 34, PUTHUPARIYARAM POST, THODUPUZHA 685 584 REP. BY ITS DIRECTOR, MS. SHEERAN NAVAS. BY ADVS. JOSEPH MARKOSE (SR.) V.ABRAHAM MARKOS ABRAHAM JOSEPH MARKOS ISAAC THOMAS ALEXANDER JOSEPH MARKOS SHARAD JOSEPH KODANTHARA RESPONDENTS: 1 THE ADDITIONAL/JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX OFFICER, NATIONAL E-ASSESSMENT CENTRE, NEW DELHI 110 001 2 THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX NATIONAL E-ASSESSMENT CENTRE, NEW DELHI 110 001. 3 INCOME TAX OFFICER CORPORATE WARD -1(2), KOCHI 682 018 4 THE PRINCIPAL COMMISSIONER OF INCOME TAX KOCHI 682 018. BY ADV SRI. JOSE JOSEPH, STANDING COUNSEL THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 15.03.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 11540 OF 2021 2 BECHU KURIAN THOMAS, J. =========================== W.P.(C) No.11540 of 2021 ============================ Dated this the 15th day of March, 2022 JUDGMENT Alleging that an assessment order, dated 24.04.2021, was issued against the petitioner, without complying with the principles of natural justice, petitioner has approached this Court, invoking the jurisdiction under Article 226 of the Constitution of India. 2. For the assessment year 2018-19, petitioner had declared a net loss of Rs.6.20 crores through its return. The return of the petitioner was selected for scrutiny and later, the respondents informed the petitioner that the assessment will be completed through the Faceless Assessment Scheme. 3. Petitioner was issued with notices calling for information which were all promptly responded to. Thereafter, WP(C) NO. 11540 OF 2021 3 petitioner was served with a show cause notice, dated 16.04.2021 as per Section 144B (xvi) of the Income Tax Act, 1961, seeking its objection as to why an order of assessment should not be completed, as per the draft assessment. The said notice granted him seven days time to respond-(by 11:59 p.m. on 23.04.2021) 4. Immediately, on receipt of the proposal for completing the assessment based upon the draft assessment order, petitioner sought for a breathing time to respond and requested for a further four days time, as per communication dated 23.04.2021, evidenced by Ext.P7. Petitioner sought for an extended time to submit its response, specifying the reason as “gathering of material from multiple sources requires time.” According to the learned Senior Counsel Shri.Joseph Markos, though petitioner expected a communication from the respondents, either granting time or atleast rejecting it, contrary to its expectations, the respondents proceeded with and issued an order of assessment on 24.04.2021, after observing that petitioner had not responded to WP(C) NO. 11540 OF 2021 4 the show cause notice. According to the petitioner, the opportunity contemplated under Section 144B(1)(vii) and Section 144B(1)(xxii), of the Income Tax Act, 1961 was not granted and therefore, the impugned order of assessment is contrary to law. 5. Shri. Jose Joseph, learned counsel for the respondents submitted that sufficient time was granted and that even though the petitioner had sought time, as per Ext.P7, the petitioner was bound to appear on 24.04.2021 for hearing. According to the learned counsel, without appearing for the hearing, the petitioner is not entitled to raise the contention on violation of the principles of natural justice. 6. The Faceless Assessment Scheme, though intends to lend transparency to the process of assessments and eliminate physical interface between the assessee and the tax officer, it ensures a reasonable opportunity to respond to notices. 7. Section 144B(1)(vii) and Section 144B(1)(xxii) are relevant for the present and are extracted as below:- WP(C) NO. 11540 OF 2021 5 “144B(1)(vii) the assessee or any other person, as the case may be, shall file his response to the notice referred to in clause (vi) within the time specified therein or such time as may be extended on the basis of an application in this regard to the National Faceless Assessment Centre” (xxii) the assessee may, in a case where show cause notice has been served upon him as per the procedure laid down in sub-clause (b) of Clause (xvi) furnish his response to the National Faceless Assessment Centre on or before the date and time specified in the notice or with the extended time, if any; 8. The statute thus contemplates an application for extension of time and even the grant of extended time to furnish a response. Thus when the petitioner sought for a further four days time to respond, citing the reason to gather necessary materials from different sources, the assessing officer was bound to give a response, intimating either the rejection or its acceptance of request for time. Such a response is part of the basic requirements of the principles of natural justice. When there was a lack of response, it is only probable that the WP(C) NO. 11540 OF 2021 6 petitioner would have expected his request for adjournment having been accepted. Therefore, the assessing officer ought not to have proceeded with the assessment on 24.04.2021, as originally mentioned. In view of the above, there is a clear evidence of violation of principles of natural justice and hence, Ext.P8 is liable to be set aside on this count alone. 9. Notwithstanding the setting aside of Ext.P8, the respondents must be granted an opportunity to pass fresh orders of assessment and accordingly, there will be a direction to the respondents to accept objections to Ext.P6 show cause notice, if any filed by the petitioner within a period of thirty days from the date on which the respondents open up a link for filing objections, since, presently, the Faceless Assessment regime is in place. If such an objection is filed by the petitioner within the time stipulated above, respondents shall, necessarily, consider the same and pass appropriate orders, after granting an opportunity of hearing to the petitioner, as expeditiously as possible, at any rate, WP(C) NO. 11540 OF 2021 7 within a period of two months from the date of opening of the link to file the objections as mentioned. The writ petition is allowed as above. Sd/- BECHU KURIAN THOMAS JUDGE ssa/ WP(C) NO. 11540 OF 2021 8 APPENDIX OF WP(C) 11540/2021 PETITIONER’S EXHIBITS Exhibit P1 TRUE COPY OF THE RETURN ACKNOWLEGMENT FOR AY 2018-19 DATED 31.10.2018 Exhibit P2 TRUE COPY OF THE NOTICE DATED 28.9.2019 ISSUED BY THE 1ST RESPONDENT TO THE PETITONER FOR AY 2018-19 Exhibit P3 TRUE COPY OF THE NOTICE DATED 3.2.2020 ISSUED BY THE 1ST RESPONDENT TO THE PETITONER FOR AY 2018-19 Exhibit P4 TRUE COPY OF THE NOTICE DATED 6.5.2020 ISSUED BY THE 1ST RESPONDENT TO THE PETITONER FOR AY 2018-19 Exhibit P5 TRUE COPY OF THE RESPONSE ACKNOWLEGMENT DATED 1.6.2020 Exhibit P6 TRUE COPY OF THE SHOW CAUSE NOTICE DATED 16.4.2021 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER FOR AY 2018-19 Exhibit P7 TRUE COPY OF THE SCREEN SHOT OF THE E- PROCEEDINGS. Exhibit P8 TRUE COPY OF THE ASSESSMENT ORDER DATED 24.4.2021 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER FOR AY 2018-19 ALONGWITH COMPUTATION SHEET AND NOTICE OF DEMAND. Exhibit P9 TRUE COPY OF THE JUDGMENT DATED 10.5.2021 IN W.P.(C) NO.5234 OF 2021 PASSED BY THE DELHI HIGH COURT AND REPORTED IN (2021) 127 TAXMANN.COM 194 (DELHI) Exhibit P10 TRUE COPY OF THE JUDGMENT REPORTED IN 1994 KLJ TAX CASES 24-M S JEWELLERY VS. ASSISTANT COMMISSIONER (ASSESSMENT). "