Reopening assessment without furnishing information violates principles of natural justice: Calcutta High Court

The Calcutta High Court in the case Maharaja Edifice Pvt. Ltd. Vs. Union of India & Ors, the bench comprising of Justice T.S. Shivagnanam and Justice Bivas Pattanayak observed and has held that the failure to furnish information based on which assessment was reopened is a violation of principles of natural justice.

The assessment order was challenged by the assessee/appellant under the provisions of the Income Tax Act 1961 on the ground that it has been passed in violation of the principles of natural justice.

A notice under Section 148A (b) was issued by the Assessing Officer stating that the he has information which suggests that income chargeable to tax has escaped the assessment within the meaning of Section 147 of the Act. It was stated in the notice that the details of the information and enquiry, if conducted, are enclosed with the notice in Annexure A.

Therefore, the response was submitted by the assessee through e-proceedings, pointing out that they had not furnished the Annexure said to have been appended to the notice under Section 148A (b). No reply was given by the Assessing Officer but another notice under Section 148A (b) of the Act was issued.

It was contended by the department that a second notice was issued as the first notice did not provide the minimum time of seven days as it had provided only five days’ time. Further, along with the notice, it has been stated that information available to the department is enclosed in Annexure A. No information was there in Annexure A but it is titled as “case related information detail.” Through, e-proceedings, the assessee filled the response. The assessee along with their response attached various documents. Thereafter, the order was passed under Section 148A (b) of the Income Tax Act, 1961.

The Court noted that it is surprising to find that in the order the officer has furnished information which runs to more than seven paragraphs. At the first instance, this information was not furnished to the assessee and what was appended to the notice dated 21.03.2022 was only case-related information details. Further, it was held by the Court that there had been a violation of principles of natural justice as the appellant was not furnished with full information based on which the assessment was sought to be reopened. The order under Section 148A Clause (d) is overturned, and to the position when he issued the notice under Section 148A(b), the matter was remanded to the Assessing Officer.

Accordingly, the court directed the assessee to take note of the information mentioned in the order dated 7.04.2022 passed under Clause (d) of Section 148A as the basis for reopening and the assessee within 10 days was directed to submit their objections, from the date of receipt of the order.

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