Difficult To Submit Complete Reply To The SCN In Less Than 12 Hours: Gujarat High Court Quashes Assessment Order

The Gujarat High Court quashed an assessment order made by the income tax authorities without granting the petitioner an opportunity to be heard. The court found that the show cause notice cum draft assessment order was issued with an extremely short deadline, leaving the petitioner less than 12 hours to respond.

The case stems from the petitioner, Dineshkumar Chhaganbhai Nandani's filing of an income tax return for the Assessment Year 2014-2015 in July 2014, declaring a total income of Rs. 3,39,730/-. Following the processing of the return under Section 143(1) of the Income Tax Act, 1961, the Income Tax Officer (Respondent no. 1) issued a notice under Section 148 of the Act in March 2021, requesting the petitioner to file an income tax return for the same assessment year. The petitioner promptly complied by submitting the required return of income.

Subsequently, the petitioner received several notices under Section 143(2) and 142(1) of the Act, requesting additional details. In February 2022, a show cause notice under Section 144 of the Act was issued. The petitioner submitted preliminary objections and supporting evidence, urging the authorities to drop the assessment proceedings. However, the objections raised by the petitioner were rejected in March 2022, as conveyed through a letter.

In March 2022, the Additional/Joint/Deputy/Assistant Commissioner of Income Tax (Respondent no. 2) issued another show cause notice, allowing the petitioner only 12 hours to submit a reply. The petitioner swiftly filed part submissions/replies and requested an opportunity for a video conference hearing, which was granted. Despite these efforts, an assessment order was passed under Section 147 read with Section 144B of the Act; the petitioner, therefore moved the High Court.

The division bench of Justices Vipul M Pancholi and DM Desai, observed that the requested documents were not provided to the petitioner, and no opportunity for cross-examination was given within the extremely limited time frame of less than 12 hours. “Even otherwise, within less than 12 hours, it is difficult for the petitioner to submit complete reply to the respondents,” the bench noted.

Advocate BS Soparkar, representing the petitioner, argued that the respondents' act of allowing only 12 hours to file a reply to the show cause notice was a clear violation of the principles of natural justice. He further argued that the petitioner had filed a hasty reply, but the authorities failed to provide adequate opportunity for a hearing.

Advocate Soparkar pointed out that the petitioner had also requested certain documents for cross-verification and the chance to cross-examine a witness whose statement formed the basis for the petitioner's explanation. However, the requested documents were not provided, and no opportunity for cross-examination was granted, thereby violating the principles of natural justice. He, therefore, urged the High Court to quash the assessment order on these grounds and remand the matter back to the authorities for fresh consideration.

Alternatively, the Standing Counsel, Advocate Karan Sanghani, representing the respondents, opposed the petition while contending that the petitioner had failed to reply to various notices issued prior to the show cause notice cum draft assessment order.

He stated that the petitioner had been asked to provide necessary details but failed to do so. Moreover, he emphasized that the petitioner had submitted a reply to the show cause notice and had been granted an opportunity for a video conference hearing, Therefore, Sanghani asserted that the petitioner's claim of only 12 hours being provided for a reply was unfounded.

It was also contended that by not granting such adequate opportunity to the petitioner, no prejudice is caused to the petitioner as the respondents issued various notices to the petitioner to which the petitioner did not reply.

However, rejecting the Standing Counsel’s argument, the bench opined, “when the show cause notice-cum-draft assessment order is issued to the petitioner, reasonable/adequate opportunity was required to be given to him. In the present case, adequate opportunity was not given to the petitioner and therefore only on this ground the petition deserves to be allowed.”

Consequently, the impugned assessment order was quashed and set aside by the bench.

Case Title: Dineshkumar Chhaganbhai Nandani Versus Income Tax Officer,Ito Wd 2(1)(1), Rkt R/Special Civil Application No. 7864 Of 2022

Case Citation: 2023 Livelaw (Guj) 108

Appearance: Mr B S Soparkar(6851) For The Petitioner(S) No. 1 Mr Karan Sanghani For Mrs Kalpanak Raval(1046) For The Respondent(S) No. 1 Served By Rpad (N) For The Respondent(S) No. 2

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