Assessment order passed u/s 147 of the Income Tax Act without considering Reply of Assessee is Violative of Natural Justice Principle: Kerala HC [Read Order]

The Kerala High Court held that the assessment order passed under Section 147 of the Income Tax Act, 1961 without considering the reply of the assessee is violative of the principle of natural justice.  The Court found that the department failed to consider the reply filed by the assessee.

Mr Mammed Komban, the petitioner assessee challenged the final assessment order passed under the Income Tax Act, 1961 and notice issued under Section 147 read with Sections 144 and 144B of the Act. 

The Income Tax Act, 1961, empowers the Assessing Officer (AO) to reassess income that may have escaped assessment (“IEA”) under Sections 147 and 148 of the act. Section 144 of the act deals with the Faceless Assessment, which is an assessment carried out as per the best judgment of the Assessing Officer based on all relevant material he has gathered. This assessment is carried out in cases where the taxpayer fails to comply with the requirements specified in section 144.

Under the show cause notice and draft assessment order, a response was submitted by the petitioner before the 1st respondent. However, the petitioner states that, when the final assessment order was issued, it reflected non consideration of the response to the draft assessment notice.

Standing counsel for the respondents submitted that the petitioner has submitted the response after the expiry of the period for submitting such response.  On the other hand, the petitioner submitted that the petitioner got only two days’ time to submit the response.

Justice Murali Purushothaman found that the objection of the petitioner was not taken into consideration. Since the assessment order brings penal consequences to the petitioner, the 1st respondent ought to have considered reply before finalising the assessment order. The Court found that the assessment order was issued in violation of the principles of natural justice and set aside the same. 

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