Income Tax SCN on Variations Issued without  Providing time to respond: Calcutta HC Grants time to All India Trinamool Congress [Read Order]

The Calcutta High Court granted time to All India Trinamool Congress to respond on the show cause notice issued under section 148 of the Income Tax Act, 1961 with variations. The decision was made as the court found that the respondent department failed to provide time to respond.

The petitioner challenged the order passed under Section 148A(d) of the Income Tax Act, 1961 ( “said Act”), dated 27th March, 2024 for the assessment year 2017-18, the sanction order under Section 151 of the said Act, in respect of the selfsame assessment year and the notice issued under Section 148 of the said Act dated 27th March, 2024, in respect of the selfsame assessment year, the instant writ petition has been filed.

Mr. Khaitan, senior advocate appearing for the petitioner by drawing attention of the Court to the show-cause notice issued under Section 148A(b) of the said Act dated 9th February, 2024 for the assessment year 2017-18 would submit that the said notice has been issued, inter alia, on the ground of violation of the proviso to Section 13A of the said Act, as also on the ground that the respondents had on the basis of information available with them found discrepancies in the deposits made in the petitioner’s various bank accounts, and on the basis thereof had ascertained the differential figure of income which according to the respondents had escaped assessment.

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It was submitted that special provisions have been made relating to income of political parties so as to, not include certain income in the total income of the previous year of such political party, subject to compliance of certain conditions as set forth therein. According to Mr. Khaitan, the conditions provided under Section 13A of the said Act, have all been complied with by the petitioner. He would however, submit that in the instant case, there was no reason for the petitioner to seek benefit of Section 13A of the said Act for reasons noted hereunder.

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It is the petitioner’s case that the petitioner had duly responded to the aforesaid show-cause notice and had given a detailed reply explaining the discrepancies identified by the respondents. Mr. Khaitan would then by placing before this Court the provisions of Section 147 and 148 of the said Act, the first proviso and the explanation thereto, would submit that only in case there is information with the assessing officer that income has escaped assessment that a notice under Section 148 can be issued.

It was also argued that the Principal Chief Commissioner of Income Tax while granting approval did not take into consideration the materials on record and had acted mechanically. While explaining the delay in moving the instant petition, he would submit that the petitioner was preoccupied in filing writ petitions for the previous years. However, according to him, the delay should not disentitle the petitioner from seeking relief since, the basis of issuance of a notice under Section 148 of the said Act is under challenge.

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Per contra, Mr. Dutt, advocate representing the respondents would submit that admittedly in this case not only the order under section 148A(d) of the said Act but the approval under section 151 of the said Act and the notice issued under Section 148 of the said Act were all issued on 27th March, 2024. No steps had been taken by the petitioner to challenge the same until filing of this petition.

It was found that the same had been issued, inter alia, for non-compliance of certain terms of Section 13A of the said Act which provides for special provisions related to incomes of political parties and on the ground of information available with the authorities that income had escaped assessment.

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The return submitted by the petitioner would demonstrate that the petitioner had suffered a loss and therefore, ordinarily, as rightly submitted by Mr. Khaitan the exemption under Section 13A of the said Act would not have made a difference. This aspect in my view ought to have been considered by the sanction granting authority while granting sanction under Section 151 of the said Act.

While granting the sanction, the sanction granting authority being the Principal Chief Commissioner of Income Tax did not consider the reply issued by the assessee at least the sanction order does not reflect the same. Though, Mr. Dutt, would submit that such reply was duly considered, at this stage, from the available records there is no such reflection especially having regard to the disclosure made in serial no. 15 of the aforesaid sanction order.

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The aforesaid raises serious doubts as regards the sanctioning authority’s application of mind while granting sanction under Section 151 of the said Act. The entire records are yet to be placed before this Court and having regard thereto, it shall not be prudent at this stage to arrive at the finding that the approval is unsustainable in law.

The assessment has since proceeded further and a show-cause notice proposing variation has already been issued on 13th March, 2025. From the disclosure made in the writ petition, it would transpire that in July, 2024, the petitioner had intimated the respondents that it was in the process of challenging the order passed under Section 148A(d) of the said Act and the notice issued under Section 148 of the said Act, both dated 27th March, 2024 for the assessment year 2017-18.

The single bench of Justice Raja Basu Chowdhury viewed that the petitioners despite having made out a prima facie case is not entitled to stay of further proceedings, though a limited protection may be afforded.

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The bench granted liberty to the petitioner to respond to the notice proposing variation dated 13th March, 2025 by 04:30 p.m. on 29th March, 2025. Accordingly, if such response is filed, the Faceless Assessment Unit shall upon accepting such response and upon providing opportunity of hearing, if sought for, shall take the proceeding under Section 148A of the said Act to its logical conclusion.

The respondents are directed to communicate the aforesaid order to the concerned officer for him to take appropriate steps in the matter.

To Read the full text of the Order CLICK HERE

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