No Prejudice when Assessee “clearly understood” Purport and Import of Income Tax Notice issued before 30 years: Bombay HC [Read Order]

In a significant ruling the Bombay High Court ruled that no prejudice is caused to the assessee when the assessee “clearly understood” the purport and import of income tax notice issued before 30 years.

The question is as to whether an alleged defect in the notice issued to the appellant under Section 271(1)(c) read with Section 274 of the Income Tax Act, in regard to which the appellant had never raised an objection from the very inception, that is since last 30 years (from 19 August, 1993), can now be permitted to be raised, in the absence of any prejudice being caused to the appellant – assessee.

The appeal under section 260A of the Income-tax Act, 1961 was filed by the appellant/assessee, being aggrieved by the judgment and order dated 30 October, 2001 passed by the Income-tax Appellate Tribunal ( ITAT ), whereby the respondent/Revenue’s appeal against the order passed by the Commissioner of Income-tax (Appeals) (“CIT(A)”) has been allowed.

It is after about 20 years of admission of the appeal, the issue has been raised merely because in the meantime, there were certain decisions rendered by the Courts to hold that the Assessing Officer would be required to tick mark the relevant ground as falling under Section 271(1)(c) of the Income Tax Act being attracted for levy of penalty, namely either the first limb of “concealment of particulars of income” or the second limb of “furnishing inaccurate particulars of such income”.

A Division Bench of the Madras High Court in Sundaram Finance Ltd. vs. Assistant Commissioner of Incometax, Co. Circle VI(4), Chennai observed that “If the case of the assessee is that the assessee was put to a prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. It was observed that on facts, the Court could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee “clearly understood” what was the purport and import of notice issued under section 274 read with Section 271 of the Income Tax Act.

A Division Bench comprising Justices Jitendra Jain and Justice GS Kulkarni observed that “If the party has taken up a particular position not only at the early stage of the proceedings but even before the appellate forums, it is not open to a party to appropriate and reprobate and resile from such position. When a question of fact namely whether a prejudice was at all caused, was not raised before the forums below, the parties were estopped from urging it before the appellate forum. Even otherwise and considering the well settled position in law, even a legal right which may accrue to a party can be waived. Such party would be later on estopped / precluded from raising any question on a breach of a right which stood waived.”

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