The Calcutta High Court has observed that failure of revenue authorities to put assessee on notice about addition made under section 69A of Income Tax Act, 1961 is violative of natural justice Principles.It was observed that the determination made by the respondents as is reflected in the assessment order dated 20th March, 2024 stands vitiated by reasons of failure on the part of the revenue authorities to put the petitioner on notice in respect of addition under Section 69A of the said Act.
Vishal Jhajharia , the petitioner challenged the order passed under Section 147 read with Section 144 and 144B of the Income Tax Act, 1961 ( “said Act”). The petitioner was served with a notice dated 21st February, 2024 in respect of the Assessment Year 2016-17, calling upon the petitioner to show cause as to why a sum of Rs.1,50,45,00,000/- should not be added back to the total income of the petitioner, as unexplained cash credits under Section 68 of the said Act.
The petitioner had duly responded to the said notice by a communication in writing dated 23rd February, 2024 and ultimately the above proceeding culminated in an assessment order dated 20th March, 2024, whereunder a sum of Rs.1,50,45,00,000/- was added back to the petitioner’s income for the aforesaid Assessment Year on account of unexplained money under Section 69A of the said Act.
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Mr. Majumder, senior advocate representing the petitioner,submitted that although, in the show cause notice the variation proposed indicated that the amount of Rs.1,50,45,00,000/-should be added back to the total income of the petitioner as unexplained cash credits under Section 68 of the said Act, however, despite the fact that the petitioner had explained the circumstances as to why such addition should not be made, the Faceless Assessing Unit by its order which is impugned in the present writ petition has added back the aforesaid amount as “unexplained money” under Section 69A of the said Act. By referring to the provisions of Section 68 and 69A of the said Act, it is submitted that the provisions stand independent of one another.
The respondents having issued a show cause for adding back to the petitioner’s income for a sum of Rs.1,50,45,00,000/-as ‘unexplained cash credits’ under Section 68 of the said Act, could not have passed the final order by adding back the said amount as an ‘unexplained money’ under Section 69A of the said Act, without affording the petitioner an opportunity to explain.
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Mr. Dutt, advocate enters appearance on behalf of the revenue authorities. He acknowledges the fact that although the show cause notice was issued by treating Rs.1,50,45,00,000/-as unexplained cash credits under Section 68 of the said Act, the final order was passed by treating the aforesaid sum as unexplained money under Section 69A of the said Act.
The respondents proposing variation in the return of income filed by the petitioner for the Assessment Year 2016-17 had issued a show cause notice and had, inter alia, called upon the petitioner to explain as to why a total amount of Rs.1,50,45,00,000/-should not be added back to the total income of the petitioner for the year under consideration as unexplained cash credits under Section 68 of the said Act.
A single bench of Justice Raja Basu Chowdhury observed that the language used in Section 69A of the said Act clearly required the assessee to be afforded with an opportunity to explain. In absence of any notice, the petitioner was obviously taken by surprise and was denied the opportunity to appropriately explain. The petitioner may or may not have any explanation to offer but the same is not for this Court to decide, nor could the respondents prejudge the same.
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It was observed that the determination made by the respondents as is reflected in the assessment order dated 20th March, 2024 stands vitiated by reasons of failure on the part of the revenue authorities to put the petitioner on notice in respect of addition under Section 69A of the said Act. Since, the above is violative of the principles of natural justice, the order impugned becomes unenforceable in law and is declared as such.
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