Atma Ram Saria Vs. Additional Commissioner of Income Tax, Delhi - (High Court of Delhi) (25 Apr 2022)

Assessing Officer is bound to furnish reasons within a reasonable time

MANU/DE/1357/2022

Direct Taxation

Present writ Petition has been filed challenging the notice issued by the Respondent under Section 148 of the Income Tax Act, 1961 and the assessment order passed by the Respondent under Section 147 read with Section 144B of the IT Act for the Assessment Year 2013-14.

Learned counsel for the Petitioner states that, during the year under consideration, the Petitioner sold the shares of Croitre Industries Limited/Mahavir India Limited through online transaction at the Bombay Stock Exchange through the SEBI registered Stock Broker and had received the sale price in cheques on which Securities Transaction Tax at applicable rates had been paid. He states that though as per the impugned assessment order, there is no record of filing of return of income pursuant to Section 148 notice on e-filing portal, yet the Petitioner had filed return on 27th April, 2021 as is apparent from record. He also states that the Respondent had violated Section 144B of the Act as it has passed the assessment order without issuing a prior show cause-cum-draft assessment order.

The Supreme Court in GKN Driveshafts (India) Ltd. vs. Income Tax Officer and Ors., has held that when a notice under Section 148 of the IT Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.

In the present case, from the documents on record, it is apparent that the Petitioner-assessee had filed his return of income for the Assessment Year 2013-14 on 27th April, 2021. However, the reasons for reassessment were supplied to the Petitioner-assessee for the first time as late as 26th March, 2022. Thereafter even when the Petitioner-assessee had filed his objections, the same were disposed of prior to passing of the impugned assessment order.

It is apparent that the impugned assessment order has been passed contrary to the procedure stipulated by the Supreme Court in GKN Driveshafts (India) Ltd. Income Tax Officer and Ors. Accordingly, the impugned assessment order, demand notice and penalty notice are set aside and the Assessing Officer is directed to decide the objections filed by the Petitioner-assessee in accordance with law within ninety days.

Tags : DEMAND NOTICE PENALTY LEGALITY