Facts of the Case

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

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

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

However, the petitioner contended that:

  • It did not receive earlier notices except the notice dated 12.07.2022 under Section 142(1)
  • The notice provided extremely limited time (3 days) for response
  • A reply dated 20.07.2022 was sent seeking extension and explaining non-receipt of earlier notices
  • Technical issues (password reset failure due to foreign mobile number) prevented portal access

Despite this, the Assessing Officer proceeded with best judgment assessment, ignoring the petitioner’s reply.

Issues Involved

  1. Whether the assessment orders were vitiated due to violation of principles of natural justice
  2. Whether failure to consider the petitioner’s reply amounts to non-application of mind
  3. Whether granting only 3 days’ time under Section 142(1) violates procedural fairness and CBDT guidelines
  4. Whether consequential penalty under Section 271(1)(c) can survive when assessment itself is invalid

Petitioner’s Arguments

  • No proper service of earlier statutory notices was made
  • The notice dated 12.07.2022 allowed insufficient time (3 days), violating natural justice
  • A reply dated 20.07.2022 was duly submitted requesting extension and providing key facts
  • The Assessing Officer ignored the reply and wrongly recorded that no response was filed
  • Technical issues (portal access/password reset) prevented proper compliance
  • Assessment was completed arbitrarily under best judgment without fair opportunity

Respondent’s Arguments

  • Multiple notices under Sections 148 and 142(1) were issued and served
  • The petitioner failed to comply with notices
  • Assessment was rightly completed based on available material due to non-cooperation

Court Findings / Order

1. Non-Application of Mind

  • The Assessing Officer failed to consider the petitioner’s reply dated 20.07.2022
  • Incorrect observation was made that no reply was filed
  • This rendered the assessment orders unsustainable

2. Violation of Natural Justice

  • Only 3 days’ time was granted to respond to notice under Section 142(1)
  • This was held to be inadequate and violative of fair hearing principles
  • It also breached CBDT SOP dated 19.11.2020 requiring reasonable response time (normally 15 days)

3. Consequential Orders Invalid

  • Since assessment orders were invalid, demand notices and penalty orders automatically fail

Final Order

  • Draft Assessment Orders, Final Assessment Orders, Demand Notices, and Penalty Orders were set aside
  • Matter remanded to Assessing Officer for fresh assessment with proper opportunity of hearing
  • Direction to issue fresh notice under Section 142(1)

Important Clarifications

  • Even in digital/portal-based compliance, technical difficulties must be reasonably accommodated
  • Recording incorrect facts (like “no reply filed”) constitutes serious procedural illegality
  • Adequate opportunity of hearing is mandatory, not a mere formality
  • CBDT SOP guidelines are binding in ensuring procedural fairness

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
  • Principles of Natural Justice
  • CBDT SOP dated 19.11.2020

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

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