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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Sms India (p) Ltd. – Appellant
Versus
Assistant Commissioner of Income Tax, Circle Int. Tax 3(1)(2), New Delhi – Respondent
W.P.(C) 7049 of 2023 & CM Nos.27419-20 of 2023
Decided On : 23-05-2023
Income Tax Act - Assessment Year 2019-20 - The court set aside the impugned order and consequential notice issued under the Income Tax Act, remitting the matter to the Assessing Officer for reexamination based on the certificate issued by a third party and the merger of the petitioner company with another company.
Fact of the Case:
The writ petition challenged a notice and order issued under the Income Tax Act for Assessment Year 2019-20, claiming that the income said to have been escaped assessment was never accrued to the petitioner.
Finding of the Court:
The court set aside the impugned order and consequential notice, remitting the matter to the Assessing Officer for reexamination based on the certificate issued by a third party and the merger of the petitioner company with another company.
Issues: Challenge to notice and order under the Income Tax Act, 1961 for Assessment Year 2019-20, and the contention that the income said to have been escaped assessment was never accrued to the petitioner.
Ratio Decidendi: The court found that the notice and order were flawed as they were directed towards a company which no longer existed due to a merger, and the income in question was disputed based on a certificate issued by a third party.
Final Decision: The court disposed of the writ petition, setting aside the impugned order and consequential notice, and remitted the matter to the Assessing Officer for reexamination.
JUDGMENT
[Physical Hearing/Hybrid Hearing (as per request)]
Rajiv Shakdher, J. (Oral)
CM No.27420/2023
1. Allowed, subject to just exceptions.
W.P.(C) 7049/2023 & CM No.27419/2023 [Application filed on behalf of the petitioner seeking interim relief]
2. Issue notice.
2.1 Mr Aseem Chawla, learned senior standing counsel, accepts notice on behalf of the respondent/revenue.
3. Given the directions that we propose to issue, Mr Chawla says that counter-affidavit need not be filed, and he will argue the matter based on the record presently available with the court.
3.1 Therefore, with the consent of learned counsel for the parties, the matter is taken up for hearing and final disposal at this stage itself.
4. This writ petition concerns Assessment Year (AY) 2019-20.
5. This writ petition seeks to challenge notice dated 23.03.2023 issued under Section 148A(b) of the Income Tax Act, 1961 [in short, "Act"].
5.1. Besides this, challenge is also laid to the order dated 24.04.2023 passed under Section 148A(d) of the Act.
5.2. In addition thereto, the petitioner has assailed the consequential notice of even date, i.e., 24.04.2023, issued under Section 148 of the Act.
6. Mr Rajan Bhatia, who appears on behalf of the petitioner, says that the income said to have been escaped assessment was never accrued to the petitioner.
7. A perusal of the record shows that, according to the respondent/revenue, the petitioner had received, during the relevant period, rent on plant and machinery from an entity going by the name Gannon Dunkerley & Co. Ltd.
7.1. The amount crystallized by the respondent/revenue in this regard is Rs.32,65,403/-.
8. Mr Bhatia says that this amount neither accrued, nor was received, by the petitioner. In this regard, reliance is placed on the certificate issued by an entity going by the name, Gannon Dunkerley & Co. Ltd.
8.1. The relevant part of the certificate reads as follows:
"TO WHOM IT MAY CONCERN
It is certified/confirmed that an amount of INR 32,65,403/- & TDS 65,308/- reflecting in the 26AS of Financial Year 2018-19, under PAN-AAACI1682F of SMS Iron Technology Pvt. Ltd. This amount is neither related to SMS Iron Technology Pvt. Ltd. (PAN-AAACI1682F) nor to SMS India Pvt. Ltd. (PAN- AABCS8348B).
Inadvertently wrong PAN AAACI1682F mentioned while filling & filing our TDS return for the F.Y 2018-19 instead of correct one.
We also assure to SMS Iron Technology Pvt. Ltd. that we/our concerned staff has start working on this issue and will revise the return as earliest."
9. Furthermore, Mr Bhatia says that the proceeding is flawed, as the notice issued under Section 148A(b) and the order passed under Section 148A(d) of the Act, are directed towards a company which is no longer in existence.
10. It is stated that SMS Iron Technology (P) Ltd. merged with the petitioner company pursuant to a scheme sanctioned by the NCLT via order dated 01.04.2016.
11. Having regard to the aforesaid position, in our view, this is a matter where the Assessing Officer (AO) could have verified the exact position by issuing notice to Gannon Dunkerley & Co. Ltd.
12. Therefore, we are inclined to set aside the impugned order passed under Section 148A(d), and the consequential notice issued under Section 148 of the Act.
13. The matter is remitted to the AO for reexamination.
13.1. The AO will be at liberty to seek information from Gannon Dunkerley & Co. Ltd., in line with the certificate issued by them, which is appended on page 136 of the case file and is marked as Annexure P-4.
14. The AO, before reexamining the case, will issue notice to the authorized representative of the petitioner, setting forth therein the date and time of hearing.
15. The AO will also grant an opportunity to the petitioner of hearing through its authorized representative.
16. Needless to add, the AO will pass a speaking order, a copy of which will be furnished to the petitioner.
17. The writ petition is disposed of, in the aforesaid terms.
18. Consequently, the pendin
The court established that failure to supply information required for assessment invalidates the reassessment notice, supporting due process in tax proceedings.
Compliance with procedural requirements and the right to a fair hearing are essential in proceedings under the Income Tax Act, 1961.
The importance of timely assertion and the requirement for verification and personal hearing before passing an assessment order under the Income Tax Act.
Notices issued under the Income Tax Act must provide clear and specific information to the assessee, and vagueness or lack of clarity may lead to their quashing.
The Assessing Officer must provide adequate reasoning for reassessment actions and ensure compliance with natural justice principles.
The court upheld the authority of the Assessing Officer to reassess income under amended provisions of the Income Tax Act, reinforcing that objections can be addressed during reassessment proceedings....
The court emphasized the importance of the Assessing Officer considering the explanation given by the petitioner and the need to establish the taxable income in the hands of the legal entities.
A personal hearing is essential in tax assessment procedures to ensure administrative fairness; failure to provide one invalidates the assessment orders.
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