The Kerala High Court quashed an assessment order passed under the Income Tax Act, 1961 as there was violation of the natural justice principles.
The petitioner is an assessee under the provisions of the Income Tax Act, 1961. The petitioner did not file its return of income for the assessment year 2018-19. However, as per the information flagged in accordance with the risk management strategy formulated by the CBDT, the petitioner had deposited cash of Rs.1,26,41,200/- in the Bank account and had withdrawn cash of Rs.31,87,595/- in the financial year 2017-18 relevant to the assessment year 2018- 19.
The petitioner was issued notice under Section 148 of the Income Tax Act and was provided an opportunity of being heard under Section 148A(b) of the Income Tax Act. The petitioner was issued show cause notice to explain as to why the said cash deposit of Rs.1,26,41,200/- should not be assessed as income chargeable to tax, which had escaped assessment within the meaning of the provision of Section 147 of the Income Tax Act for the assessment year 2018-19.
The counsel for the petitioner submitted that there has been violation of the principles of natural justice, inasmuch as the petitioner requested on 2.3.2023 for adjournment to give response to the notice dated 23.2.2023, and the status of the said request would suggest that the petitioner was granted time for response, but without date. Therefore, the petitioner had bona fide believed that the petitioner was granted time till 17.3.2023.
The Senior Standing Counsel for the Income Tax Department, was not in a position to dispute that on petitioner’s request adjournment date for submission of the response to the show cause notice dated 23.2.2023 was not mentioned and it was also not reflected on whether the request was accepted or not, because the status of the request would show open. However, no adjourned date for submission of response was mentioned.
A Single Bench of Justice Dinesh Kumar Singh observed that “I am in agreement with the learned counsel for the petitioner that in the absence of date mentioned for submission of the response to the show cause notice dated 23.2.2023, the petitioner had bona fide believed that the petitioner’s request for adjournment to 17.3.2023 to give response to the show cause notice dated 23.2.2023 was accepted. However, before 17.3.2023, the impugned order, Ext.P6, has been passed on 14.3.2023, and therefore, I am of the considered view that there was violation of the principles of natural justice.”
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