Madras HC quashes I-T Assessment Order adding Rs. 16Cr Unexplained Expenditure without Providing Reasonable Time, Orders Portal Reopening [Read Order]

The Madras High Court directed the Income Tax department to open the portal for the petitioner. The bench quashed the assessment order adding Rs. 16 crores as unexplained expenditure without providing reasonable time to explain.

The petitioner, Imperial Shipping Service, who had filed the return of income for the assessment year 2022-23 on 30.12.2022, with a declared income of Rs.1,19,06,850/-, received notices under Section 143(2) and Section 142(1) of Income Tax Act, 1961 upon scrutiny.

Subsequently, upon receiving a show cause notice dated 19.03.2024 proposing a variation concerning purchases reflected in the petitioner's GSTR 1 statement, the petitioner requested for further time on 20.03.2024. Despite the request, the petitioner was granted only until 21.03.2024 to respond to the notice.

The petitioner responded on the given date, providing the required ledger account statements of suppliers, asserting the correctness of freight charges, and confirming payments made through bank channels against invoices.However, the impugned assessment order was issued without due consideration of these submissions.

The petitioner's counsel submitted that the order's basis for confirming the proposed variation was the petitioner's alleged failure to provide invoices and income statements. Furthermore, the entire expenses claimed by the assessee were treated as unexplained expenditure and added to their income under relevant sections of the Income Tax Act.

Mrs. S. Premalatha, representing the respondents, contended that reasonable opportunities were provided to the petitioner, referring to three prior notices under Section 143(2) and Section 142(1).

A single bench of Justice Senthilkumar Ramamoorthy observed show cause notice dated 19.03.2024 calls upon the petitioner to show cause on or before 20.03.2024 by enclosing all

supporting documents such as bills, vouchers and bank statements. By reply dated 20.03.2024, the petitioner requested for further time to respond. By reply thereto dated 20.03.2024, the respondents stated that extension is being granted only up to 21.03.2024 since the limitation period is approaching.

However, examining the impugned assessment order, the bench noted that the respondents refused to provide further time since the limitation period expires on 31.03.2024. By refusing further time, the entire expenses claimed by the assessee of the aggregate value of Rs.16,20,67,647/- were added to the income of the assessee as unexplained expenditure.

Thus, the court opined that without providing reasonable time to the petitioner, the proposed variation was confirmed. In these circumstances, the interest of justice warrants that a reasonable opportunity be provided to the petitioner.

The Madras HC, observing the denial of reasonable time to the petitioner, set aside the assessment order dated 26.03.2024, remanding the matter to the first respondent for reconsideration.

The petitioner was given fifteen days to submit a detailed reply with relevant documents. The respondents were directed to provide access to the portal for uploading the reply. Following this, the first respondent was instructed to provide a reasonable opportunity, including through video conference hearing, and issue a fresh assessment order within three months from receiving the petitioner's reply.

Accordingly, the writ petition was disposed of.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates