2025 (5) TMI 1668 - HC - Income Tax

Reopening of assessment u/s 147 - appellants were afforded no sufficient opportunity to submit their documents and clarifications during the assessment proceedings. HELD THAT - Assessee did not have sufficient opportunity to put-forth their submissions in the form of documents to establish the merits of the matter. It is not that as if the assessees were not diligent in contesting the matter as could be seen from the various replies submitted by the assessees and also the acknowledgement of the e-Proceedings which are enclosed of the stay application. Therefore we are of the view that one more opportunity can be granted to the assessees to go before the AO submit their documents and clarifications so that the assessees have the satisfaction of placing all records before the AO and that the assessment can be redone. Thus we are inclined to interfere with the order of assessment and remand the matter back to the AO for fresh consideration.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

• Whether the order passed under Section 148A(d) and the consequential assessment order under Section 147 of the Income Tax Act, 1961, were passed in violation of the principles of natural justice.
• Whether the Court exercising jurisdiction under Article 226 of the Constitution of India can interfere with such orders despite the availability of an appellate remedy under the Act.
• Whether the appellants were afforded sufficient opportunity to submit their documents and clarifications during the assessment proceedings.
• Whether the delay in filing the appeal should be condoned.
• Whether the peculiar facts and circumstances of the case justify interference with the assessment order and remand for fresh consideration.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Violation of Principles of Natural Justice in Passing Orders under Sections 148A(d) and 147

Relevant Legal Framework and Precedents: The Income Tax Act, 1961, particularly Sections 148A(d) and 147, govern the reassessment procedure where income is alleged to have escaped assessment. Principles of natural justice require that the assessee be given a fair opportunity to present their case before any adverse order is passed. The Court's jurisdiction under Article 226 allows interference with administrative orders if principles of natural justice are violated, notwithstanding the existence of statutory appellate remedies.

Court's Interpretation and Reasoning: The Court noted that the appellants did not challenge the orders on merits but solely on the ground of violation of natural justice. The Assessing Officer issued notices and sought replies, which the appellants submitted through the Income Tax Portal. Subsequently, a show cause notice was issued, and the appellants appeared via video conferencing for hearing. The appellants requested an adjournment to submit additional documents and clarifications, which they could not upload due to technical difficulties. Despite this, the Assessing Officer proceeded to pass the order without considering the appellants' submissions.

Key Evidence and Findings: The appellants submitted multiple replies and documents, including acknowledgment numbers from the Income Tax Portal, evidencing their diligence in contesting the matter. The assessment order itself acknowledged that time was granted till March 14, 2023, but erroneously stated that no reply was filed by the appellants by that date. The Court found this factual finding incorrect.

Application of Law to Facts: Given the appellants' repeated attempts to submit documents and the failure of the Assessing Officer to consider their request for adjournment and additional submissions, the Court found a breach of natural justice. The appellants were denied a fair opportunity to present their case fully before the adverse order was passed.

Treatment of Competing Arguments: The Department argued that the appellants failed to file replies within the stipulated time and that the order should not be disturbed. The Court, however, emphasized the peculiar facts of the case and the appellants' consistent efforts to comply, concluding that the procedural lapse by the Assessing Officer warranted interference.

Conclusions: The Court held that the principles of natural justice were violated, justifying interference with the assessment order under Article 226 despite the availability of statutory appellate remedies.

Issue 2: Jurisdiction of the Court under Article 226 Despite Availability of Appellate Remedy

Relevant Legal Framework and Precedents: Generally, the existence of an adequate statutory appellate remedy bars interference by writ jurisdiction under Article 226. However, courts have consistently held that violation of natural justice constitutes an exception permitting such interference.

Court's Interpretation and Reasoning: The Court acknowledged the existence of an appellate remedy under the Act but emphasized that the appellants' grievance was confined to procedural fairness and violation of natural justice. The Court held that such violation falls within the exceptions permitting interference under Article 226.

Key Evidence and Findings: The impugned order of the Single Bench, which had disposed of the writ petition on the ground that the appellants should exhaust the appellate remedy, was reconsidered. The Court found that the appellants' challenge was not on merits but on procedural grounds, thereby justifying direct interference.

Application of Law to Facts: The Court exercised its discretion to entertain the intra-court appeal and condoned the delay in filing it, recognizing the sufficiency of cause shown and the nature of the grievance.

Treatment of Competing Arguments: The Department contended that the writ petition was premature and that the appellate remedy should be exhausted. The Court distinguished this case on its peculiar facts and procedural irregularities, permitting interference.

Conclusions: The Court confirmed that violation of natural justice constitutes a valid ground for interference under Article 226 notwithstanding the availability of statutory appellate remedies.

Issue 3: Sufficiency of Opportunity to the Assessees to Present Their Case

Relevant Legal Framework: The principles of natural justice require that an assessee be given adequate opportunity to submit evidence, documents, and explanations before an adverse order is passed.

Court's Interpretation and Reasoning: The Court found that although notices were issued and replies submitted, the appellants were not allowed adequate opportunity to submit certain documents and clarifications due to technical difficulties in uploading them. The request for adjournment was not granted, and the order was passed without considering the appellants' submissions.

Key Evidence and Findings: The appellants' submissions, acknowledgments of replies, and the video conferencing hearing record were examined. The Court noted the appellants' diligence in contesting the proceedings and the Assessing Officer's failure to provide a fair opportunity.

Application of Law to Facts: The Court concluded that the appellants were denied a reasonable opportunity to place their case fully before the Assessing Officer, amounting to a breach of natural justice.

Treatment of Competing Arguments: The Department argued that the appellants failed to comply with timelines and that the assessment order was valid. The Court rejected this on the facts, emphasizing the appellants' attempts and the procedural irregularity.

Conclusions: The Court ordered that the appellants be granted one more opportunity to submit all documents and clarifications and that the assessment be redone in accordance with law.

Issue 4: Condonation of Delay in Filing Appeal

Relevant Legal Framework: Courts have discretion to condone delay in filing appeals upon sufficient cause being shown.

Court's Interpretation and Reasoning: The Court found that the appellants had shown sufficient cause for the 90-day delay in filing the appeal and exercised discretion to condone the delay.

Conclusions: The delay was condoned, and the appeal was admitted for hearing.

Issue 5: Whether the Peculiar Facts Justify Interference and Remand

Court's Interpretation and Reasoning: The Court found the facts peculiar, including the appellants' registration under relevant sections of the Act and the procedural irregularities. It was noted that the assessment order itself acknowledged the appellants' credentials and submissions.

Application of Law to Facts: The Court concluded that interference was warranted and remanded the matter to the Assessing Officer for fresh consideration after affording the appellants an opportunity to place all documents and submissions.

Treatment of Competing Arguments: The Department cautioned that this decision should not be treated as a precedent and that delay in filing appeals should be discouraged. The Court agreed but emphasized the uniqueness of the facts.

Conclusions: The assessment order was set aside, and the matter remanded for fresh assessment in accordance with law.

3. SIGNIFICANT HOLDINGS

"The short issue which falls for consideration is whether there has been violation of principles of natural justice and if it is found so, then it would fall within one of the explanations which would entitle the Court exercising jurisdiction under Article 226 of the Constitution of India to interfere with such orders despite there being an appellate remedy provided under the Act."

"Considering the peculiar facts and circumstances of this case, it appears that the assessees did not have sufficient opportunity to put-forth their submissions in the form of documents to establish the merits of the matter."

"We are of the view that one more opportunity can be granted to the assessees to go before the Assessing Officer, submit their documents and clarifications so that the assessees have the satisfaction of placing all records before the Assessing Officer and that the assessment can be redone."

"This judgment and order has been passed considering the peculiar facts and circumstances of this case and not to be treated as a precedent."

Core principles established include:

• Violation of natural justice in tax assessment proceedings justifies interference under Article 226 notwithstanding the availability of statutory appellate remedies.
• An assessee must be afforded a reasonable opportunity to submit documents and clarifications before an adverse order is passed.
• Court has discretion to condone delay in filing appeals upon sufficient cause being shown.
• Remand for fresh assessment is appropriate where procedural irregularities have prejudiced the assessee's right to be heard.

Final determinations:

• The delay in filing the appeal was condoned.
• The impugned assessment order dated March 22, 2024, was set aside.
• The matter was remanded to the Assessing Officer for fresh consideration after affording the appellants an opportunity to submit all documents and clarifications.
• The appellants were permitted to canvass all grounds, including those challenging the order under Section 148A(d) of the Act.
• The order was passed with the caveat that it should not be treated as a precedent and that the appellants must cooperate and avoid further adjournments.