Income Tax SCN issued less than 7 day Response Time violates CBDT’s SOP: Karnataka HC Sets aside Orders against Bangalore Metro Rail Corp Ltd [Read Order]

The Karnataka High Court held that a Show Cause Notice issued with less than the mandatory seven-day response period under the Standard Operating Procedure for faceless assessments is invalid, setting aside the income tax assessment order, penalty notices, and consequential demand issued against Bangalore Metro Rail Corporation Limited (BMRCL).

BMRCL, the petitioner, challenged multiple actions taken by the Income Tax Department in relation to Assessment Year 2023-24. The case arose when the Assessment Unit issued a Show Cause Notice dated 27 January 2025 requiring BMRCL to submit a reply by 31 January 2025 at 11:15 a.m., providing less than seven days’ time.

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Subsequently, an assessment order under Section 144 read with Section 144B of the Income TaxAct, 1961, a computation sheet, a demand notice under Section 156, and penalty notices under Section 271AAC(1) and Section 272A(1)(d) were issued. Aggrieved, BMRCL approached the High Court seeking quashing of these actions.

Counsel A. Shankar, and Annamalai S., argued that the Show Cause Notice violated the mandatory seven-day response period required under the Standard Operating Procedure governing faceless assessments. This breach of the minimum timeline resulted in a denial of opportunity to respond, thereby violating principles of natural justice.

Bench of Justice S.R. Krishna Kumar held that issuing a notice on 27 January 2025 and directing a reply by 31 January 2025 provided less than the minimum seven-day period mandated under the governing Standard Operating Procedure. The Court upheld that insufficient response time led to breach of natural justice principles.

The Court ruled that the assessment order, demand notice, and penalty notices were vitiated by procedural illegality. Consequently, all impugned notices and orders were set aside, and the matter was remitted to the Assessing Officer to allow BMRCL to file its reply and proceed afresh strictly in accordance with law.

Therefore, the petition was allowed.

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