Power of Reopening Assessment is a Power, which is to be Sparingly used for Adequate Reasons: Calcutta HC quashes Assessment Order on Failure to Comply Natural Justice Principles

Quashing the assessment order on failure to comply natural justice principles the Calcutta High Court remarked that the power of reopening assessment is a power, which is to be sparingly used for adequate reasons.

The intra-court appeal by the writ petitioner, Pramod Kumar Madhogarhia, is directed against the order in which the appellant had challenged the order passed by the respondents under Section 148A(d) of the Income Tax Act, 1961. The Single Bench of the Court had dismissed the writ petition on the ground that during the pendency of the writ petition, an order under Section 147 of the Income Tax Act has been passed, which is an appealable order. Aggrieved by the dismissal of the writ petition, the appellant has filed the present appeal.

The respondents issued notice under Section 148A(b) of the Income Tax Act. The said notice was served through e-mail on 16th March, 2022 and the appellant’s contention is that both 17th March, 2022 and 18th March, 2022 were holidays. Nevertheless, with whatever records, which were there in their possession, an interim reply was sent on 17th March, 2022. The respondents had passed the order under Section 148A(d) of the Income Tax Act on 30th March, 2022, which was impugned in the writ petition.

The appellant’s case is that due to want of time, the appellant could not produce the bank statements and other documents, more particularly when 17th March, 2022 and 18th March, 2022 were holidays. The Assessing Officer appears to have not given an opportunity of hearing to the assessee nor has specifically dealt with the correctness of the ledger, which were enclosed along with the interim reply dated 17th March, 2022.

A Division Bench of the Calcutta High Court comprising Chief Justice TS Sivagnanam and Justice Hiranmay Bhattacharyya observed that “The opportunity afforded at the first instance should be an effective opportunity because the power of reopening of an assessment is a power, which is to be sparingly used for adequate reasons. Therefore, we are convinced to hold that there has been violation of principles of natural justice.”

The Bench further directed the assessee to submit a comprehensive reply enclosing all documents in support of his claim and the Assessing Officer shall redo the process in accordance with law and that the assessee cannot raise the point of imitation before the Assessing Officer as this order has been passed accepting the case of the assessee that there has been violation of the principles of natural justice, alleged.

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