Facts of the Case

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

The Revenue claimed that multiple notices under Sections 148 and 142(1) were issued. However, the petitioner contended that:

  • It received only one notice dated 12.07.2022 under Section 142(1)
  • Earlier notices were never served at the correct registered address

The petitioner:

  • Sought extension of time via email dated 20.07.2022
  • Faced technical issues accessing the income tax portal due to password reset complications involving a foreign mobile number
  • Submitted a reply via email explaining the source of funds

Despite this:

  • Draft Assessment Order was passed on 26.07.2022 ignoring the reply
  • Final Assessment Order dated 10.09.2022 was passed on a best judgment basis
  • Penalty orders were later passed under Section 271(1)(c)

Issues Involved

  1. Whether the assessment orders were passed in violation of principles of natural justice?
  2. Whether failure to consider the assessee’s reply amounts to non-application of mind?
  3. Whether granting only 3 days’ response time violates procedural fairness?
  4. Whether penalty orders can survive when the assessment itself is invalid?

Petitioner’s Arguments

  • Notices prior to 12.07.2022 were never received
  • The registered address used by the department was incorrect
  • A reply dated 20.07.2022 was duly sent requesting time extension
  • Technical issues prevented timely submission through the portal
  • The Assessing Officer ignored the reply and passed orders mechanically
  • Only 3 days were granted to respond, which is arbitrary and unjust

Respondent’s Arguments

  • Multiple notices were issued under Sections 148 and 142(1)
  • Notices were served through the functional email address
  • The assessee failed to comply with statutory notices
  • Assessment was validly completed based on available records

Court Findings / Judgment

1. Non-Consideration of Reply

  • The Assessing Officer failed to consider the petitioner’s email dated 20.07.2022
  • Incorrectly recorded that no reply was filed
  • This amounted to clear non-application of mind

2. Violation of Natural Justice

  • Only 3 days’ time was granted to respond
  • This violated:
    • Principles of natural justice
    • CBDT SOP requiring reasonable time (normally 15 days)

3. Invalid Assessment Process

  • Draft and final assessment orders were passed mechanically
  • Opportunity of being heard was effectively denied

4. Consequential Penalty Unsustainable

  • Since assessment orders were invalid, penalty orders under Section 271(1)(c) also could not survive

Court Order

  • Draft Assessment Orders dated 26.07.2022 – Set Aside
  • Final Assessment Orders dated 10.09.2022 – Set Aside
  • Demand Notices – Set Aside
  • Penalty Orders dated 30.03.2023 – Set Aside
  • Issue fresh notices under Section 142(1)
  • Provide fair and adequate opportunity of hearing
  • Conduct proceedings in accordance with law

Important Clarifications

  • Ignoring a taxpayer’s reply amounts to non-application of mind
  • Granting insufficient response time violates natural justice principles
  • CBDT SOP prescribing reasonable time is binding on authorities
  • Penalty proceedings automatically fail if assessment proceedings are invalid
  • Technical issues faced by taxpayers must be reasonably considered

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


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