Best Judgment Assessment Passed U/s 144 Without Giving Seven Day's Time To Taxpayer To Respond To SCN: Bombay HC Quashes Assessment
Pankaj Bajpai
14 Aug 2024 1:50 PM GMT
Finding that the AO has arbitrarily exercised jurisdiction by granting an extension of only two days to the Assessee in filing reply to the SCN, the Bombay High Court quashed the assessment and remanded the proceedings for passing fresh assessment order u/s 144 read with Section 144B.
Tax assessment under Section 144 of the Income Tax Act allows Assessing Officers to assess tax liability using the best judgment assessment process. It is initiated when taxpayers fail to file returns or provide required information.
The Division Bench comprising of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan observed that “approach on the part of the Respondents was clearly in breach of the SOP, which has also resulted in breach of the principles of natural justice, which guaranteed to the Petitioner a fair and reasonable opportunity to respond to the SCN under the procedure prescribed, in undertaking the assessment proceedings”. (Para 8)
This has surely caused a prejudice to the Petitioner, added the Bench.
Facts of the case:
Prior to the Assessment Order being passed, the Petitioner was issued a Show Cause Notice (SCN) calling upon to show cause on the variations which were sought to be made, in the return as filed by the Petitioner. The Petitioner contended that such notice was generated and uploaded on the portal on Mar 22, 2024 at late evening. Even when next day was Saturday, the Petitioner objected to the said SCN alleging that it was granted less than 24 Hours to respond the SCN, which was in breach of the principles of natural justice and amounted to a flaw in the decision-making process.
The AO replied to such objections and recorded that as a matter of last opportunity to the Petitioner to make proper and complete submissions with all documentary evidence, the time to reply to SCN was extended up-to Mar 26, 2024. The Petitioner, however, could not submit its response within the short extension of time, and in these circumstances, the assessment was completed.
Observations of the High Court:
The Bench accepted the contention of the Petitioner that hurried exercise of passing of the assessment order was arbitrary and in breach of the principles of natural justice, inasmuch as the time-limit of seven days to respond to the SCN was not complied, in passing the Assessment Order.
The Bench observed that the SOP, as issued under the provisions of Section 144B(6)(xi) of the Act, clearly provides a response time of seven days from the issuance of the Show Cause Notice to the assessee to submit his reply.
In the present case, the Bench found that after issuance of the SCN on Mar 22, 2024, sufficient time was available to the AO to pass an assessment order even if he was to grant seven days time to the Petitioner to file reply to the SCN.
However, the Bench found that the AO has granted only two days time at the first instance and thereafter extended the same by another two days, which apart from being not sufficient, was certainly, not in accordance with the time to respond the SCN, as prescribed under the SOP.
Hence, the High Court remanded the matter to the AO and directed for opening of the portal and allow the petitioner to submit its detailed response to the SCN within a period of seven days thereafter.
Counsel for Petitioner/ Assessee:
Counsel for Respondent/ Revenue:
Case Title: Cheftalk Food and Hospitality Services vs. ITO
Case Number: W.P No. 2919 of 2024
