Karnataka High Court
Doreswamaiah Sureshbabu vs National Faceless Assessment ... on 19 July, 2023
Bench: S.Sunil Dutt Yadav
-1-
NC: 2023:KHC:25162
WP No. 9167 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF JULY, 2023
BEFORE
THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV
WRIT PETITION NO. 9167 OF 2023 (T-IT)
BETWEEN:
1. DORESWAMAIAH SURESHBABU
S/O SRI H B DORESWAMAIAH
AGED ABOUT 58 YEARS,
SURESH SERVICE STATION,
M C ROAD
MANDYA-571402
KARNATAKA
... PETITIONER
(BY SRI. ANNAMALAI S., ADVOCATE)
AND:
1. NATIONAL FACELESS ASSESSMENT CENTRE
Digitally signed REP. BY ADDITIONAL / JOINT / DEPUTY /
by VIJAYA P
ASSISTANT COMMISSIONER OF INCOME TAX /
Location: High
Court of INCOME TAX OFFICER
Karnataka INCOME TAX DEPARTMENT,
MINISTRY OF FINANCE,
ROOM NO.401, 2ND FLOOR, E-RAMP
JAWAHARLAL NEHRU STADIUM
DELHI-110 003
2. THE INCOME TAX OFFICER
WARD 1 AND TPS
MANDYA
I.T. OFFICE, MANDYA
-2-
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WP No. 9167 of 2023
CAUVERY PARK ROAD
MANDYA-571 401
... RESPONDENTS
(BY SRI. E.I. SANMATHI., ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO
QUASH THE ASSESSMENT ORDER PASSED UNDER SECTION
147 R.W.S. 144 R.W.S. 144B OF THE ACT DTD. 28.03.2022
BEARING DIN NO. ITBA/AST/S/147/2021-22/1041851514(1)
FOR THE AY. 2017-18 BY THE R1 HEREIN MARKED AS ANNX-A1
AND ETC.
THIS WRIT PETITION COMING ON FOR PRELIMINARY
HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Petitioner has sought for setting aside of the
assessment order passed under Section 147 read with
Section 144 read with Section 144B of the Income Tax
Act, 1961 (for short 'the Act') at Annexure-A1;
computation sheet at Annexure-A2; demand notice at
Annexure-A3; rectification order at Annexure-A4;
computation sheet at Annexure-A5; penalty order at
Annexure-A6, computation sheet at Annexure-A7; demand
notice at Annexure-A8; penalty order at Annexure-A9;
computation sheet at Annexure-A10; demand notice at
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Annexure-A11 and the notice under Section 148 of the Act
at Annexure-B.
2. Sri. S. Annamalai, learned counsel for petitioner
submits that notice was issued under Section 142(1) at
Annexure-J1 for the assessment year 2017-18 on
10.03.2022 with an opportunity for filing response on or
before 14.03.2022 by 1:29 p.m. It is submitted that time
prescribed is in violation of the Standard Operating
Procedure (SOP) dated 19.11.2010 at Annexure-T. It is
submitted that as the petitioner could not respond to
Annexure-J1, a show cause notice came to be issued again
as per Annexure-J2 under Section 144 of the Act on
23.03.2022 requiring for a response by 26.03.2022, which
also is in violation of the SOP at Annexure-T.
3. It is further submitted that if the petitioner had
made out a reply to the notice under Section 142(1) at
Annexure-J1, question of proceeding under Section 144
may not have arisen. It is also pointed out that the
notices at Annexures-J1 and J2 were addressed to an
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WP No. 9167 of 2023
email ID which does not belong to the petitioner and the
petitioner's email ID has been updated as
[email protected] as per Annexure-N1 and the
same has been confirmed by the Department. Accordingly,
it is submitted that on the basis of violation of principles of
natural justice, the notice at the first instance at
Annexure-J1 requires to be set aside and if that were to
so, all other orders that are passed being consequent and
pursuant to the non-reply to the notice at Annexure-J1 are
required to be set aside.
4. Sri. E. I. Sanmathi, learned counsel appearing
for the respondent - revenue submits that the petitioner
though is pointing out to the violation of principles of
natural justice with respect to Annexures-J1 and J2, he
has not been diligent in participating in the proceedings
and that is made clear from the observations in the
assessment order at Paragraph Nos.3 and 4 which read as
follows:
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WP No. 9167 of 2023
"3. The assessee remained non compliant to
the notices dated 30.03.2021 and 27.12.2021.
But, in response to the notices dated
27.12.2021 the assessee replied on
22.02.2022 much beyond the date of
compliance.
The assessee has furnished and has submitted
that the assessee is a Hindustan Petroleum
Dealer. Every day the sales value is calculated
on the basis of meter reading in each pump
and dip rod in each storage tank. All the sales
made is entered for each products by only one
entry daily and is credited to the sundry
customers account.
With reference to the sources of cash deposits,
the assessee has submitted that the cash
deposits during demonetization were out of
cash collected from such sales is taken in to
cash book as received from sundry customers.
The assessee also makes credit sales to truck/
bus owners and the balance in the sundry
customers accounts represent the same.
4. As per information available on record, it
is found that the assessee has opened a new
account having number 36134690223 on
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28.09.2016 and deposited cash in this account
to the tune of Rs.18.81 lac during the
demonetization period which was unusual than
that of the previous trends. But on perusal of
the insight portal of the department, it is found
that the assessee has deposited cash as per
following information.
The assessee vide notice dated 20.11.2021
was asked to furnish the reply with reference
to the above. The reply filed by the assessee
vide reply dated 22.02.2022 and it is observed
that assessee only provided sale register for
the F.Y. 2016-17. This document has no
authenticity, as it is not signed by any
authorized person, and has no details of
cash/credits etc. It is also not supported by
any cash receipts/cash details bifurcating the
receipts as per customer or entities. As such,
the source of cash deposit is not justified by
the assessee.
The assessee again vide notice dated
23.02.2022 was specifically asked to furnish
the details of all bank accounts and the
deposits made therein, source of deposits
year-wise details of cash deposits for the year
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2015-16, 2016-17 and 2017-18, stock register
sale register, cash sales, credits sales, bills
and vouchers etc. in support of the cash
deposits made by the assessee.
Despite giving ample opportunity of being
heard, and asking the questions specifically,
the assessee failed to provide the information
as desired. Hence, in the absence of the
satisfactory evidences/concrete proof relating
to nature and sources of fund, it is clear that
the assessee has nothing to say in this
regard."
5. Heard both sides.
6. What is of relevance is the validity of the notice
at Annexure-J1. Though there may have been some lapse
on the part of the petitioner at the earlier stages, the
Court is required to see as to whether the notice at
Annexure-J1 is in order. If it were not to be so,
consequential proceedings would go and the earlier
defaults may fall into significance as it is only Anenexure-
J1 which is of relevance insofar as action has been taken
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construing there is no reply to the notice at Annexure-J1.
The SOP at Annexure-T dated 19.11.2020 is clear insofar
as the period prescribed for notice under Section 142(1).
The Clause-B of the SOP reads as follows:
"B. Process of issuance of notice u/s 142(1) /
questionnaire:
1. The notice is to be sent to assessee,
through the NeAC, with the approval of the
Unit Head of the AU. Normally, a response
time of 15 days may be given to the assessee
for compliance with the notice u/s 142(1) from
the date of issue of the notice. It is advisable
that time may be reduced to 7 days for
subsequent notices. However, these guidelines
must keep in view the limitation date for
completing the assessment."
7. If it were to be noticed, a period of 15 days
normally to be given as a response time, which could be
reduced to 7 days in cases of subsequent notices. In the
present case, notice at Annexure-J1 has been issued on
10.03.2022, with a date for response as 14.03.2022,
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which is even below 7 days as mandated. It is further to
be noticed that limitation for conclusion of the proceedings
admittedly did not arise in the present case. There is
substantial merit in the contentions raised by the learned
counsel for petitioner.
8. The question of resort to best judgment
assessment under Section 144 may not have arisen, if the
petitioner had made out its reply to Annexure-J1 and the
same was considered and the valid points were present as
asserted that would be put forth in the reply to
Annexure-J1. If that were to be so, the subsequent show
cause notice under Section 144 at Annexure-J2 and the
orders passed are required to be consequentially set aside.
It is also to be noticed that Annexure-J1 has not been sent
to the email ID updated as per Annexure-N1.
9. Accordingly, on the sole ground of violation of
principles of natural justice, the notice at Annexure-J1 is
set aside. All other proceedings resulting in orders passed
as adverted to in the preamble paragraph of this order
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WP No. 9167 of 2023
(Annexures A1 to A11), are to be treated as consequential
orders and the same are also set aside. The matter is
remanded back to the stage post Annexure-J1 notice and
the petitioner is permitted to file his response to the notice
at Annexure-J1 within a period of two weeks from the date
of receipt of certified copy of this order. The email portal
may be enabled for the petitioner to take the benefit of
reopening of the proceedings. All contentions are kept
open.
10. Writ petition is disposed off accordingly.
Sd/-
JUDGE
VP
