Facts of the Case

The petitioner, Sanskriti Exim Pvt. Ltd., challenged six separate assessment orders passed on 28.03.2023 for multiple Assessment Years (AYs 2014–15 to 2019–20). These orders were passed under Section 153C read with Section 144 of the Income Tax Act, 1961.

Additionally, the petitioner also challenged:

  • Demand notices issued under Section 156, and
  • Notices seeking information under Section 142(1).

The core grievance arose from the extremely short time frame provided by the Assessing Officer (AO) for compliance.

Issues Involved

  1. Whether passing assessment orders within an unreasonably short time violates the principles of natural justice.
  2. Whether the Assessing Officer acted arbitrarily by:
    • Granting 30 days to file returns under Section 153C, but
    • Allowing only 2 days to furnish detailed information under Section 142(1).
  3. Whether such procedural irregularity invalidates assessment orders and consequential demand notices.

Petitioner’s Arguments

  • The petitioner contended that:
    • Notices under Section 153C granted 30 days to file returns.
    • However, subsequent notices under Section 142(1) required compliance within 2 days, which was impractical.
    • The petitioner requested additional time, but the same was ignored.
    • The assessment orders were passed without granting a fair opportunity to respond.
  • Therefore, the entire process suffered from gross violation of natural justice.

Respondent’s Arguments

  • The Revenue argued based on the available records and justified the assessment proceedings.
  • It was submitted that the matter could be adjudicated without filing a counter affidavit.

Court’s Findings / Observations

  • The Assessing Officer placed the petitioner under an unreasonably restrictive timeline.
  • Expecting the petitioner to compile documents for six assessment years within two days was impractical and unfair.
  • There was a clear inconsistency:
    • 30 days granted under Section 153C
    • Only 2 days under Section 142(1)
  • This conduct amounted to a violation of principles of natural justice.

 

Court Order / Decision

  • The High Court set aside all the impugned assessment orders dated 28.03.2023.
  • Consequently, demand notices under Section 156 were also quashed.
  • The matter was remanded back with directions:
    • Fresh proceedings to begin from the stage of notice under Section 142(1)
    • Petitioner to be given 3 weeks to respond
    • AO must:
      • Provide relevant material to the petitioner
      • Grant personal hearing before passing any order

Important Clarifications by the Court

  • The notices under Section 142(1) were not quashed, but proceedings must restart from that stage.
  • The Assessing Officer is required to:
    • Ensure fair opportunity of hearing
    • Share all relevant documents in possession
  • Reinforces that procedural fairness is mandatory in tax proceedings.

Sections Involved

  • Section 153C – Assessment of income of any other person
  • Section 142(1) – Inquiry before assessment
  • Section 144 – Best judgment assessment
  • Section 156 – Notice of demand

(All under the Income Tax Act, 1961)

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS19052023CW67562023_133030.pdf

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