Facts of the Case

The petitioner, Pratyaksh Apparels Pvt. Ltd., challenged multiple assessment orders dated 28.03.2023 passed for different Assessment Years (AY 2013–14 to AY 2019–20) under Section 153C read with Section 144 of the Income Tax Act, 1961.

The Assessing Officer (AO) initially issued notices dated 14.03.2023 under Section 153C granting 30 days to file returns. Subsequently, further notices dated 20.03.2023 under Section 142(1) were issued requiring submission of documents within two days (by 22.03.2023).

The petitioner sought 30 days to respond due to the extensive nature of information required across multiple years. However, the AO proceeded to pass the assessment orders without granting adequate time 

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 not granting sufficient opportunity despite earlier granting 30 days.
  3. Validity of assessment orders passed under Section 153C read with Section 144 when procedural fairness is compromised.

Petitioner’s Arguments

  • The petitioner contended that only two days’ time was granted to furnish voluminous documents for multiple assessment years, which was unreasonable.
  • It was argued that the AO contradicted his own earlier notice granting 30 days under Section 153C.
  • The petitioner emphasized that such conduct amounted to a clear breach of natural justice, as adequate opportunity to respond was denied.
  • Requests for extension of time were ignored without justification. 

Respondent’s Arguments

  • The Revenue proceeded on the basis of available records and justified the assessment orders.
  • It was submitted that counter-affidavits were not necessary and the matter could be decided on existing records. 

Court’s Findings / Order

  • The time granted (two days) to furnish information for six assessment years was impractical and unreasonable.
  • The AO placed the petitioner on an “extremely tight leash,” violating procedural fairness.
  • There was a clear breach of principles of natural justice.

Order:

  • The impugned assessment orders dated 28.03.2023 were set aside.
  • Consequential demand notices under Section 156 were also quashed.
  • The matter was remanded back to the AO for fresh consideration. 

Important Clarification by the Court

  • The notice under Section 142(1) dated 20.03.2023 was not set aside.
  • The petitioner was directed to furnish information within four weeks.
  • The AO must:
    • Provide all relevant material in its possession
    • Grant a personal hearing before proceeding further

Sections Involved

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

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS19052023CW68182023_182439.pdf

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