Dept. Failed To Put Assessee On Notice In Respect Of Section 69A Addition, Assessment Order Not Sustainable: Calcutta High Court
The Calcutta High Court has quashed the assessment order on the grounds that the department has failed to put the assessee on notice in respect of addition under Section 69A of the Income Tax.
The bench of Justice Raja Basu Chowdhury has observed that the determination made by the respondent-department as reflected in the assessment order stands vitiated by reasons of failure on the part of the department to put the petitioner on notice in respect of addition under Section 69A. Since the assessment order is violative of the principles of natural justice, it is unenforceable in law.
The petitioner/assessee was served with a notice in respect of the Assessment Year 2016-17, calling upon the petitioner to show cause as to why a sum of Rs. 1,50,45,00,000 should not be added back to the total income of the petitioner as unexplained cash credits under Section 68 of the Act.
The petitioner duly responded to the notice, and ultimately, the proceeding culminated in an assessment order. As per the assessment order, a sum of Rs. 1,50,45,00,000 was added back to the petitioner's income for the assessment year on account of unexplained money under Section 69A of the Income Tax Act.
The assessee contended that although, in the show cause notice, the variation proposed indicated that the amount of Rs. 1,50,45,00,000 should be added back to the total income of the petitioner as unexplained cash credits under Section 68. However, despite the fact that the petitioner had explained the circumstances as to why the addition should not be made, the Faceless Assessing Unit, by its order, has added back the amount as “unexplained money” under Section 69A.
The assessee contended that the provisions of Sections 68 and 69A are independent of one another. The respondents, having issued a show cause for adding back to the petitioner's income a sum of Rs. 1,50,45,00,000 as 'unexplained cash credits' under Section 68, could not have passed the final order by adding back the said amount as 'unexplained money' under Section 69A without affording the petitioner an opportunity to explain.
The department contended that although the show cause notice was issued by treating Rs. 1,50,45,00,000 as unexplained cash credits under Section 68, the final order was passed by treating the sum as unexplained money under Section 69A. Since the petitioner has an alternative remedy in the form of an appeal, no interference is called for.
Section 68 states that if a sum is found credited in the books of an assessee maintained for the previous year in the absence of any explanation about the nature and source thereof or if the explanation is found to be not satisfactory, the sum so credited may be charged by the income tax as the income of the assessee for the previous year.
Section 69A states that if it is found that the assessee is the owner of any money, jewelry, or other valuable articles and the same is not recorded in the books of accounts, if any, maintained by him for any source of income, and in the absence of any explanation about the nature and source of acquisition of the same or in the absence of satisfactory explanation, it would be deemed to be the income of the assessee for the financial year.
“I find that the language used in Section 69A of the said Act clearly required the assessee to be afforded an opportunity to explain. As such, even if the respondents were of the opinion that in this case Section 69A of the said Act ought to be invoked, in my view the respondents ought to have at least prior to passing of the assessment order granted an opportunity to the petitioner to explain as to why the aforesaid sum of Rs. 1,50,45,00,000/- should not be added back as unexplained money under Section 69A of the said Act,” the court said.
The court observed that, in the absence of any notice, the petitioner was obviously taken by surprise and was denied the opportunity to appropriately explain. The petitioner may or may not have any explanation to offer, but it is not for the Court to decide, nor could the Department prejudge it.
The court held that the order be treated as a show cause. It, however, shall not prevent the respondents from taking any additional point or raising any additional grounds if so advised. In such a case, however, a notice would be required to be served as an addendum to the show cause notice to the petitioner. Such an addendum, if any, must be served within a period of 15 days from the date.
Counsel For Petitioner: Abhratosh Majumdar
Counsel For Respondent: Aryak Dutt
Case Title: Vishal Jhajharia Versus The Assessment Unit, Income Tax Department Faceless Assessment Centre & Ors.
Case No.: WPA 9982 of 2024