null V. Income Tax Department and Central Government

WP/10853/2022

AI Insights

The case involves multiple writ petitions filed by a petitioner challenging the assessment orders and penalty notices issued by the Income Tax Department for the assessment year 2013-14. The petitioner argued that the orders were in violation of natural justice, arbitrary, and unreasonable, citing insufficient time to respond to the notices and incorrect email communication. The Income Tax Department contended that the petitioner failed to provide necessary documentation and evidence to support his claims. The court found that the time given to respond to the notices was inadequate, especially as they were issued late at night, and thus set aside the orders and remanded the case for a fresh assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 675379 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 09-09-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Sick Industrial Companies (Special Provisions) Act, 1985, Constitution of India
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: M KIRANMAYEE; N HARINATH
• Assessee Lawyers: CHALLA GUNARANJAN
• Keywords: Assessment Order; BIFR; Condonation of delay; Draft Assessment Order; Income Tax; Natural Justice; Rehabilitation scheme; Show cause notice; Sick industrial company; Writ of Mandamus
• Section: 148; 142(1); 143(2); 271(1)(c); 119(2)(b); 271F; 226

Judgement Text

"THE HONOURABLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HONOURABLE SRI JUSTICE A.V.RAVINDRA BABU WRIT PETITION Nos.10928, 10853, 10937, 10970 & 11003 of 2022 COMMON ORDER:- (Per Hon’ble Sri Justice C.Praveen Kumar) Heard Sri Challa Gunaranjan, learned counsel for the petitioner, Smt M. Kiranmayee, learned Senior Standing Counsel for Income Tax appearing for respondent Nos.1, 2 and 4, and Sri N. Harinath, learned Standing Counsel for Central Government appearing for respondent Nos.3 and 5, and with their consent, these writ petitions are disposed of at the stage of admission. 2. Since the issue involved in all these writ petitions is one and the same, they are disposed of by this common order taking W.P.No.10853 of 2022 as a lead writ petition. 3. W.P.No.10853 of 2022 came to be filed under Article 226 of the Constitution of India seeking the following relief:- “…… to issue a writ, order or direction more particularly one in the nature of Writ of Mandamus declaring the Assessment Order vide DIN No.ITBA/AST/S/147/2021- 22/1041486539(1) dated 24.03.2022 and consequential notices of Demand No.ITBA/AST/S/156/2021- 22/1041487090(1) dated 24.03.2022 (“Demand Notice”) and Penalty Notice bearing Nos.ITBA/PNL/S/271F/2021- 22/1041486582(1) dated 24.03.2022 under Section 274 2 read with Section 271F of the Income Tax Act and Penalty Notice bearing Nos.ITBA/PNL/S/271(1)(c)/2021- 22/1041486581(1) dated 24.03.2022 under Section 274 read with Section 271(1)(c) of the Income Tax Act passed by the Respondent for the AY 2013-14 as being in violation of the principles of natural justice, in contravention of the provisions of the Income Tax Act, 1961, arbitrary and unreasonable, besides being violative of the Petitioner’s rights guaranteed under Articles 14 and 19(1)(g) of the Constitution of India and consequently set aside the same and pass ……” 4. The averments in the affidavit filed in support of the writ petition, in brief, are that the petitioner herein was regular in filing income tax returns up to the assessment year 2005-2006. Thereafter, the petitioner was declared as a sick industrial company in terms of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the same was submitted to Board for Industrial and Financial Reconstruction (BIFR) for financial reconstruction in Case No.63/2006. It is said that by an order, dated 20.10.2016, BIFR has provided for a rehabilitation scheme to carry forward and set off of business losses and accordingly, the petitioner was exempted from the provisions of Sections 72 and 80 of the Income Tax Act, 1961 (for short, “the Act”). The Board has further ordered for condonation of delay in filing income tax returns for the years in dispute without levying penalties and interest. Pursuant thereto, the petitioner herein made an application under Section 119(2)(b) of the Act for condonation of 3 delay in filing the returns of income, so that the booked losses for the assessment years 2005-2006 to 2008-2009 amounting to Rs.77,12,39,806/- may be allowed to be carried forward. However, by an order, dated 06.04.2018, respondent No.3 rejected the petitioner’s application as pre-mature and infructuous, holding that insofar as the applicability of the provisions of the Income Tax Act is concerned, the order of BIFR is binding on the Income Tax Department and therefore, the claim of carry forward of losses is still under consideration. At that stage, the authority reopened the assessments of the petitioner by issuing a notice under Section 148 of the Act. In response to the said notice, the petitioner herein has submitted his return of income for the assessment years 2013-2014 on 15.08.2021 under Section 139(1) of the Act declaring the income as “nil” after setting off earlier year’s losses. The averments in the affidavit further reveal that notice under Section 143(2) of the Act, dated 01.10.2021, was issued to the petitioner and also a notice under Section 142(1) of the Act, dated 14.06.2021, was also issued asking the petitioner to furnish copies of 26AS, Form No.16A and to show cause as to why interest received from IDBI bank should not be added to the total income. In response to the notice under Section 142(1) of the Act, the petitioner filed his written submissions on 26.02.2022 and since then, it is said that there is no response 4 from the respondents. On 23.03.2022, a show cause notice – cum - draft assessment order came to be issued by respondent No.1, proposing to tax, interest of Rs.1,31,37,835/- credited to the account as ‘income from other sources’ and added to the total income. The draft assessment order also shows levy of penalty under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income. It is said that the show cause notice-cum-draft assessment order was sent to the e-mail of the petitioner on 22.03.2022 at 20:18:54 IST, demanding the petitioner to submit his reply by 23:59 hours of 23.03.2022 failing which the draft assessment order would be finalized. The authorized e-mail ID was [e-mail] but the show cause notice was sent to [e-mail]. The impugned show cause notice was confirmed by passing the assessment order on 24.03.2022. Challenging the same, the present writ petition came to be filed mainly contending that no sufficient time was given to the petitioner to submit his explanation and prepare for personal hearing of the matter. It is further stated that the show cause notice, dated 22.03.2022, was sent to the incorrect e-mail ID and as such, the petitioner could not respond to the said notice. 5. A counter came to be filed by the learned Standing Counsel for Income Tax disputing the averments made in the affidavit filed in support of the writ petition. It is said that all 5 throughout, the petitioner has neither furnished the computation of total income for the earlier years i.e., up to the assessment year 2007-08 nor furnished evidence to support the claim of BIFR declaring the company as a sick industrial company and directions to Income Tax Department thereon. It is further stated that the averments in para Nos.10 and 11 of the affidavit, to the extent that the petitioner has claimed his income as “nil” in his returns filed on 15.08.2021 for the assessment year 2013-14 after setting off an earlier year’s loss, cannot be accepted as the petitioner did not submit copies of the Income Tax Returns said to have been filed for the said assessment years to prove his claim of unabsorbed depreciation. Insofar as sending of e-mail to the incorrect ID, it is said that all prior communications were done to the authorized e-mail ID available as per the e-mail portal, which is [e-mail]. Therefore, the argument that it was sent to wrong ID cannot be accepted. Taking into consideration the overall circumstances of the case and the attitude of the petitioner, the learned Standing Counsel would contend that the assessment order was in accordance with law and the same warrants no interference. 6. A rejoinder came to be filed by the petitioner to the counter filed by respondent Nos.1, 2 and 4 stating that the notices under Sections 143(2) and 142(1) of the Act were not 6 sent to the petitioner’s authorized e-mail ID and hence, the petitioner was not notified of the same and he was not given an opportunity to notify to the said notices. It is further stated that the petitioner herein was never asked to furnish the computation of total income nor any evidence to support the claim of BIFR declaration at any point of time. In view of the same, it is urged that the assessment order passed warrants interference of this Court. 7. Though various issues relating to service of notice etc., were narrated in the affidavit filed in support of the writ petition, but the short question that falls for consideration is:- “Whether the respondents were right in issuing a show cause notice – cum draft assessment order under Section 144B of the Act on the night of 22.03.2022 demanding the petitioner to submit his explanation by 23:59 hours of 23.03.2022?” 8. In other words, just 24 hours time was given for the petitioner to respond to the show cause notice – cum assessment order. Learned Standing Counsel for Income Tax states that steps of this nature were forced to be taken since the time limit for passing the orders were getting expired due to indifferent attitude of the assesses. 9. We are not inclined to go into that aspect in this writ petition. Since the time given for responding to the cause notice 7 – cum draft assessment order was very short and more particularly, when the said notice was sent in the night, which could not have been noticed by the petitioner, we deem it appropriate, in the facts and circumstances of the case, to set aside the impugned assessment orders and remand the matters back to respondent No.1 for passing orders afresh by giving sufficient time to the petitioner to respond to the impugned show cause notices, in accordance with law. Consequently, the impugned penalty orders issued shall not be given effect to till the assessment orders are passed. 10. Accordingly, all the Writ Petitions are allowed and remanded. There shall be no order as to costs. Miscellaneous petitions pending, if any, in these Writ Petitions shall stand closed. _______________________________ JUSTICE C.PRAVEEN KUMAR ________________________________ JUSTICE A.V.RAVINDRA BABU Date : 09.09.2022 AMD 8 153 THE HONOURABLE SRI JUSTICE C.PRAVEEN KUMAR AND THE HONOURABLE SRI JUSTICE A.V.RAVINDRA BABU WRIT PETITION Nos.10928, 10853, 10937, 10970 & 11003 of 2022 Date : 09.09.2022 AMD "