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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
S. B. Distributors Acting Through Its Partners Petitioner 2, 3 And 4 & Ors. – Appellants
Versus
Income Tax Officer Ward 35(1) Delhi & Ors. – Respondents
W.P.(C) 8949 of 2023
Decided On : 07-07-2023
Assessment Order - Income Tax - The court set aside the impugned assessment order due to the failure to issue a show cause notice cum draft assessment order prior to upward revision of the petitioner's income, and directed the Assessing Officer to pass a fresh assessment order after issuing the necessary notice and allowing the petitioner to file a response and have a personal hearing.
Fact of the Case:
The petitioner challenged the assessment order passed under Section 147 read with Section 144 of the Income Tax Act, 1961, on the grounds of fundamental flaw in the absence of a show cause notice cum draft assessment order proposing variation in income.
Finding of the Court:
The court found that the impugned assessment order was flawed due to the absence of a show cause notice cum draft assessment order, and set it aside with directions for the Assessing Officer to pass a fresh assessment order after following the necessary procedures.
Issues: Failure to issue show cause notice cum draft assessment order, validity of demand notice and penalty notices.
Ratio Decidendi: The court emphasized the requirement for the Assessing Officer to issue a show cause notice cum draft assessment order proposing variation in income before making any upward revision, and directed the AO to follow the prescribed procedure for assessment.
Final Decision: The impugned assessment order was set aside, and the Assessing Officer was directed to pass a fresh assessment order after issuing the necessary notices and allowing the petitioner to respond and have a personal hearing.
JUDGMENT
Rajiv Shakdher, J. (Oral)
CM No.33933/2023
1. Allowed, subject to just exceptions.
W.P.(C) 8949/2023 & CM Appl. 33932/2023 [Application filed on behalf of the petitioner seeking interim relief]
2. Issue notice.
2.1. Mr Zoheb Hossain, learned senior standing counsel, accepts notice on behalf of the respondents/revenue.
3. In view of the directions that we propose to pass, Mr Zoheb Hossain says that counter-affidavit need not be filed in the matter, and that he will argue the matter based on the record presently available with the court.
4. Dr Rakesh Gupta, who appears on behalf of the petitioner, says that apart from anything else, the impugned assessment order dated 29.05.2023 passed under Section 147 read with Section 144 of the Income Tax Act, 1961 [in short, "the Act"] is flawed, as no show cause notice cum draft assessment order was served on the petitioner, proposing variation in income.
5. Dr Gupta says that on account of this fundamental flaw, the consequent steps taken by the Assessing Officer (AO), i.e., the issuance of demand notice dated 29.05.2023 and the penalty notices dated 29.05.2023 and 30.05.2023, are also unsustainable in law.
6. Mr Zoheb Hossain, learned senior standing counsel, who appears on behalf of respondent/revenue, cannot but accept that the law requires the AO to issue a show cause notice cum draft assessment order, proposing variation in income.
7. A perusal of the impugned assessment order shows that additions have been made, enhancing the taxable income of the petitioner.
8. Given the fact that no show cause notice cum draft assessment order was issued prior to upward revision of the petitioner's income, the impugned assessment order is set aside, albeit with liberty to the AO to pass a fresh assessment order.
9. Before the AO passes a fresh assessment order, he will issue a show cause notice cum draft assessment order, indicating therein the proposed variation in income.
10. This exercise will be completed by the AO within the next four (4) weeks.
11. The petitioner will be at liberty to file a response. The response will be filed within four (4) weeks of receipt of the draft show cause notice cum draft assessment order.
12. The AO will, thereafter, accord personal hearing to the authorized representative of the petitioner. For this purpose, the AO will issue a notice to the petitioner, whereby the date and time of the hearing will be indicated.
13. Needless to say that the AO will pass a speaking assessment order, which would deal with the contentions embedded in the reply, if any, filed by the petitioner.
14. As a result of the directions issued hereinabove, the demand notice dated 29.05.2023, and the penalty notices dated 29.05.2023 and 30.05.2023, shall also collapse.
15. The above-captioned petition is disposed of, in the aforesaid terms.
16. Consequently, the pending application shall stand closed.
17. Parties will act based on the digitally signed copy of the order.
The necessity of issuing a show cause notice cum draft assessment order before making any upward revision in income for assessment under the Income Tax Act, 1961.
The impugned assessment order and consequential notices were set aside as they were passed without issuance of a show cause notice-cum-draft assessment order, as required by Section 144B of the Act a....
Failure to adhere to the directions in the Standard Operating Procedure (SOP) for Assessment Unit, which led to the quashing of the impugned notices and order.
Failure to consider a request for accommodation on medical grounds by the Assessing Officer amounted to a breach of principles of natural justice, leading to the setting aside of the impugned assessm....
The court established that a draft assessment order under the Income Tax Act should be treated as a show cause notice, ensuring procedural fairness.
The central legal point established in the judgment is the mandatory requirement of issuing a prior show cause notice and draft assessment order under the Faceless Assessment Scheme as stipulated in ....
Assessment orders must adhere strictly to procedural requirements, including show cause notices, to ensure fairness in the income assessment process.
Failure to inform the petitioner about the decision on their request for accommodation constituted a breach of principles of natural justice, warranting the setting aside of the assessment order and ....
The absence of a show cause notice in tax assessments violates natural justice, requiring annulment of any adverse variations to taxable income.
Assessment orders under the Income Tax Act must comply with mandatory procedural requirements, including issuing a show-cause notice and draft assessment order, to uphold principles of natural justic....
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