Sri. Ravi Basavaraj Naik V. The Assistant Commissioner of Income Tax, Circle 2(2)(1) and The Commissioner of Income Tax-2 and Central Board of Direct Taxes

WP/1980/2020

AI Insights

The case involves Sri. Ravi Basavaraj Naik, the petitioner, challenging the orders and notices issued by the Income Tax authorities, which included an assessment order, a demand notice, and a penalty notice, all dated 18.12.2019. The petitioner argued that the proceedings did not comply with the mandatory procedures of the E-Assessment Scheme, 2019, which came into effect during the pendency of the proceedings. The petitioner also contended that he did not receive subsequent show-cause notices, which led to a violation of the principles of natural justice. The respondents defended the validity of their actions, asserting that the petitioner was duly informed and had not raised objections timely. The court, after considering the submissions and the procedural lapses, decided to set aside the impugned orders and remit the matter for fresh consideration.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 798759 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 04-11-2022
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Orissa Corporation \\u2013 (1986) 159 ITR 0078
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: M V SESHACHALA; ARAVIND V CHAVAN
• Keywords: Assessment Order; E-assessment Scheme; Income Tax; Natural Justice; Show cause notice; Writ petition
• Section: 143(3); 68; 22; 274; 6; 271AAC(1); 156; 227

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 4TH DAY OF NOVEMBER, 2022 BEFORE THE HON'BLE MR.JUSTICE S.R.KRISHNA KUMAR WRIT PETITION No.1980 OF 2020 (T-IT) BETWEEN: SRI. RAVI BASAVARAJ NAIK S/O SRI. BASAVARAJ NAIK AGED 64 YEARS R/AT. NO.26/23A, ABSHOT LAYOUT SANKEY ROAD CROSS BENGALURU – 560 052. …PETITIONER (BY SRI. M.V.SESHACHALA, SENIORJ COUNSEL FOR SRI. ARAVIND.V. CHAVAN, ADVOCATE) AND: 1. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(2) (1) BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU – 560 095. 2. THE COMMISSIONER OF INCOME TAX-2 BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU – 560 095. 3. CENTRAL BOARD OF DIRECT TAXES NORTH BLOCK, NEW DELHI – 110 001 REP. BY ITS CHAIRMAN. …RESPONDENTS (BY SRI. E.I.SANMATHI., ADVOCATE) THIS W.P. IS FILED UNDER ARTICLES 22 6 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY THE R-1 DATED: 18.12.2019 ANNEX-L AND CONSEQUENTLY DEMAND NOTICE U/S 156 OF THE IT ACT DATED: 18.12.2019 ANNEX-M AND FURTHER NOTICE DATED TO LEVY PENALTY U/S 274 RWS 271AAC(1) DATED: 18.12.2019 ANNEX-N AND ETC. 2 THIS W.P. COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER In this petition, the petitioner has sought for the following reliefs: a. Issue a writ of certiorari to quash the order passed by the first respondent bearing No.ITBA/AST/S/143(3)/2019-20/1022620250(1) dated 18.12.2019 Annexure-L and consequential demand notice u/s. 156 of the IT Act bearing No.ITBA/AST/S/156/2019-20/1022620349(1) dated 18.12.2019 Annexure-M and further notice dated to levy panalty u/s. 274 rws 271AAC(1) bearing No.ITBA/PNL/S/271AAC(1)/2019- 20/1022625291(1) dated 18.12.2019 Annexure- N. b. Pass such other suitable orders as this Hon’ble Court deems to fit grant in the facts and circumstances of the case in the interest of justice and equity. 2. Heard Sri. M.V. Seshachala, learned Senior counsel appearing on behalf of learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3 3. In addition to reiterating the various contentions urged in the Memorandum of Petition and referring to the documents produced by the petitioner, learned Senior Counsel for the petitioner submits that though the impugned proceedings culminating in the impugned order dated 18.12.2019 were initiated prior to 12.09.2019 when the E-Assessment Scheme, 2019 (for short “the said Scheme of 2019) came into force, having regard to the undisputed fact that the said scheme of 2019 came into force during the pendency of the proceedings, it was essential that the respondents followed the mandatory procedure in terms of the said Scheme of 2019, which has not been done by the respondents. In this context, it is pointed out that the scheme envisages that the draft assessment order has to be passed by the respondent and served upon the assessee as per the procedure prescribed under Clause (5) as well as Clause 5(xiv) of the said Scheme of 2019. It is also submitted that every communication, notice or order under the said Scheme of 2019 shall not only be delivered to the petitioner-assessee by forwarding an authenticated copy thereto to the 4 assessee’s registered e-mail address but the same shall also be followed by a real time alert and service of notice/communication shall become complete and complied with only after issuing a real time alert. It is also submitted by learned Senior counsel for the petitioner that though the petitioner submitted a reply in the prescribed format to the respondent as sought for in the notice dated 04.02.2019, subsequent show cause notices were not received by the petitioner, who was not aware of the same and as such, it was not possible for the petitioner to submit replies to the said subsequent show-cause notices and consequently, the impugned assessment order, which proceeded on the basis that the petitioner has not submitted his reply to the show- cause notices dated 19.09.2019, 25.09.2019 and 22.10.2019 are violative of principles of natural justice and the same deserves to be quashed. It is also submitted by learned Senior Counsel that a perusal of the impugned Assessment Order will indicate that the respondents have invoked Section 68 of the Income Tax Act, 1961, which mandates that before accepting or rejecting the explanation offered by the petitioner, it is incumbent upon the 5 respondent to examine the creditors which are named and disclosed in the documents and disclosures by the petitioner/assessee as held by the Apex Court in the case of the Commissioner of Income Tax Vs. Orissa Corporation – (1986) 159 ITR 0078. It is submitted that if an opportunity is given to the petitioner to submit his reply to the notices and if personal hearing is provided to the petitioner, petitioner would be in a position to substantiate his contentions and as such, it is necessary that the impugned order is set aside and the matter is remitted back to the respondents for reconsideration afresh in accordance with law. 4. Per contra, learned counsel for the respondents submits that the petitioner was duly intimated about the proceedings and show-cause notices received by him and the impugned order does not warrant interference by this Court in the present petition. It is also contended that the objections regarding non-compliance of the said scheme was never raised by the petitioner-assessee and he is estopped from putting forth the said contention before 6 this Court in the present petition, which is liable to be dismissed. 5. A perusal of the material on record including the impugned order discloses that the respondents have proceeded to pass the impugned order on the premise that the petitioner has not submitted his response/reply or documents to the show-cause notices dated 19.09.2019, 25.09.2019 and 22.10.2019. In this regard, in the light of the specific assertion on the part of the petitioner that the said notices were not received by him, though the said contention is opposed by the respondents, by adopting a justice oriented approach and to provide one more opportunity to the petitioner to submit his reply to the show- cause notices along with the documents in support of his claim, I deem it just and appropriate to set aside the impugned order and remit the matter back to the respondent for reconsideration afresh in accordance with law. 6. In so far as the contention urged by the petitioner with regard to applicability of the said Scheme of 7 2019 is concerned, in view of my findings above that the impugned assessment order deserves to be set aside and the matter be remitted back to the respondents for reconsideration afresh, issue / question regarding the requirement of following the scheme in respect of the proceedings, which were initiated prior to coming into force of the said Scheme of 2019 may not be relevant for adjudication of present petition. In so far as the contention urged by the petitioner, the judgment of the Apex Court in the case of the Commissioner of Income Tax (supra), it is needless to state that after providing an opportunity to the petitioner to submit its reply and documents to the aforesaid show-cause notices, the respondents would necessarily have to follow the procedure prescribed in law bearing in mind the judgment of the Apex Court in the case of Commissioner of Income Tax (supra) and other judgments of the Apex Court rendered in relation to Section 68 of the Income Tax Act, 1961. 7 In the result, I pass the following: ORDER (i) The petition is hereby allowed. 8 (ii) The impugned order at Annexure-L dated 18.12.2019, the consequential demand notice at Annexure-M dated 18.12.2019 and the impugned further notice at Annexure-N dated 18.12.2019 passed by respondent No.1 is set aside; (iii) The matter is remitted back to the concerned respondents for reconsideration afresh in accordance with law. (iv) Liberty is reserved in favour of the petitioner to submit response, submission etc., along with relevant documents to the show-cause notices, which shall be considered by the respondents, who shall proceed to pass orders in accordance with law and the prescribed procedure and bearing in mind the provisions of Section 68 of the Income Tax Act as well as the judgment of the Apex Court in the case of the Commissioner of Income Tax Vs. Orissa Corporation – 9 (1986) 159 ITR 0078 and other judgments of the Apex Court rendered in the said context. Sd/- JUDGE Bmc "