Facts of the Case

The present writ petition pertains to Assessment Year (AY) 2015–16. The petitioner, Metro Irrigation Private Limited, was issued a show-cause notice dated 20.04.2023 requiring submission of its response by 25.04.2023.

The petitioner, on 24.04.2023, sought an extension of time till 10.05.2023 on the ground that relevant documents were required to be collated. However, the Assessing Officer proceeded to pass the assessment order on 04.05.2023 without addressing the request for adjournment.

Simultaneously, penalty proceedings were also initiated on the same date.

Issues Involved

  1. Whether passing an assessment order without disposing of the assessee’s request for extension of time violates principles of natural justice.
  2. Whether reassessment proceedings under Sections 148 and 148A(d) of the Income Tax Act, 1961 are sustainable when proper opportunity of hearing is not granted.
  3. Whether such assessment and penalty proceedings are liable to be set aside.

Petitioner’s Arguments

  • The petitioner contended that adequate opportunity of being heard was not provided.
  • The Assessing Officer failed to consider or respond to the request for adjournment.
  • The assessment order and penalty proceedings were passed arbitrarily and in violation of principles of natural justice.
  • The impugned proceedings, including notice under Section 148 and order under Section 148A(d), were therefore liable to be quashed.

Respondent’s Arguments

  • The Revenue argued the matter based on the available records without filing a counter-affidavit.
  • It was implied that the Assessing Officer acted within the statutory framework of reassessment proceedings.

Court’s Findings / Order

The Delhi High Court held that there was a clear breach of principles of natural justice, as the Assessing Officer failed to inform the petitioner whether its request for extension of time had been accepted or rejected.

  • Set aside the assessment order dated 04.05.2023.
  • Quashed the penalty proceedings initiated on the same date.
  • Set aside the order passed under Section 148A(d) dated 27.07.2022.
  • Also quashed the consequential notice issued under Section 148.
  • Granted liberty to the Assessing Officer to conduct fresh (de novo) proceedings in accordance with law.

Important Clarifications by the Court

  • The petitioner was directed to file a reply to the notice under Section 148A(b) within four weeks.
  • The Assessing Officer must provide all relied-upon material to the petitioner.
  • A proper notice specifying date, time, and venue of hearing must be issued.
  • The timeline for filing reply shall commence only after such material is furnished.
  • The Assessing Officer must pass a speaking order after granting adequate opportunity of hearing.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Opportunity of being heard
  • Section 148A(d) – Order for initiation of reassessment
  • Principles of Natural Justice

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS22052023CW68932023_135623.pdf

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