The Madurai Bench of the Madras High Court has remitted a matter back to the Assistant Commissioner of Income Tax citing inadequate response to the Notices rendering lack of Evidence for order. The judgment highlighted the critical importance of procedural compliance and adequate response to official notices issued under the Income Tax Act, 1961.
The case involves Tamil Nadu Viswakarma Mutual Benefit Nidhi Limited, a financial company engaged in receiving deposits and lending to its depositors.
The crux of the matter revolves around the petitioner’s tax filing obligations and its subsequent interaction with the Income Tax department. The petitioner had filed its regular Income Tax Return (ITR) under Section 139 of the Income Tax Act, 1961, on 18th October 2022. However, it failed to adequately respond to several subsequent notices issued by the tax authorities.
The petitioner had received a Show Cause Notice ( SCN ) dated 18th March 2024, which was preceded by notices under Section 142(3) of the Income Tax Act, 1961, on 3rd November 2023, and further notices under Section 142(1) of the Act on 27th October 2023 and 3rd November 2023. Despite these repeated attempts at communication from the Income Tax department, the petitioner’s responses were deemed insufficient.
The impugned order was passed by the Assessing Officer based on the petitioner’s failure to provide adequate documentation within the stipulated time frame. The order was challenged by the petitioner through a Writ Petition filed under Article 226 of the Constitution of India.
The petitioner assessee, represented by Mr. S. I. Muthiah stressed inadequate time for reply to the notices, leading to insufficient document submission challenging adverse order due to procedural lapses.
The respondent revenue, the Assistant Commissioner of Income Tax, represented by Mr. N. Dilip Kumar contended that the petitioner’s failure to furnish documents within the stipulated period warranted adverse inference and hence upheld the order citing lack of cooperation and evidence.
The court noted the petitioner’s inability to produce relevant documents had led to the adverse order issued by the Assessing Officer. However, the Madurai Bench of the Madras High Court, while acknowledging the procedural lapses on the part of the petitioner, also recognised the need for a fair and thorough examination of the case.
The single bench of Justice C. Saravanan emphasised the fundamental principles of natural justice and due process. The court observed that while the Assessing Officer was constrained by the lack of adequate materials and proper replies from the petitioner, there remained a possibility for the petitioner to present its case effectively.
In result, the Madras High Court ordered the remittance of the matter back to the Income Tax authority, directing them to pass a fresh order on merits and in accordance with the law within a period of six months from the date of receipt of the court’s order. Additionally, the petitioner was instructed to provide a proper reply to the SCN dated 18th March 2024 within 60 days from the receipt of the court’s order.
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