2024 (4) TMI 497 - HC - Income Tax

Validity of Show Cause Notice and the consequential order of assessment as it suffers from the vice of pre-determination - SCN says as noticed from the database of the department there exist an amount of Rs. 4, 22, 83, 715 and sale of equity share is Rs. 37, 000/- since there is no explanation offered why the same should not treated unexplained investment for the relevant period under consideration and taxed accordingly. HELD THAT - Though titled as Show Cause Notice the submission of the learned counsel for the petitioner that it is really not in the realm of show cause notice but one where it suffers from the vice of pre-determination has merit. Any order which suffers from the vice of pre-determination is arbitrary and would thereby fall foul of Article 14 of the Constitution of India. In this regard it may be relevant to rely on the judgment in the case of Siemens Ltd v. State of Maharashtra and others 2006 (12) TMI 203 - SUPREME COURT wherein it was held that whenever there is a demand the same may no longer be in the realm of notice and would suffer from the vice of pre-determination. Further the show cause notice does not even indicate the time limit within which the assessee / petitioner is required to respond to the same. The show cause notice is bad the order of assessment thus stands vitiated. Considering the submissions of both sides and the facts of the case this Court is inclined to set aside the impugned order. The petitioner shall submit its objection within a period of 8 weeks from the date of receipt of a copy of this order by treating the assessment order as show cause notice. The Respondent shall thereafter proceed to complete the assessment in accordance with law.

Summary

Issues:
The issues involved in the judgment are the challenge to the impugned order dated 29.12.2019 for the assessment year 2017-18, focusing on the validity of the assessment order, service of notices, and the grounds of challenge raised by the petitioner.

Validity of Assessment Order:
The petitioner challenged the assessment order on various grounds. Firstly, it was contended that the show cause notice lacked a proposal and displayed pre-determination on the part of the respondent, as it concluded that certain transactions would be treated as unexplained income. The petitioner argued that the assessment order was served only on the Chartered Accountant and not directly to the petitioner, leading to delayed awareness of the order. Moreover, it was asserted that one of the bank accounts considered as unexplained income did not belong to the petitioner but to the Electricity Board, indicating an error in the assessment order.

Service of Notices:
The petitioner raised concerns regarding the service of notices, particularly the assessment order, which was allegedly sent to an outdated email address of the Chartered Accountant. This raised issues of proper communication and awareness on the part of the petitioner. The respondent defended the service of notices by stating that the Chartered Accountant's address was listed in the assessee profile, justifying the mode of service.

Grounds of Challenge:
The petitioner contended that the show cause notice and subsequent assessment order suffered from pre-determination, which was deemed arbitrary and in violation of Article 14 of the Constitution of India. The petitioner argued that the show cause notice did not specify a time limit for response, rendering it defective and vitiating the assessment order. The court, after considering arguments from both sides, set aside the impugned order and directed the petitioner to submit objections within a specified period, treating the assessment order as a show cause notice for further assessment proceedings.