Double Taxation of Income Already Offered to Tax in Subsequent Assessment Year: Orissa HC Overrides Appellate Remedy and Remits Order [Read Order]

The Orissa HighCourt recently set aside an assessment order passed under Section 147 read with Section 144 and 144B of the Income Tax Act, 1961, observing plausibility of double taxation of the same income upon finding that the petitioner had already disclosed the concerned income in a subsequent assessment year.

The Assessee Antarjyami Mohapatra, filed a writ petition before the High Court against the assessment order dated 21.03.2023 for the Assessment Year (AY) 2018–19 passed by the National Faceless Assessment Unit, New Delhi, raising allegations of the department having double taxed income from capital gains already declared in AY 2019–20.

The petitioner had sold agricultural land for ₹61.87 lakhs on 12.02.2018 and offered the resultant gains to tax in AY 2019–20, as reflected under Form 26AS and the ITR records and had also paid requisite tax on the same.

A notice dated 11.03.2022 under Section 148A(b) alleging escapement of income in AY 2018–19 was issued to the petitioner, but the petitioner failed to respond due to ill health and unable to substantiate his claim before the authority.

Although a subsequent notice under Section 142(1) and dated 17.02.2023 was replied to, the authority continued with the assessment, resulting in double taxation of the same transaction.

Before the Orissa High Court, Tushar Kanti Satapathy, Debasish Hazara, K.R. Satapathy, and B.K. Panda represented the petitioner and submitted that the consideration received on account of aforesaid sale of immovable property has been shown under the Head of Income ‘Long Term Capital Gains’, claiming exemption under Section 54F of the Income Tax Act along with the returns filed for Assessment Year 2019-20.

Senior Standing Counsel Subash Chandra Mohanty and Junior Standing Counsel Avinash Kedia appearing for the respondents argued that the writ petition was not maintainable owing to availability of an alternative appellate remedy.

The Division Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman found merit in the petitioner’s plea of procedural unfairness and observed that the assessment had been completed without giving the petitioner an effective opportunity to substantiate that the transaction had already been taxed in the subsequent year.

Regarding the topic of an available appellate remedy, the Orissa High Court referred to the decision in Tin Box Company v. CIT (2001) and held that denial of a fair hearing was sufficient ground to invoke Article 226 despite the existence of appellate remedies.

In light of the observations made, the Orissa High Court set aside the impugned assessment order and remitted the matter back to the Assessing Officer for fresh adjudication upon proper opportunity of hearing.

The High Court further directed the petitioner to appear before the Assessing Officer within two weeks and produce the relevant documents, whereafter the authority shall pass a fresh order within two months after granting personal hearing. It was clarified that failure to comply would revive the original assessment order automatically.

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