Assessment Order passed without giving copy of valuation report to assessee quashed

Assessment Order passed without giving copy of valuation report to assessee quashed by High Court

In a recent judgment, High Court of Telangana has quashed Assessment order passed based upon valuation report without giving copy of valuation report to assessee.

ABCAUS Case Law Citation:
ABCAUS 4108 (2024) (06) HC

In the instant case, the assesses being daughter and father had filed Writ Petitions challenging the order passed by the National Faceless Assessment Centre u/s 143(3) of the Income Tax Act, 1961 (the Act).

The petitioners had initially filed their income tax return vide e-filing. However, due to oversight, there was an error reflected under the long term capital gains. The petitioners therein filed a revised return and these revised returns were processed and accepted by the respondent income tax authorities.  

Subsequently, the revised returns were subjected to scrutiny. However, the Petitioners alleged that the impugned order was passed without considering their submissions.

It was contended that the impugned orders were bad for the simple reason that they were passed relying upon the valuation report submitted by the Sub-Registrar. It was the contention of the petitioners that the valuation report and its details were not made available to the petitioners while issuing show cause notice and therefore there was clear violation of the principles of natural justice.

The whole contention of the petitioners was that once when the respondent authorities in the course of passing of an order relies upon certain documents which in the instant cases were the Sub-Registrar’s valuation report, it was incumbent upon the Assessing Officer to have made available the Sub-Registrar’s report to the petitioners enabling them to file their response to the said reports. In the absence of which the assessment. order was passed taking into consideration certain extraneous documents and the contents of which were either not made available to the petitioners nor was it formed part of the show cause notices itself. Thus, the entire action stands vitiated on this ground alone.

The Income Tax Department contended that the petitioners in fact had not raised this ground all along and therefore they were estoppeled from raising this ground at this belated stage. It was further contended that upon plain reading of the two show cause notices by itself would reveal that the basis for issuance of the said impugned orders was the Sub-Registrar’s report; however, the petitioners did not seek for the said report or its contents. Nor did they raise their objections on the same at any point of time.

The Hon’ble High Court observed that it stood established that the Sub-Registrar’s report was not attached to the show cause notices nor was the contents of the same made available to the petitioners. Another striking feature was the fact that the impugned orders had been passed strictly based upon valuation report submitted by the Sub-Registrar.

The Hon’ble High Court observed that the Hon’ble Supreme Court has dealt with that issue elaborately and observed that “during the course of the adjudication, the fundamental principle is that material which is used against a person must be brought to notice.” The Hon’ble Supreme Court also laid down principles.

The Hon’ble High Court noted that the Sub-Registrar’s report was not made available to the petitioners along with the show cause notices or at a subsequent stage at all. Admittedly, two show cause notices were issued to the petitioners but in either of the two, a copy of the Sub-Registrar’s report was not enclosed. Thus, from the ratio laid down by the Hon’ble Supreme Court, the impugned orders smacks arbitrariness on the part of the respondent authorities in passing the same.

Further the Hon’ble High Court observed that another striking feature was the fact that the show cause notices issued and the final assessment orders passed at a very short period of time gap which gives an interference against the respondent authorities in showing undue haste in passing of the assessment orders. The assessment order was passed in less than a period of six days from the issue of notice.

In the given factual matrix, the Hon’ble High Court set aside and quashed impugned orders having passed without providing a copy on the basis of which the proceedings were initiated.

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