The Delhi High Court quashed assessment order issued under Section 147 of the Income Tax Act, 1961 as no Show Cause Notice (SCN) was issued prior to upward revision of income.
Dr Rakesh Gupta, who appeared on behalf of the petitioner, submitted that apart from anything else, the impugned assessment order passed under Section 147 read with Section 144 of the Income Tax Act, 1961 is flawed, as no show cause notice cum draft assessment order was served on the petitioner, proposing variation in income.
The Counsel also argued that on account of this fundamental flaw, the consequent steps taken by the Assessing Officer (AO), i.e., the issuance of demand notice and the penalty notices dated 29.05.2023 and 30.05.2023, are also unsustainable in law.
Zoheb Hossain, senior standing counsel, who appeared on behalf of respondent/revenue, cannot but accept that the law requires the AO to issue a show cause notice cum draft assessment order, proposing variation in income.
A Division Bench of Justices Rajiv Shakdher and Girish Kathpalia observed that “A perusal of the impugned assessment order shows that additions have been made, enhancing the taxable income of the petitioner. Given the fact that no show cause notice cum draft assessment order was issued prior to upward revision of the petitioner’s income, the impugned assessment order is set aside, albeit with liberty to the AO to pass a fresh assessment order. Before the AO passes a fresh assessment order, he will issue a show cause notice cum draft assessment order, indicating therein the proposed variation in income.”
“The petitioner will be at liberty to file a response. The response will be filed within four (4) weeks of receipt of the draft show cause notice cum draft assessment order. The AO will, thereafter, accord personal hearing to the authorized representative of the petitioner. For this purpose, the AO will issue a notice to the petitioner, whereby the date and time of the hearing will be indicated. Needless to say that the AO will pass a speaking assessment order, which would deal with the contentions embedded in the reply, if any, filed by the petitioner” the Bench concluded.
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