In White Pay LLP vs. The Income tax Officer, a division bench of the Bombay High Court held that the Assessing officer has an obligation to provide reasons to the assessee while reducing the normal notice period of thirty days in terms of proviso to Section 220(1) of the Income Tax Act, 1961.
A Notice of Demand or Section 156 Tax Notice is issued by the Income Tax Department when any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed. The amount which is demanded in the Section 156 demand notice has to be paid by the Assessee within a period of 30 days after the date of receipt of the notice. As per the proviso to Section 220(1) if the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days is allowed, he may, with the previous approval of the Joint Commissioner, direct the Assessee to pay that sum within less than the normal period of thirty days.
In this case, the Petitioner, White Pay LLP, was served with a penalty of Rs. 1.88 Crores. A Notice of Demand was also served on the same day. The Assessing Officer (A.O.) had directed the Petitioner to pay the amount within 7 days. No reasons for the curtailment of the normal 30 day period were given. The petitioner made an application for stay of the Notice of Demand, as he wanted to make an appeal before the Commissioner of Income Tax Appeals (CIT (A). He also sought a copy of the reasons for curtailing the normal thirty day notice period. However, the A.O rejected the application on the ground that a stay could only be considered after the payment of 20% of the penalty. Thereafter, the A.O attached the Bank Account of the Petitioner. Aggrieved by the action of the A.O, a petition under Article 226 of the Constitution of India was filed before the Bombay High Court.
The division bench of Justice Sandeep K. Shinde and Justice M.S Sanklecha reaffirmed its decision in the case of Firoz Tin Factory vs. Asstt. Commissioner of Income Tax. in which the court had made it clear that the reasons for reduction of normal period should be communicated to the assessee, while invoking proviso of Section 220(1) of the Income Tax Act, 1961.
“The Assessing Officer shall in accordance with the decision of this Court in Firoz Tin Factory (supra) provide the reasons which lead the Revenue to restrict the notice period under Section 156 of the Act to only 7 days instead of the normal 30 days period” ordered the bench.
