The Gujarat High Court headed by Justice N.V.Anjaria and Justice Bhargav D. Karia quashed the demand of the Income Tax of Rs. 101 Crore on the ground of violation of principles of natural justice.
The succinct fact is that the petitioner is engaged in the business of refining and trading different kinds of edible oil from crude and raw cotton wash oil. The petitioner filed a return of income declaring total income at Rs.1,97,88,000/.
According to the petitioner, the respondent authority passed the final assessment order, which contained a significant addition of Rs. 92,42,86,979, without giving the petitioner a chance to be heard.
Further, the petitioner claimed, violated the principles of natural justice because it was based on new information that was never mentioned in the assessment order or any of the earlier notices.
According to Hardik Vora, counsel for petitioner, section 144B of the Income Tax Act of 1961 provides the Assessing Officer (AO) the authority to develop a draft assessment order based on already-available information and to ask other units for additional investigation, verification, or technical support. Then, depending on the results of such inquiries and verifications, the AO prepares the draught assessment order in accordance with the Act’s clause (xv) requirements.
Further submitted that the petitioner assessee is not aware regarding issuance of notices under section 133(6) of the Income Tax Act were issued by the review unit or any other unit as it is an internal departmental working.
M.R. Bhatt, the counsel for respondent, contended that the assessee had been given ample opportunities, beginning with the issuance of a notice under section 143(2) of the Income Tax Act and continuing notices under section 142(1) as needed, and that as a result, the principles of natural justice were upheld, including the grant of the assessee’s right to a fair hearing and a reasonable opportunity to be heard.
The petitioner further posited that unsecured loans totaling Rs. 68,86,84,206 were listed in the audited accounts of the petitioner; however, when asked to prove the identity, veracity, and creditworthiness of the creditors, the petitioner instead of providing the aforementioned information claimed that the amount of Rs. 68,86,84,206 was a trade payable rather than an unsecured loan.
Additionally submitted that the assessee has efficacious alternative remedy under section 246A of the Income Tax Act and therefore, the petitioner should be relegated to avail such remedy.
Additionally, the National Faceless Assessment Center for review report delivered the draft assessment order with show cause notice to the Review unit. Additionally, the planned additions were for Rs. 1,17,05,44,981 according to the show cause notice dated 12.05.2021; however, in the final assessment decision dated 23.09.2021, the additions were decreased to Rs. 92,42,86,979.
The bench settled that after issuing a show cause notice-cum-draft assessment order to give the petitioner an opportunity to be heard within 12 days of the date of receipt of a copy of this order, the respondent/Revenue will be free to proceed with assessment under the provisions of section 144B of the Income Tax Act in manner permitted by law.
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