Facts of the Case

The petitioner, APHV India Investco Private Limited, filed multiple writ petitions under Article 226 of the Constitution challenging assessment proceedings for AY 2015–16 and 2016–17.

The challenge covered:

  • Draft Assessment Orders dated 26.07.2022
  • Final Assessment Orders dated 10.09.2022
  • Demand Notices
  • Penalty Orders dated 30.03.2023 under Section 271(1)(c)

The Revenue contended that several notices under Sections 148 and 142(1) were issued between March 2021 and July 2022.

However, the petitioner asserted that:

  • It received only one notice dated 12.07.2022 under Section 142(1)
  • Earlier notices were never served
  • The address used by the department was outdated

The petitioner:

  • Responded via email on 20.07.2022 seeking extension till 05.08.2022
  • Faced technical issues in accessing the Income Tax portal
  • Later submitted a detailed reply on 23.08.2022 explaining the source of funds

Despite this, the Assessing Officer proceeded with best judgment assessment without considering the petitioner’s response.

Issues Involved

  1. Whether non-consideration of the assessee’s reply violates principles of natural justice
  2. Whether granting only 3 days to respond to a notice under Section 142(1) is legally valid
  3. Whether assessment and penalty orders passed without proper opportunity of hearing are sustainable

Petitioner’s Arguments

  • No proper service of earlier notices under Sections 148 and 142(1)
  • Reply dated 20.07.2022 was duly sent but ignored by the Assessing Officer
  • Insufficient time (3 days) was granted to respond
  • Technical difficulties prevented timely portal submission
  • Assessment orders were passed without proper hearing, violating natural justice principles

Respondent’s Arguments

  • Multiple notices were issued to the petitioner
  • Notices were served on the registered/functional email address
  • The petitioner failed to comply with statutory requirements
  • Assessment was rightly completed under best judgment due to non-compliance

Court’s Findings / Order

1. Non-Consideration of Reply

  • The Assessing Officer failed to consider the petitioner’s email dated 20.07.2022
  • This reflected non-application of mind

2. Violation of Natural Justice

  • Only 3 days were given to respond to notice under Section 142(1)
  • This violated:
    • Principles of natural justice
    • CBDT SOP requiring reasonable time (normally 15 days)

3. Orders Set Aside

  • Quashed draft and final assessment orders
  • Set aside demand notices
  • Set aside penalty orders under Section 271(1)(c)

4. Remand

  • Matter remanded to Assessing Officer
  • Direction to issue fresh notice and provide fair opportunity of hearing

Important Clarification

  • Even in best judgment assessments, reasonable opportunity must be provided
  • Failure to consider a reply already submitted renders the entire assessment invalid
  • Procedural fairness is mandatory even in tax proceedings

Sections Involved

  • Section 142(1), Income Tax Act, 1961
  • Section 148, Income Tax Act, 1961
  • Section 271(1)(c), Income Tax Act, 1961
  • Article 226, Constitution of India

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60806092023CW142242022_155117.pdf

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