Calcutta High Court | A Division Bench comprising of T.S. Sivagnanam*, CJ., and Hiranmay Bhattacharyya, J., held that the opportunity afforded the petitioner at the first instance to file reply to the Show Cause Notice was not an effective opportunity, therefore, there was a violation of principles of natural justice.
Factual Matrix
In the instant matter, a Show Cause Notice under S. 148-A(b) of the Income Tax Act, 1961 (the Act) was issued by the Assessing Officer (the AO) alleging that the petitioner had entered into purchase transactions therefore needed to provide corroborative evidence and authentic details/documents to support said transactions and later passed an order dated 30-03-2022 before the petitioner could file submissions in a proper and effective manner in response to the show cause notice.
Aggrieved by the order dated 30-03-2022 passed by the AO, the petitioners preferred a writ petition before Single Bench of this Court. The Single Bench dismissed the impugned writ petition vide order dated 04-04-2023 on the ground that during the pendency of the writ petition, an assessment order under S. 147 of the Act has been passed on 22-03-2023 and the said order is an appealable order. Aggrieved by the dismissal of the impugned writ petition, the appellant preferred an appeal before this Court challenging impugned order dated 04-04-2023.
Moot Point
Whether the assessment order dated 22-03-2023 and the impugned order dated 04-04-2023 is passed by violating the principle of natural justice?
Law Point
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S. 147 of the Income Tax Act, 1961 – Income escaping assessment
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S. 148-A of the Income Tax Act, 1961 – Conducting inquiry, providing opportunity before issue of notice under S. 148
Court’s Observation
The Court observed that the time granted to the petitioner to submit his reply was inadequate, especially when the source of information based on which the reopening proceedings were initiated was not disclosed to the petitioner, hence, disabling the petitioner from putting forth his submissions in a proper and effective manner. The Court further observed that the AO had neither given appropriate opportunity of hearing to the petitioner nor had dealt with the issue of correctness of the ledger as enclosed along with the interim reply to the Show Cause Notice.
The Court observed that there has been violation of principles of natural justice as the opportunity afforded at the first instance to the petitioner was not an effective opportunity and effective opportunity should be provided because power of reopening of an assessment should be used for adequate reasons.
“…the opportunity afforded at the first instance should be an effective opportunity because the power of reopening of an assessment is a power, which is to be sparingly used for adequate reasons. Therefore, we are convinced to hold that there has been violation of principles of natural justice.”
Court’s Verdict
The Court set aside the Show Cause Notice under S. 148-A(b) of the Act, order dated 30-03-2022 passed by the respondents under S. 148-A(d) of the Act and impugned order dated 04-04-2023 passed by the single bench on the grounds that the opportunity of being heard provided at first instance should be an effective opportunity.
The Court restored the matter at the stage of the Show Cause Notice before the AO and directed the petitioner to submit a comprehensive reply along with all documents supporting the claim. The court further directed the AO to provide the petitioner with the relevant documents based on which the Show Cause Notice was issued.
[Pramod Kumar Madhogarhia v. Union of India, 2023 SCC OnLine Cal 1244, order dated 12-05-2023]
*Judgment by Chief Justice T.S. Sivagnanam
Advocates who appeared in this case :
Mr. Himangshu Kumar Ray, Mr. Paban Kumar Ray, Ms. Shiwani Shaw and Mr. Nitish Bhandary, Counsel for the Appellant;
Ms. Smita Das De, Counsel for the Respondents.
