AO must grant time for reply if assessee requests adjournment under 148A(b)

By | March 16, 2025
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AO must grant time for reply if assessee requests adjournment under 148A(b)

This case highlights the crucial aspect of providing a reasonable opportunity to be heard in reassessment proceedings under Section 148A. Here’s a summary:

Issue:

  • Whether an Assessing Officer (AO) is required to grant time to an assessee to file a reply to a notice issued under Section 148A(b) if the assessee requests an adjournment.
  • Whether the AO’s actions in this case violated principles of natural justice.

Facts:

  • The AO issued a notice under Section 148A(b) to the assessee, seeking to reopen the assessment for the assessment year 2018-19.
  • The notice required the assessee to file a reply by March 15, 2022.
  • The assessee requested an adjournment on March 15, 2022.
  • The assessee filed a detailed response on March 22, 2022.
  • The AO did not grant the adjournment or communicate its denial to the assessee.
  • The AO passed an order under Section 148A(d) on March 30, 2022, and issued a notice under Section 148 on March 31, 2022, without considering the assessee’s reply.

Outcome:

  • The court held that the AO is required to grant time to the assessee if they request an adjournment.
  • The court found a clear breach of the principles of natural justice on the part of the AO.
  • The impugned order passed under Section 148A(d) and the notice issued under Section 148 were set aside.
  • The matter was remanded back to the AO.
  • The AO was directed to furnish the information that was the basis for the issuance of the notice under Section 148A(b) to the assessee and then pass a fresh order under Section 148A(d).

Key Points:

  • Section 148A: This section mandates that the AO conduct an inquiry and provide an opportunity to be heard before issuing a notice under Section 148.
  • Principles of Natural Justice: These principles require that individuals be given a fair hearing and that decisions be made impartially.
  • Reasonable Opportunity: The AO must provide a reasonable opportunity to the assessee to respond to notices and present their case.
  • Adjournment: A reasonable request for an adjournment should be considered.
  • Communication: The AO should communicate their decisions to the assessee.
  • Remand: When procedural irregularities occur, courts can remand cases back to the AO for proper proceedings.

In essence, this case emphasizes that procedural fairness is paramount in tax proceedings. The AO cannot arbitrarily disregard requests for adjournments or fail to consider the assessee’s submissions. Proper procedure must be followed.

HIGH COURT OF GUJARAT
Pratul Krishnakant Shroff
v.
Deputy Commissioner of Income-tax
BHARGAV D. KARIA and D.N. Ray, JJ.
R/SPECIAL CIVIL APPLICATION NO. 8348 of 2022
JANUARY  27, 2025
B.S. Soparkar, Adv., for the Petitioner. Varun K. Patel, Adv., for the Respondent.
JUDGMENT
Bhargav D. Karia, J.- Heard learned advocate Mr. B.S.Soparkar for the petitioner and learned Senior Standing Counsel Mr.Varun Patel for the respondent.
2. Rule returnable forthwith. Mr.Varun Patel, learned Senior Standing Counsel waives service of notice of rule on behalf of the respondent. Since the controversy involved is short, the matter is finally heard and disposed of.
3. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the orders dated 30th March, 2022 passed under Section 148A(b) of the Act, 1961 (for short “the Act”) and the notice dated 31.3.2022 issued under Section 148 of the Act on the ground that the reply filed by the petitioner is not considered while passing the impugned order holding that it is a fit case to reopen the assessment for the Assessment Year 2018-19.
4. The brief facts of the case are as under:-
4.1 The petitioner filed return of income on 24.08.2018 offering total income at Rs.588,10,15,830/- for the Assessment Year 201819. The return of the income was scrutinized and the assessment order under Section 143(3) of the Act was passed at the return income on 17.03.2021.
4.2 Thereafter, the petitioner received the show cause notice under Section 148A(b) of the Act issued on 08.03.2022 along with the details of information that income chargeable to tax has escaped assessment for the Assessment Year 2018-19 requiring the petitioner to file reply before 15th March, 2022.
4.3 The petitioner made an application for adjournment on 15th March, 2022 indicating that the detailed reply is under preparation and sought time for 15 days to file the reply on merits. The petitioner also sought certain materials/documents to file the reply as stated in the said application.
4.4 The petitioner thereafter filed a detailed response on 22nd March, 2022 running into 500 pages explaining as to why there is no income which has escaped assessment and why the proceedings are required to be dropped.
4.5 The respondent-Assessing Officer disposed off the objections filed by the petitioner by the impugned order under Section 148A(d) of the Act dated 30th March, 2022 and issued the impugned notice dated 31st March, 2022 under Section 148 of the Act. Being aggrieved the petitioner has preferred this petition.
5. Learned advocate Mr.B.S.Soparkar appearing for the petitioner stated that the respondent -Assessing Officer ought to have granted the adjournment sought for by the petitioner on 15th March, 2022 and could not have ignored the voluminous reply filed by the petitioner on 22nd March, 2022. It was submitted that on perusal of the impugned order issued under Section 148A(d) of the Act, the respondent-Assessing Officer has not referred to the reply filed by the petitioner though the impugned order is passed on 30th March, 2022 on the ground that the petitioner did not submit the reply within the stipulated time to the notice under Section 148A(b) of the Act.
5.1 It was further submitted that the respondent -Assessing Officer has also not provided the information sought for and the information, details and the documents sought for by the petitioner in the letter of adjournment dated 15th March, 2022.
5.2 It was submitted that it was incumbent upon the respondent- Assessing Officer to provide the details and the information in his possession along with the notice issued under Section 148A(b) of the Act so as to enable the petitioner to file effective reply and nonfurnishing of such information in possession of the Assessing Officer would result into the breach of principles of natural justice by not providing an opportunity to the petitioner for filing the reply in relation to the information which is the basis for reopening the assessment.
5.3 In support of his submissions, the reliance is placed on the decision of this Court in case of Yuva Trading Co. (P) Ltd. v. Income Tax Officer reported in [2023] 150 taxmann.com 187/292 Taxman 598 (Gujarat) as well as the decision of the Bombay High Court in the case of Anurag Gupta v. Income Tax Officer reported in [2023] 150 taxmann.com 99/454 ITR 326 (Bombay).
6. Per contra learned Senior Standing Counsel Mr. Varun K.Patel for the respondent submitted that it is not in dispute that the petitioner did not file any reply nor sought any adjournment till 15th March, 2022 and on the last date, has sent a letter for adjournment. It was therefore, submitted that the impugned order is rightly passed under Section 148A(b) of the Act, as the petitioner failed to file the reply within the stipulated time and accordingly, the Assessing Officer was justified in passing the impugned order ignoring the reply dated 22nd March, 2022 filed by the petitioner.
6.1. In support of his submissions, the reliance was placed on the following averments made in affidavit-in-reply filed on behalf of the respondent :-
“5. It is further submitted that it was contended by the petitioner that the impugned order u/s 148A(d) is passed in violation of provisions of section 148A which necessitates the respondent to consider the reply of the petitioner filed against the notice issued u/ s 148A(b) of the Act as his reply dated 22.03.2022 is not considered. In this regard, it is submitted that the notice referred by the petitioner was issued on 04.03.2022 and in response to this notice the assessee/petitioner was requested to file his submission/clarification in this regard by the 15.03.2022. The assessee, however, by letter dated 15.03.2022 sought an adjournment of 15 days in the case without any sufficient cause. It is further submitted that this action on the part of the petitioner is nothing but a ploy to delay the proceedings. Instead, by seeking adjournment, was in a way trying to delay the on going proceedings. For want of any response or clarification in this regard from the petitioner’s end even after a considerable time from the date of issue of notice u/s 148A(b) of the Act, the respondent relied on the information which stated that the petitioner is a beneficiary of such transaction and that he had not fully and truly disclosed all material facts in his return of income for year under consideration. Hence, such amount (Rs 60,68,33,883/-), the genuineness of which was not proven by the petitioner had escaped from being assessed to tax within the meaning of section 147 of the IT Act, 1961.
7 Having heard the learned advocates appearing for the respective parties and considering the materials available on the record, it is not in dispute that the petitioner sought the time of 15 days for furnishing the reply. The petitioner also sought for various information and documents which are relevant for the reasons recorded in notice under Section 148A(b) of the Act. The petitioner required the copies of the statement of JM Financial Asset Management Limited recorded during or after such survey as stated in the reasons and various other documents.
7.1 However, the respondent-Assessing Officer did not grant adjournment nor communicated the denial of adjournment to the petitioner after 15th March, 2022 and without considering the reply dated 22nd March, 2022 which was filed by the petitioner on merits after referring to the information sought for by the petitioner as no reply was given by the Assessing Officer passed the impugned order.
7.2 It appears that the impugned order under Section 148A(d) of the Act was passed on 30th March, 2022 though, the petitioner has filed the reply dated 22nd March, 2022. Thus, there is a clear breach of principle of natural justice on the part of the respondentAssessing Officer for not considering the reply filed by the petitioner on the ground that the petitioner did not file the reply within the stipulated time i.e. on or before 15th March, 2022. On perusal of the provision of under Section 148A(b) of the Act as it existed at the relevant point of time, the respondent -Assessing Officer is required to grant time to the petitioner to file the reply if the petitioner prays for the adjournment. Section 148A(b) reads as under :-
Section 148A(b) in The Income Tax Act, 1961
(b) provide an opportunity of being heard to the assessee, [***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
7.3 On perusal of the above provision, it is clear that the respondent-Assessing Officer which could not have rejected the adjournment sought for by the petitioner as provided in the said provision and could have granted the time to the petitioner as the last date for issuance of notice under Section 148 of the Act was on 31.3.2022.
8. The petitioner had already filed the detailed reply on 22nd March, 2022 could also have been considered by the respondent while passing the impugned order holding that it is a fit case to reopen the assessment without considering the reply filed by the petitioner containing more than 500 pages.
9. In view of the above facts, the impugned order passed under Section 148A(d) of the Act dated 30th March, 2022 and the notice issued under Section 148 of the Act dated 31st March, 2022 are hereby quashed and set aside.The matter is remanded back to the Assessing Officer to furnish the information in his possession which is the basis for issuance of the notice under Section 148A(b) of the Act so as to enable the petitioner to file further reply if required, in addition to the reply filed on 22nd March, 2022. After considering the reply dated 22nd March, 2022 and further reply which may be filed by the petitioner on receipt of the information from the respondent -Assessing Officer, the fresh denovo order under Section 148A(d) of the Act shall be passed in accordance with law. Such exercise shall be completed within a period of six (6) months from the date of receipt of copy of this order. Rule is made absolute to the aforesaid extent. No order as to costs.