SCN not giving minimum 7 days time to respond to proposed variation–Assessment set aside

Show cause not giving minimum seven days to respond to proposed variation – Assessment order set aside

In a recent judgment, the Hon’ble High Court has set aside the assessment order passed by not giving minimum prescribed time of seven days to respond to show cause for proposed variation

ABCAUS Case Law Citation:
ABCAUS 3957 (2024) (04) HC

In the instant case, the assessee had filed a Writ Petition against the assessment order made under section 147 read with section 144-B Income Tax Act, 1961 (the Act).

The main grievance of the assessee was that no opportunity was provided to the assessee despite a variation prejudicial to the interest of assessee was proposed, by serving a notice calling upon him to show-cause as to why the proposed variation should not be made.

The case of the assessee was reopened by the issue of notice u/s 148 of the Act. As required, in response to the notice, the Petitioner filed a revised return.Towards the completion of the re-assessment, a draft assessment order was sent to the assessee to show cause as to why the proposed variation should not be made.

As per the show cause only three days’ time was allowed to the assessee to furnish his response. In response to the proposed variation the Petitioner requested one week time to submit response to the show cause notice on the ground that his counsel was out of station.

However, the assessment was finalised and the impugned assessment order was passed making the additions proposed in the show cause notice.

The Petitioner relied upon the standard operating procedure (SOP) dated 3rd August, 2022 issued by Central Board of Direct Taxes wherein it has been provided that response time of seven days from issue of SCN is to be given to the assessee and it may be curtailed, keeping in view the limitation date for completing the assessment.

It was submitted that the limitation aspect was not applicable in the instant case and therefore the assessee was entitled to minimum seven days notice to respond to the show cause notice. It was submitted that the show cause notice was dated 24th February, 2023 and the the response was required to be filed by 11.34 hours on 27th February, 2023.

The Petitioner contended that law is well settled that directions of CBDT are binding on the department. The minimum response time was not allowed to him. An attempt at filing better response was made but the portal was closed on expiry of the short time given by the show cause notice.

It was contended that the present case is a clear case of violation of principles of natural justice and prayed interference on the submission that it goes to root of the matter and therefore the assessment be set aside for restoration to the Assessing Officer.

On the contrary, the Department submitted that the SOP was said to be strictly for departmental use only. Be that as it may, the show cause notice was issued and response duly filed by petitioner in the portal. Pursuant to the filing, petitioner filed revised return and the proceeding on reopening culminated in said impugned assessment order. Petitioner cannot claim prejudice caused on plea that principles of natural justice had been violated in not having had opportunity to present his case in the reopening proceeding.

The Hon’ble High Court observed that the said show cause notice itself indicated three reply options available to the assessee, i.e. (a) accept the proposed variation; or (b) file written reply objecting to the proposed variation; or (c) in addition to filing written reply you may request for personal hearing so as to make oral submissions or present your case. It was further stated that in case no response is received by the given time and date, the assessment shall be finalized taking into account the proposed variations.

The Hon’ble High Court also noted that there was no dispute that a reply to the show cause notice was uploaded by petitioner in the portal seeking time to file response.

Further it was observed that in the impugned assessment order it has been mentioned the date of final show cause, date of communication and date of response by the assessee and last date of compliance as 27th February, 2023. Hence, it cannot be said that the issuance and reply to the show cause notice was not considered in making impugned order.

The Hon’ble High Court observed that on issuance of the show cause, the petitioner did not wait till date of compliance i.e. 27^th Feb 2023, even though it was less than seven days. But the petitioner straightway sought adjournment up to 2nd March, 2023.  The Hon’ble High Court opined that the conduct of petitioner did not appear to be an attempt to prevent or delay making of the assessment order.

The Hon’ble High Court opined that in the circumstances, petitioner having had filed revised return earlier does not rob him of opportunity to state his position on the proposed variation to be made, prejudicial to his interest.

The Hon’ble High Court stated that facts and circumstances of the case require exercise of extraordinary power of judicial review in restoring to petitioner his opportunity to respond to the show cause notice on variation to be made in the reopening proceeding, as prejudicial to his interest.

Accordingly, the Hon’ble High Court allowed the Writ Petition and set aside impugned assessment order u/s 147 and directed revenue to accept petitioner’s response to show cause notice for grant of more time to respond to the proposed variation.

Download Full Judgment ABCAUS 3957 (2024) (04) HC Click Here >>

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