Sree Durga Theja Aswini Films V. Income Tax Department

WP/21632/2022

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The case involves a petitioner, engaged in the film distribution business, who challenged an assessment order for the year 2016-17 under Sections 147, 144, and 144-B of the Income Tax Act, 1961. The petitioner argued that the assessment was made in violation of the principles of natural justice, primarily due to his health issues and lack of response to notices. The respondents countered that all notices were duly served and the petitioner had multiple opportunities to respond but did not. The court found that the petitioner was not denied a fair opportunity to present his case and directed him to appeal to the National Faceless Appellate Authority.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 795463 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 22-09-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M
• Assessee Lawyers: S
• Keywords: Assessment Year 2016-17; Best Judgment Assessment; Cash deposits; Income Tax Return; Natural Justice
• Section: 147; 148; 144; 142(1); 69 A; 144(b)

Judgement Text

"HON'BLE SRI JUSTICE C. PRAVEEN KUMAR AND HON'BLE SRI JUSTICE A.V.RAVINDRA BABU WRIT PETITION No.21632 OF 2022 ORDER: (Per Hon'ble Sri Justice C. Praveen Kumar) Heard Sri S. Dwarakanath, learned Senior Counsel, appearing on behalf of the petitioner, and Smt. M. Kiranmayee, learned Standing Counsel for Income Tax, appearing for the respondents, and with their consent the Writ Petition is disposed of at the admission stage. 2. Assailing the assessment order, dated 30.03.2022, made for the assessment year 2016-17, passed under Section 147 R/w. Sections 144 and 144-B of the Income Tax Act, 1961 (for short, ‘the Income Tax Act’) by the 1st respondent, the present Writ Petition is filed raising various grounds, more particularly that the order impugned came to be passed in violation of the principles of natural justice. 3. The facts in issue are as under: The petitioner herein was involved in the Film Distribution business in the name of Sree Durga Theja Aswini Films in West Godavari District since 2014. The major components of his business relates to sales/receipts generated 2 from the theatre collection and the sale of movie tickets. The petitioner also claims to have acted as Manager of his friend by name A. Mahalakshmi Rao, who was running a Bar and Restaurant. It is said that as he is not familiar with the Income Tax, did not approach any Tax Consultant or any Auditor to file income tax returns for the assessment year 2016-17, though he has a Permanent Account Number (PAN) on the rolls of the 2nd respondent. While so, the 2nd respondent issued a notice under Section 148 of the Income Tax Act on 26.03.2021 alleging that the income pertaining to tax for the year 2016-17, escaped assessment. The petitioner was called upon to file income tax returns in a prescribed form for the said assessment year. It is said that a notice was also sent through e-mail but he did not file any income tax returns pursuant to the said notice. In other words, it is his case that he is not in the habit of keeping a track of the e-mails. On 30.06.2021, another notice came to be issued under Section 142(1) of the Income Tax Act calling upon the petitioner to furnish documents and accounts as specified in notice on the ‘e-filing’ website of the Income Tax Department. In spite of giving an opportunity of filing documents and also the returns, in response to the notice under Section 148 of the Income Tax Act, within 30 days of the receipt of the notice, 3 which came to be received on 31.03.2021, the petitioner did not file his returns. As there was no response to the notices issued earlier, another notice, dated 26.11.2021, came to be issued by the 1st respondent, who took over the assessment from the 2nd respondent, asking the petitioner to furnish documents by 03.12.2021. Even this notice was not in the knowledge of the petitioner as it was communicated by e-mail. Thereafter, on 29.12.2021, another notice under Section 142(1) of the Income Tax Act was issued by the 1st respondent giving time till 07.01.2022 to submit series of documents as mentioned in the Annexure. The petitioner did not respond to the notice for the reason that he was hospitalized between 08.12.2021 and 13.12.2021 and that he underwent surgery. On 09.01.2022, a notice under Section 144 of the Income Tax Act was issued to the petitioner proposing to do best judgment assessment for the assessment year 2016-17 giving time till 17.01.2022 to file his response. This notice was issued as the petitioner failed to file his response to the earlier notices. A similar notice was also issued on 09.02.2022 giving time to reply till 17.02.2022, which was issued to treat the cash deposits of Rs.1,47,52,000/- in the bank account as undisclosed income and to levy tax by way of best judgment assessment. The petitioner was served with 4 show-cause notice, dated 15.03.2022, for proposed addition of Rs.1,11,62,000/- being the cash deposits in the savings bank account. On the same day i.e., on 15.03.2022, draft assessment order, under Section 147 R/w. Sections 144 and 144-B of the Income Tax Act was served proposing addition of Rs.1,47,52,000/- being the cash deposits, which is in addition to Rs.1,11,62,000/- in savings bank account. As there was no response to the reopening notices and the notices issued from time to time, the best judgment assessment was proposed under Section 144 R/w. Section 147 invoking Section 69-A of the Income Tax Act assessing the amount of Rs.1,47,52,000/- to tax at the rate of 60%. 4. The case of the petitioner appears that all e-mails, which were issued, were not to the knowledge of the petitioner as he is not in the habit of checking his e-mails. Further, the health condition of the petitioner was not good due to COVID-19 and he was suffering with half paralysis post COVID-19. However, he would submit that on 16.03.2022 itself he gave a reply to the show-cause notice explaining the deposits made and the cash received and accordingly requested to drop the proposed best judgment assessment, under Section 147 R/w. Sections 144 and 144-B of the Income Tax Act. He also sought for 30 days 5 time to support his claim. However, the impugned order came to be passed on 30.03.2022 raising a huge demand of Rs.1,22,52,792/- and also proposing to levy penalty by issuing separate notice. This order of assessing authority, dated 30.03.2022, is the subject matter of challenge in this Writ Petition mainly on the ground that no opportunity was given to the petitioner to explain the circumstances of the case and though a request for adjournment was made in the reply to the assessment order, no time was given. Hence, pleads that the order under challenge be set-aside and the matter be remanded to the Assessing Authority. 5. A counter came to be filed by the respondent disputing the averments made in the affidavit filed in support of the Writ Petition. While agreeing to the factual aspects mentioned in the affidavit filed, it is said that huge cash deposits were made by the petitioner into his bank account during the relevant assessment year and, in the absence of income tax returns for the assessment year 2016-17, the procedure as required under law was initiated. It is specifically mentioned in the counter that notice under Section 148 of the Income Tax Act was sent not only by e-mail but also by speed post and also by personal service through the Department, which the petitioner has 6 received. Hence, it is urged that the argument of the petitioner that he had no knowledge of the notice which was sent to his e- mail is incorrect. It is also stated in the counter that as there was no response, the subsequent notices were not only sent by e-mail but also through speed post and they were served on the petitioner, more particularly the notice dated 30.06.2021 issued under Section 142(1), which was served on 03.07.2021. Thereafter, the case of the petitioner was transferred to National Faceless Assessment Centre, Delhi. It is said that after transfer of the case, notice under Section 142(1), dated 26.11.2021 was issued to the petitioner by way of e-mail and on 26.11.2021 itself the e-mail was sent. Notice was sent to the designated e- mail address of the petitioner as provided in his e-filing account and therefore it is the responsibility of the petitioner to check his e-mail account. Since all the notices/orders would be in electronic mode only, in case of the faceless assessment proceedings, the petitioner ought to have verified his e-mails. Insofar as the plea taken by the petitioner claiming that he was hospitalized and as such he could not respond to the notice, it is said that the hospitalization was from 08.12.2021 to 13.12.2021 and the notice was served on the petitioner on 29.12.2021 i.e., long after his discharge from the hospital. The 7 averments in Para Nos.9 and 10 of the counter will show that in spite of service of notices issued, there was no response at all from the petitioner. Left with no other option, best judgment assessment came to be made on 15.03.2022. It is to be noted here that immediately after the draft assessment order was sent by e-mail, the petitioner responded on 16.03.2022 requesting time for furnishing information. Though the petitioner in his affidavit stated that he received the notice, best draft assessment order through speed post on 16.03.2022 but the same appears to be absolutely incorrect. No speed post can be delivered within 24 hours having regard to the distance between Delhi and Palakollu in West Godavari District. Hence, it is urged that in spite of giving number of opportunities, there was no response from the petitioner and only after draft assessment order was sent by e-mail, the petitioner responded seeking 30 days time, which cannot be granted as the assessment order to be passed after giving time would be beyond the period of limitation. 6. The point that arises for consideration is whether the request of the petitioner for remand of the matter can be accepted? 8 7. As seen from the record, the main argument advanced by Sri S. Dwarakanath, learned Senior Counsel appearing for the petitioner, is that there is total violation of the principles of natural justice, as no opportunity was given to the petitioner to submit documents, more so because of his sickness. We are not in agreement with the same. It may be true that the petitioner was not well but the period of his illness was only from 08.12.2021 to 13.12.2021. Notices were issued under the provisions of the Income Tax Act, more particularly under Sections 148, 142(1) and 144 of the Income Tax Act both by the 2nd as well as the 1st respondents long prior to the said date. In fact, the notices were said to have been sent by registered post and also through e-mail but there was no response to any of those notices. It is also to be noted here that the draft assessment order was also sent to the same e-mail, to which the petitioner responded and communicated with the respondent on 16.03.2022 itself, seeking time to file documents. Therefore, the plea of the petitioner that he is not in a habit of seeing the e- mails cannot be accepted. If that was so, the petitioner could not have responded so fast to the draft assessment sent on 15.03.2022. Therefore, the argument of learned Senior Counsel that there was total violation of the principles of natural justice 9 cannot be accepted. It may be true that the petitioner herein would have to pay huge amount if the best assessment goes uncontested but, the averments made in the affidavit itself would show the petitioner has got statutory remedy of filing an Appeal under Section 246-A of the Income Tax Act to the National Faceless Appellate Authority. Hence, in view of statutory remedy of appeal under Section 246-A of the Income Tax Act to the National Faceless Appellate Authority, the petitioner can submit all the documents or information regarding cash deposits etc., 8. Accordingly, the Writ Petition is disposed of directing the petitioner to prefer an Appeal in which event the Commissioner of Appeals shall consider the same, including the request for condonation of delay, having regard to the facts involved in the case in accordance with law. No order as to costs. As a sequel, miscellaneous applications pending, if any, shall also stand closed. ______________________________ JUSTICE C. PRAVEEN KUMAR ______________________________ JUSTICE A.V.RAVINDRA BABU Date:22.09.2022 Dsh 10 HON'BLE SRI JUSTICE C. PRAVEEN KUMAR AND HON'BLE SRI JUSTICE A.V.RAVINDRA BABU 166 WRIT PETITION No.21632 OF 2022 (Order of the Division Bench delivered by Hon'ble Sri Justice C. Praveen Kumar) Dated: 22.09.2022 Dsh "